August 22/29, 2016; Volume 31, Number 5
By Reginald Tucker
It is often said that the U.S. economy—and the retail sector in particular—tends to slow down in Presidential Election years. Specialty flooring retailers are looking to buck that trend by giving consumers valid reasons to spend over the course of the selling season leading up to November.
“I can’t say that we have been affected due to the fact that it’s an election year,” said T.J. Anderson, owner of Jimmie Lyles Flooring Gallery in Flowood, Miss. “We’ve had a great summer selling season, and we have no reason to believe that trend won’t continue into the fall.”
Anderson has good reason to be optimistic. For a company that spends close to nothing on marketing and advertising, Jimmie Lyles still draws consumers—both repeat customers and new walk-ins—on a regular basis. “We don’t focus on low prices; we concentrate on the mid to high-end of the market, which is much more profitable. We also do a pretty good business with our custom rug department.”
Jimmie Lyles also attributes its long track record of prosperity (the company was founded in 1958) in part to low turnover and high customer-service levels. “The folks working at Jimmie Lyles have been here for many years,” Anderson said, citing several workers who have logged at least a decade with the company. “We pride ourselves on providing the best customer service. That’s what keeps them coming back.”
Other retailers report a different experience leading up to the election. “June was an excellent month for us, but overall business has been slightly down,” said Billy Mahone III, owner of Atlas Floors Carpet One, San Antonio. “I attribute the slowdown in our market to the uncertainty that is typical in an election year.”
Not all slowdowns are attributed to election-year jitters. At HOM Furniture in Coon Rapids, Minn., for instance, the drop-off in sales activity has more to due with the seasons than anything else. “We had a very strong spring but retail traffic softened in June—probably due to the slower summer period,” said Kelly Cosgrove, manager. “However, commercial and builder sales remain strong.”
If the larger economy—which includes investment activity—is any indication, we’re in for a bumpy ride. While the outcome of the Presidential race is, of course, still an unknown, history suggests that the markets respond far better to election processes whose outcomes are more predictable. That’s according to Mary Ann Bartels, head of Merrill Lynch wealth management portfolio strategy. “This time, we’ve got a lot of uncertainties,” wrote Bartels. “And if there’s one thing markets hate, it’s uncertainty.”
Regardless of one’s political affiliation, Bartels believes this particular election season might not bode well for the economy. She writes: “Start with the fact that President Obama isn’t running for re-election; regardless of a president’s party or political leanings, departing two-term presidents create a void that financial markets typically find unnerving.”
Bartels provides further evidence. Since 1928, the Standard & Poor’s 500—a widely watched benchmark of U.S. large-cap companies—has dropped an average of 2.8% in Presidential election years that don’t include an incumbent seeking re-election, notes Stephen Suttmeier, technical research analyst at BofA Merrill Lynch Global Research. In fact, of the eight years in a two-term presidential cycle, the final year of the second term—when the incumbent can’t run—is the only one that has averaged negative market returns. By contrast, in years when the sitting president is up for re-election, the S&P 500 has averaged returns of 12.6%. (The average from 1928 through 2014 is 7.5%.)
That being said, industry observers say there’s no reason for alarm. Scott Humphrey, CEO of the World Floor Covering Association, advises keeping things in the proper perspective. “Traditionally we have seen that major elections cause a delay in purchase decisions. That is typically based on the fear of one particular candidate winning over another. Ironically, because of the high level of disapproval in both major candidates, this year there seems to be less overall impact as it relates to delaying major purchases. In an odd sense, it is as if the buying public is in denial that we are in an election year.”