February 13, 2009
Some Good News for Retail
It didn’t take long for
economists to throw cold water on the notion of a near-term recovery for
retail but, at least for January, the numbers were promising.
According to the U.S.
Commerce Department, retail sales were up one percent for January. This
marked a reversal of six months of declining sales while also marking the
biggest monthly jump in 14 months.
Joel Naroff, president
and chief economist at Naroff Economic Advisors, told The Associated
Press, that January was a month when “consumers began to treat
themselves a little better.”
He added that a number
of people are beginning to get over the shock of the economic crisis and
finding a way “to live with it.”
January represented people making the shift from “doing
nothing to doing a little something,” he added.
A number of segments
saw sales increase, including internet/mail order (+2.7 percent), gas stations
(+2.6 percent), consumer electronics (+2.6 percent), food/beverages (+2.1
percent), autos/parts (+1.6 percent), and clothing/accessories (+1.6 percent).
On the decline were
building materials (-3.2 percent), and furniture/home furnishings (-1.3
percent).
Rosalind
Wells, chief economist for the National Retail Federation, said in a press
release, “While 2009 got off to a surprising start, it’s going to
be difficult for retailers to maintain this momentum. We expect the first
half of the year to present challenges while giving way to sustained growth
in the fourth quarter.”
Discussion Questions:
Are you encouraged by the January retail sales numbers? Would you attribute
the boost to pent up demand from consumers? What makes you most optimistic
about the future prospects for the retailing industry?
BrainTrust
Recent Discussions
Discussion Questions
Poll
It’s hard to reconcile these numbers with the very soft comp sales that most stores reported for January…other than Walmart. (In fact, it’s possible that Walmart’s sheer size tends to affect the total retail sales report.) In any case, this is one of a few small bits of good news–or at least less bad news–starting to emerge, if you look closely enough for them.
Housing, for example, is starting to show a pulse in some markets based on lower prices and better mortgage terms. (As any retailer knows, sometimes you have to take a deep markdown to move the inventory, and that’s what is going on here.) For every day there is another large layoff reported, there is the occasional company with better-than-expected earnings and prospects for 2009.
Have we hit bottom? Not by any means…and apparel will likely continue to be the toughest category. But continue to look hard for a gradual rebound through the cloud of persistently negative sentiment and reporting.
These numbers are very accurate. When I went to Target the week after Christmas, their clearance section looked like a brand new holiday set. To add insult to injury, there were team members in red and khaki bringing flatbeds of clearance out with nowhere to stock the merchandise.
Their pseudo-global bazaar this year went 30% off from day one. Expansion plans will be scaled back with their self-induced slowdown. In other words, the lowering of credit limits and the raising of interest rates on prime borrower’s credit cards will continue to negatively impact retailers for the next three years at least. There are tumble weeds growing in Arizona where several Super Targets were supposed to be built, but their is no population and just a patchwork of foreclosed homes out there. These stores may never open in our lifetime.
I made a choice to go to a Super Kmart that is still open in my area and it was the scariest shopping experience I’ve ever been through in a retail store in my life. Look for the Lampert charade to end soon. The store looks like it was straight out of the 70s and the floor was buckling, carpets stained. The debit card sliders numbers were faded and the receipt was barely legible. I can’t imagine why anyone would ever shop there. There is no value and I can’t see anywhere else they can cut corners to save on cost. It’s only a liability now since the store is so dilapidated.
I am encouraged that there is at least a pulse continuing on in retail. It is expected that the swings in retail will continue wildly for an extended period of time. But at least there is some activity. Get people into the stores! Maybe they are buying but at least they will keep current on trends and fashions, hopefully to determine when it is right to jump back in. If consumers stay at home, watching the sour news about the economy, they will possibly hibernate and never come back.
Just talked to a Hong Kong Marketing Professor, with whom I am going to be collaborating on research. In Hong Kong, the locals spend as little at 8 hours in their home. They are most often, as he calls it “consuming” out-of-home or “browsing.” That is why retail, while slower, is still so dynamic here.
No.
And with each bit of contradictory/confusing “news” released, I feel even less confident anyone knows what’s going on…never mind what to do about it.
I am in agreement with the previous comments with respect to gift cards, as well as Visa, MasterCard and American Express gift cards.
Since the onset and trending up of gift card sales, there has been little or no accurate measurement of the impact of this on holiday sales. This entire increase may be related to deferred sales as a result of gift cards.
I also believe that it takes more than a one-month view. While I am always more optimistic than some, I am not prepared to pull out the old Martha Reeves 45rpm and start dancing quite yet. Not to mention that no one would really want to see that, anyways!
While the small growth in retail spending in January is welcomed, it should be remembered that this measurement is on a month-over-month basis, seasonally adjusted–not year-over-year. The increase echoes the upswing in our data (US Consumer Demand Index) from October to November/December–remember, we are forecasting three months ahead–on a year-over-year basis. The data for February will surely not rise–but probably stay a little lower than in January. Year-over-year we are dramatically down and will likely stay there for a while.
Feel free to contact me for a free copy of the Consumer Demand Index.
I choose to be encouraged because the alternative is depressing. And that’s kind of where all of us are today, experiencing varying levels of consumer confidence. Money is fungible, it doesn’t go away. Granted, an inordinate amount is currently in the pockets of Wall Streeters, bankers, and corporate heads, but it will return to circulation as consumer confidence increases.
I’m not a fan of the proposed stimulus package for a variety of reasons, including the pork and the fact that there’s very little actual spending stimulus in the bill–unless you take into account our spending our future tax dollars. But, the psychological impact of an approved stimulus bill can be incalculably positive in terms of consumer confidence–though some will try to calculate it.
While it’s always good to have some positive press for retail numbers, the reality is that January wasn’t a very good month for most retailers. With their attempts to clear unsold inventory and some help from holiday gift card buyers, retailers were able to generate some sales volume, but what will it mean to their profitability?
We are a long way from seeing a meaningful turnaround with more layoffs coming every day and a Congress that doesn’t understand that economic stimulus won’t come from massive spending on their own pet projects.
One inning doesn’t make a ball game. There are several factors contributing to the January results (confirming much of what has been posted here so far), including January, 2008 performance. I am an optimist, however, we all must be realists. Certain categories will remain constant throughout the crisis, while others will decline.
My greatest concern is the nonpartisan Congressional Budget Office stating the proposed stimulus will have only a short-term blip, and a long-term negative effect. Consumers will drive retail sales, as they always have. With their confidence being at an all-time low in the 46-year history of its measurement, they will flock to Walmart, etc, because those retailers respond best to this environment.
While I’m all for good news, I agree with previous contributors that we need to see a trend beyond just a month. The concern for me is the wide range of performance between discounters and specialty stores.
There are a lot of independent and regional specialty stores out there who will struggle to stay afloat without the consumer spending more freely. I don’t see much silver lining in these numbers if the majority of it is going to just Walmart and clubs. We need to see a rebound in all segments and all channels and all sizes of retailers…something I’m afraid is still a way off.
I think much of that spending was driven by the incredibly deep discounts that retailers had to offer in order to clear out seasonal inventories. The good news; customers will spend. The bad news; if you discount 70%.
Dollar sales may have been up, but margins took a pounding, and customer expectations have been set. While the next few months are likely to be heavily promotional, at some point we’re going to have to figure out how to sell at sustainable margins again.
So, I am at the gym doing cardio last night. Lou Dobbs was on the TV. Lou’s show usually features a boatload of intellectual dishonesty. Last night, he took this report and essentially suggested that because retail sales have now increased, stopping a six month negative trend, that we don’t need this $800 billion stimulus package. (He calls it the “so called” stimulus package.)
Anyone who would suggest that this one data point is good news is being intellectually dishonest. One can’t measure January without including December. New Year’s Day does not wipe the slate clean. My colleagues, in their previous comments, noted many reasons why January might have been greater than last January. Most of them are related to a poor December or significant pressure on pricing.
I am a bit uncomfortable with the numbers themselves. They don’t seem to jive with other reports. How could autos/parts be up 1.6% when autos were down in excess of 20%? It would take a lot of auto parts to make up that difference.
No, I am not encouraged by the increased sales reported for January. This increase is primarily because of deep discounting taken by the retailers. Nothing in the economic environment has changed fundamentally to be encouraged. People are still losing jobs, the stock market is still down (therefore people’s portfolios), there is uncertainty as to how effective the latest rescue package will be–and when.
Also remember, because the increased sales are based on deep discounts, profitability is down. It really does not matter what the sales are, what matters is, what is the bottom line?!
I am encouraged, but think we haven’t yet seen the real impact of the mounting number of layoffs. The test will be in the early spring, as weather improves and people start to participate in lawn & garden. I think “staycations” will be on a lot of family agendas this summer, which should hopefully impact home improvement as well.
I hope retailers are aware of the downside of discounting too heavily vs. inventory management. If super-heavy discounting becomes the norm, shoppers will quickly learn to sit on the couch and wait for clearance sales on every purchase they make, regardless of category. Is our industry training shoppers to behave in a way that accelerates the demise of our industry?
I believe there is some more good news out there and enjoy hearing about it. We continue to sign leases and do development in Florida. We have some retailers that are renewing and others that are expanding. The downturn has created opportunities and that should be pointed out.
While it’s nice to hear that people are spending, I would consider that to be more of a feel-good story than an indicator of economic change.
I am a firm believer that once is an occurrence, twice is a coincidence, three times is a trend. Let’s see what happens over the next few months before we start celebrating.
I also have to wonder how the increase in sales has impacted on profits. Selling at or below cost may help cash flow but doesn’t do much for the bottom line.
While this news represents a significant improvement! (Think about it; January sales were better than holiday sales?) That’s huge! So there’s a story behind this story.
Typically December sales do not include gift card purchases. Retailers who sell gift cards are not able to recognize the actual gift card transaction as a sale until the gift card is redeemed. As gift cards become an increasingly important component of holiday sales, our metrics of year over year holiday sales should span beyond December 24th.
Further, with consumer concerns (and media warnings of buying gift cards from retailers) that retailers may not make it past the holidays, there were many who purchased AMEX, or Visa/MasterCard gift cards. All of which when redeemed, represent sales. So while January was impressive, one month does not save a recession…let’s see February, March, and April. If the media is fair in reporting the real meaning of this improvement, I do think it will have a positive impact on consumer confidence, which usually translates into consumer spending.
It’s nice to hear positive numbers but there isn’t much credibility. Everyone knows that you can stimulate sales via unprofitable pricing. Everyone knows the unemployment rate is zooming upwards. Everyone sees retailer stock prices. Most retailers finish their fiscal year at the end of January. Watch for the earnings announcements coming soon.
More Discussions
As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…Is Supply Chain Volatility Here To Stay?
Can we expect an ongoing volatility to remain in terms of retail supply chain?Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?
It’s hard to reconcile these numbers with the very soft comp sales that most stores reported for January…other than Walmart. (In fact, it’s possible that Walmart’s sheer size tends to affect the total retail sales report.) In any case, this is one of a few small bits of good news–or at least less bad news–starting to emerge, if you look closely enough for them.
Housing, for example, is starting to show a pulse in some markets based on lower prices and better mortgage terms. (As any retailer knows, sometimes you have to take a deep markdown to move the inventory, and that’s what is going on here.) For every day there is another large layoff reported, there is the occasional company with better-than-expected earnings and prospects for 2009.
Have we hit bottom? Not by any means…and apparel will likely continue to be the toughest category. But continue to look hard for a gradual rebound through the cloud of persistently negative sentiment and reporting.
These numbers are very accurate. When I went to Target the week after Christmas, their clearance section looked like a brand new holiday set. To add insult to injury, there were team members in red and khaki bringing flatbeds of clearance out with nowhere to stock the merchandise.
Their pseudo-global bazaar this year went 30% off from day one. Expansion plans will be scaled back with their self-induced slowdown. In other words, the lowering of credit limits and the raising of interest rates on prime borrower’s credit cards will continue to negatively impact retailers for the next three years at least. There are tumble weeds growing in Arizona where several Super Targets were supposed to be built, but their is no population and just a patchwork of foreclosed homes out there. These stores may never open in our lifetime.
I made a choice to go to a Super Kmart that is still open in my area and it was the scariest shopping experience I’ve ever been through in a retail store in my life. Look for the Lampert charade to end soon. The store looks like it was straight out of the 70s and the floor was buckling, carpets stained. The debit card sliders numbers were faded and the receipt was barely legible. I can’t imagine why anyone would ever shop there. There is no value and I can’t see anywhere else they can cut corners to save on cost. It’s only a liability now since the store is so dilapidated.
I am encouraged that there is at least a pulse continuing on in retail. It is expected that the swings in retail will continue wildly for an extended period of time. But at least there is some activity. Get people into the stores! Maybe they are buying but at least they will keep current on trends and fashions, hopefully to determine when it is right to jump back in. If consumers stay at home, watching the sour news about the economy, they will possibly hibernate and never come back.
Just talked to a Hong Kong Marketing Professor, with whom I am going to be collaborating on research. In Hong Kong, the locals spend as little at 8 hours in their home. They are most often, as he calls it “consuming” out-of-home or “browsing.” That is why retail, while slower, is still so dynamic here.
No.
And with each bit of contradictory/confusing “news” released, I feel even less confident anyone knows what’s going on…never mind what to do about it.
I am in agreement with the previous comments with respect to gift cards, as well as Visa, MasterCard and American Express gift cards.
Since the onset and trending up of gift card sales, there has been little or no accurate measurement of the impact of this on holiday sales. This entire increase may be related to deferred sales as a result of gift cards.
I also believe that it takes more than a one-month view. While I am always more optimistic than some, I am not prepared to pull out the old Martha Reeves 45rpm and start dancing quite yet. Not to mention that no one would really want to see that, anyways!
While the small growth in retail spending in January is welcomed, it should be remembered that this measurement is on a month-over-month basis, seasonally adjusted–not year-over-year. The increase echoes the upswing in our data (US Consumer Demand Index) from October to November/December–remember, we are forecasting three months ahead–on a year-over-year basis. The data for February will surely not rise–but probably stay a little lower than in January. Year-over-year we are dramatically down and will likely stay there for a while.
Feel free to contact me for a free copy of the Consumer Demand Index.
I choose to be encouraged because the alternative is depressing. And that’s kind of where all of us are today, experiencing varying levels of consumer confidence. Money is fungible, it doesn’t go away. Granted, an inordinate amount is currently in the pockets of Wall Streeters, bankers, and corporate heads, but it will return to circulation as consumer confidence increases.
I’m not a fan of the proposed stimulus package for a variety of reasons, including the pork and the fact that there’s very little actual spending stimulus in the bill–unless you take into account our spending our future tax dollars. But, the psychological impact of an approved stimulus bill can be incalculably positive in terms of consumer confidence–though some will try to calculate it.
While it’s always good to have some positive press for retail numbers, the reality is that January wasn’t a very good month for most retailers. With their attempts to clear unsold inventory and some help from holiday gift card buyers, retailers were able to generate some sales volume, but what will it mean to their profitability?
We are a long way from seeing a meaningful turnaround with more layoffs coming every day and a Congress that doesn’t understand that economic stimulus won’t come from massive spending on their own pet projects.
One inning doesn’t make a ball game. There are several factors contributing to the January results (confirming much of what has been posted here so far), including January, 2008 performance. I am an optimist, however, we all must be realists. Certain categories will remain constant throughout the crisis, while others will decline.
My greatest concern is the nonpartisan Congressional Budget Office stating the proposed stimulus will have only a short-term blip, and a long-term negative effect. Consumers will drive retail sales, as they always have. With their confidence being at an all-time low in the 46-year history of its measurement, they will flock to Walmart, etc, because those retailers respond best to this environment.
While I’m all for good news, I agree with previous contributors that we need to see a trend beyond just a month. The concern for me is the wide range of performance between discounters and specialty stores.
There are a lot of independent and regional specialty stores out there who will struggle to stay afloat without the consumer spending more freely. I don’t see much silver lining in these numbers if the majority of it is going to just Walmart and clubs. We need to see a rebound in all segments and all channels and all sizes of retailers…something I’m afraid is still a way off.
I think much of that spending was driven by the incredibly deep discounts that retailers had to offer in order to clear out seasonal inventories. The good news; customers will spend. The bad news; if you discount 70%.
Dollar sales may have been up, but margins took a pounding, and customer expectations have been set. While the next few months are likely to be heavily promotional, at some point we’re going to have to figure out how to sell at sustainable margins again.
So, I am at the gym doing cardio last night. Lou Dobbs was on the TV. Lou’s show usually features a boatload of intellectual dishonesty. Last night, he took this report and essentially suggested that because retail sales have now increased, stopping a six month negative trend, that we don’t need this $800 billion stimulus package. (He calls it the “so called” stimulus package.)
Anyone who would suggest that this one data point is good news is being intellectually dishonest. One can’t measure January without including December. New Year’s Day does not wipe the slate clean. My colleagues, in their previous comments, noted many reasons why January might have been greater than last January. Most of them are related to a poor December or significant pressure on pricing.
I am a bit uncomfortable with the numbers themselves. They don’t seem to jive with other reports. How could autos/parts be up 1.6% when autos were down in excess of 20%? It would take a lot of auto parts to make up that difference.
No, I am not encouraged by the increased sales reported for January. This increase is primarily because of deep discounting taken by the retailers. Nothing in the economic environment has changed fundamentally to be encouraged. People are still losing jobs, the stock market is still down (therefore people’s portfolios), there is uncertainty as to how effective the latest rescue package will be–and when.
Also remember, because the increased sales are based on deep discounts, profitability is down. It really does not matter what the sales are, what matters is, what is the bottom line?!
I am encouraged, but think we haven’t yet seen the real impact of the mounting number of layoffs. The test will be in the early spring, as weather improves and people start to participate in lawn & garden. I think “staycations” will be on a lot of family agendas this summer, which should hopefully impact home improvement as well.
I hope retailers are aware of the downside of discounting too heavily vs. inventory management. If super-heavy discounting becomes the norm, shoppers will quickly learn to sit on the couch and wait for clearance sales on every purchase they make, regardless of category. Is our industry training shoppers to behave in a way that accelerates the demise of our industry?
I believe there is some more good news out there and enjoy hearing about it. We continue to sign leases and do development in Florida. We have some retailers that are renewing and others that are expanding. The downturn has created opportunities and that should be pointed out.
While it’s nice to hear that people are spending, I would consider that to be more of a feel-good story than an indicator of economic change.
I am a firm believer that once is an occurrence, twice is a coincidence, three times is a trend. Let’s see what happens over the next few months before we start celebrating.
I also have to wonder how the increase in sales has impacted on profits. Selling at or below cost may help cash flow but doesn’t do much for the bottom line.
While this news represents a significant improvement! (Think about it; January sales were better than holiday sales?) That’s huge! So there’s a story behind this story.
Typically December sales do not include gift card purchases. Retailers who sell gift cards are not able to recognize the actual gift card transaction as a sale until the gift card is redeemed. As gift cards become an increasingly important component of holiday sales, our metrics of year over year holiday sales should span beyond December 24th.
Further, with consumer concerns (and media warnings of buying gift cards from retailers) that retailers may not make it past the holidays, there were many who purchased AMEX, or Visa/MasterCard gift cards. All of which when redeemed, represent sales. So while January was impressive, one month does not save a recession…let’s see February, March, and April. If the media is fair in reporting the real meaning of this improvement, I do think it will have a positive impact on consumer confidence, which usually translates into consumer spending.
It’s nice to hear positive numbers but there isn’t much credibility. Everyone knows that you can stimulate sales via unprofitable pricing. Everyone knows the unemployment rate is zooming upwards. Everyone sees retailer stock prices. Most retailers finish their fiscal year at the end of January. Watch for the earnings announcements coming soon.