Holiday shopping season was a disappointment for US retailers – Financial Times
US retailers took a larger than expected hit from the upsurge in coronavirus cases over the all-important holiday shopping season, it became clear on Friday, as data showed an unexpectedly sharp contraction in sales in December.
Figures from the commerce department showed the third consecutive monthly decline in retail sales, on top of a downward revision to November figures that covered Black Friday and the start of the Christmas shopping period.
The data follow trading updates this week from lingerie retailer Victoria’s Secret, hipster clothing chain Urban Outfitters and department store operator Nordstrom, all of which posted declines in revenue over the holidays.
Taken together, the releases intensified concerns about the toll the pandemic is taking on the world’s largest economy and on its bricks-and-mortar retailers in particular. The S&P 500 retail select industry index fell 2.5 per cent on Friday, significantly underperforming the wider market.
“The further slump in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy,” said Andrew Hunter, senior US economist at Capital Economics.
He added that “the next few months are still likely to be difficult”, despite hopes over a new $1.9tn stimulus plan that President-elect Joe Biden laid out on Thursday.
December’s 0.7 per cent month-on-month decline fell short of estimates from economists, who had expected retail sales to hold broadly steady from November. And after revisions, retail sales in November dropped 1.4 per cent, weaker than the earlier figure of a 1.1 per cent decline.
Following a resurgence of coronavirus in the autumn, several states across the US imposed stricter shutdown measures that kept more Americans at home and put the labour market under further pressure. The US economy lost 140,000 jobs in December, driven by lay-offs in the hospitality sector as restrictions were placed on bars and restaurants.
Department store sales were particularly hard hit, falling a further 3.8 per cent and deepening the crisis in the sector. Electronics and appliance stores also struggled, with sales sliding 4.9 per cent.
Car and parts sales were a bright spot, up 1.9 per cent. Excluding the auto sector and sales at petrol stations, which advanced 6.6 per cent, US retail sales were down 2.1 per cent.
Despite the latest month-on-month decline, however, retail sales were still 2.9 per cent higher than they were in the same period last year thanks to demand for homewares and DIY gear, higher health and personal care sales and a boom in ecommerce.
Reduced travel, restaurant and other discretionary spending have freed up household budgets for online shopping.
The data lay bare the scale of the shift in consumer spending habits that has benefited Amazon and a handful of favoured bricks and mortar operators, such as Walmart and Target, at the expense of department stores and other mall-based chains.
Ecommerce sales were 19 per cent higher on a year-on-year basis. In contrast, sales slid 16 per cent slide at clothing outlets and 21 per cent at department stores.
Economists anticipate that additional stimulus from Washington, combined with the rollout of coronavirus vaccines, will bolster consumer spending this year. Fiscal aid approved by Congress late last month, which included $600 payments to many Americans, did not arrive until after the holiday shopping rush.
Neil Saunders, managing director of the GlobalData consultancy, said overall retail sales had been resilient. For the year as a whole, he noted, total retail sales, including ecommerce, were 0.6 per cent higher than they were in 2019.
“This is a very acceptable outcome given the circumstances of the year and underlines the resiliency of the retail sector and its flexibility in adapting,” he said.
Published at Fri, 15 Jan 2021 17:15:00 +0000