Baffled by the inability of cheap gasoline and more jobs to perk up purchases in December, the retail gurus are now seeking answers to only one burning question: Will consumer spending, which contributes to over two-thirds of the U.S. economy, see a pickup in January?
Data compiled by the Commerce Department revealed that retail sales dropped 0.9% in December – the biggest decline since January 2014 – and missed the forecast of a 0.1% drop by miles. The dismal results followed a 0.4% jump in November that also was revised downward from 0.7% growth originally reported. The major contributor to this decline was the sizeable 6.5% decrease in sales at gas stations due to plummeting gasoline prices.
A panel of experts believes that weak income gains and the cloud of obscurity that is gradually engulfing the global economy thanks to the beleaguered Russian economy, a stagnating European financial system and ambiguity in China may have also stopped consumers from spending freely.
Even excluding autos, gasoline and building materials, retail sales were down 0.4% according to the Commerce Department. National Retail Federation ("NRF") also suggested that retail sales, excluding automobiles, gas stations and restaurants, decreased 0.9% for the month of December.
All the disappointment aside, market analysts are hopeful of a bounce-back in January sales following the 5% GDP growth attested U.S. economic improvement, lowest unemployment rate of 5.6% in six years and increased consumer confidence. Moreover, the pundits were charged up by the hints of an overall holiday sales rise given by NRF.
According to NRF, holiday retails sales for the November-December period increased 4% to $616.1 billion, falling shy of 4.1% projected earlier. Decent results from retailers such as J. C. Penney Company, Inc. (JCP), Macy’s, Inc. (M), The Gap, Inc. (GPS) and Pacific Sunwear of California Inc. (PSUN) are likely to have backed the rise.
J. C. Penney delivered an impressive comparable-store sales (comps) rise of 3.7% for the combined November and December period. Gap’s comps increased 3%, while net sales rose 4%. Macy’s reported that comps, on an owned plus licensed basis, grew 2.7% for the period, while Pacific Sunwear of California registered 9% growth in comps for December.
Urban Outfitters Inc. (URBN) stated that sales for the months November and December surged 10% courtesy of an impressive performance by its Free People and Anthropologie brands. Sports-related teen apparel seller Zumiez, Inc. (ZUMZ) too had an outstanding holiday season with 6.3% comps growth in November, followed by an 8% increase in December.
The above discussion indicates rebounding sales in January. But we can’t ignore the overseas turmoil that may spill over to the U.S. economy. Then again, the positive sentiments could stir up some magic for retailers.
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