Gasoline Windfall Fails to Ignite October Retail Apparel Sales

Retail sales growth slowed in October for the second straight month despite falling gasoline prices that many retailers hoped would leave consumers with extra money they would spend in stores. Data released late last week by the U.S. Department of Commerce revealed that total adjusted retail sales were $444 billion, down from $443 billion in September, representing a 4.3% increase on a 12-month smoothed basis, its smallest rise in eight months. 

If there was a lift from lower gas prices, it wasn’t spent on clothing. The segments with the biggest growth in the month were automotive, health and personal care retailers, restaurants, and electronics stores, all of which outperformed the overall industry. Department, discount and apparel specialty stores all underperformed the industry average in the month.

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Key channels for apparel continued to lose momentum. Department, chain and discount stores once again suffered the biggest blow of any major sector, with sales down a smoothed 4.3%. September inventory at big stores plunged by 4.8%, less than August’s drop but its eighth straight month of declines, due primarily to the implementation of omnichannel and inventory management systems that increase inventory efficiency and visibility.

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Apparel specialty store sales rose by just 0.6%, their second worst showing in nine months. Apparel merchants blamed the lackluster results on unseasonably warm weather in key parts of the country that failed to ignite interest in cold weather merchandise. Sweaters and down jackets sat on the shelves as temperatures in the Northeast and Middle Atlantic regions remained in the 50s and 60s for much of the month.

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September’s apparel specialty store sales increase was not enough to offset the big store decline’s impact on the combined sector. Department, chain, discount and specialty store sales–a reliable barometer of apparel sales—fell by 1.4% in the month. Inventory for the combined channels dropped by 2.3%, resulting in a slight increase in the inventory-to-sales ratio.

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Sales growth at non-store retailers, which consists primarily of e-commerce pure-plays, jumped to 8 percent from 5.4% in September, indicating consumers continue to gravitate toward online shopping.

Many of the large retailers reporting third quarter sales and earnings results in recent weeks have confirmed that weather was a factor in October. Kohl’s management indicated in its third-quarter earnings conference call that cooler temperatures in November have already seemed to bring shoppers back into the stores. However, the sluggish showing in October, particularly in light of the big windfall at the gas pump, has fueled concern by some industry-watchers about the outlook for holiday sales.

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