Helped by Apparel Specialty Stores, Retail Sales Rally in March

Retail sales rebounded in March as consumers began to emerge from the frigid winter with pent-up demand and income tax refunds to spend. Although much of the jump occurred at automobile and parts dealers, better-than-expected sales at apparel specialty stores and nice gains at furniture and home furnishings merchants, e-commerce retailers and general merchandise stores (dollar stores and warehouse clubs, particularly Costco) helped move the overall retail growth rate higher, while sales at sporting goods stores and restaurants, which had been increasing in the prior few months, slowed.

Total retail sales grew by 3.8% in March on a 12-month smoothed basis according to data released Monday by the U.S. Department of Commerce, twice as fast as February’s 1.9% rise and the biggest increase in four months.

Total retail inventory rose by 6.5% in February, the most recent month for which inventory data are available, below both January’s and February’s increases.

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The department, chain and discount store sector, which includes Macy’s, Sears, JCPenney, Walmart and many others, suffered its twenty-fourth straight month of declining sales, hurt by the late Easter this year. Seasonally adjusted revenues fell by 2.7% on a 12-month smoothed basis, better than February’s 4.2% plunge but a drop nonetheless. Big store inventory rose by a mere 1.2% in February, causing the inventory-to-sales ratio in the channel to decline slightly.

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After two consecutive months of declines, apparel specialty store sales rose 1.2%. This sector, which includes brands like Gap, J. Crew, and Ann Taylor, continued to fare better than department and discount stores, a trend that is expected to continue through this year as consumers gravitate toward their easy-to-navigate stores and e-commerce sites. With the exception of the teen sector, which is losing steam as its customers trade down to fast fashion and value brands, the specialty channel should see a nice increase in April. Specialty store inventories gained 2.9% in February, and the sales to inventory ratio dropped slightly.

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Sales at the combined department, chain, discount and apparel specialty retail sectors, a traditionally reliable barometer of total apparel sales, fell by 0.4 percent in March on a 12-month smoothed basis. January inventories for the combined sectors grew by only 2.2%, much less than January’s 3.7% increase.

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