Unseasonably frigid weather and severe ice and snow in much of the country appear to have put a damper on retail sales during the last month of the fiscal year.
Total retail sales grew by only 1.7% in January on a 12-month smoothed basis, according to data released this morning by the U.S. Department of Commerce. The increase was well below December’s 3 percent uptick and the lowest monthly growth in over eighteen months.
It was a cold and snow-filled January throughout North America, according to business weather intelligence firm Planalytics. “The United States was its coldest in three years with stark regional trends. Snowfall was also the most in three years, although rainfall was the least since 2003. Canada also had its coldest retail January since 2011, with more rain than last year, but less snow,” the firm noted.
Total retail inventory rose by 8 percent in December–the most recent month for which inventory data are available–capping four months of accelerating growth. Rising retail inventories have been a concern for many industry watchers, and they provide support for the claim that much of the sales surge in the fourth quarter of 2013 was due to intensified promotions, which will no doubt show up in the form of sharp declines in operating margins for the fourth quarter and fiscal year.
The department, chain and discount store sector, which includes department stores Macy’s and Dillard’s, national chains Sears and Kohl’s, and discounters Walmart and Target, suffered its twenty-second straight month of declining sales. Seasonally adjusted revenues plunged by 5% on a 12-month smoothed basis, a steeper drop than December’s 2.9%. Big store inventory fell by 0.7% in December, causing the inventory-to-sales ratio to increase slightly.
Apparel specialty store sales edged up by only 0.7%. This sector, which includes brands like Ann Taylor, J. Crew, and Urban Outfitters, continues to grow at the expense of 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. However, consumers seemed to be taking a breather in January, despite 40-70 percent-off sales at virtually every major chain.
Specialty store inventories surged by 3 percent in December, elevating their inventory-to-sales ratio. Given January’s lackluster sales, these stores are expected to end the year with higher than anticipated inventory levels, challenging margins.
Sales at the combined department, chain, discount and apparel specialty retail sectors, a traditionally reliable barometer of total apparel sales, fell by a disappointing 1.7% in January on a 12-month smoothed basis. Although apparel-oriented stores reported brisk sales of outerwear and other seasonal apparel, much of that business was done at promotional and clearance prices. December inventories for the combined sectors advanced by 1.5%.
Unfortunately, next month doesn’t promise to be much better. Severe winter storms and continued arctic temperatures have been even more unseasonable in February than in January, which will delay the buying of spring apparel. After East Coast consumers pay their hefty heating bills, they may need to rein in spending on discretionary items.
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