After being expected to register the first decline since 2009, retail sales increased in March. Image: CC .Martin./Flickr

Retail sales increased in March, defying the expectations of a consensus of analysts. Harsh winter weather, rising gas prices and a late Easter holiday were expected to produce the first monthly retail sales decline since 2009. But factors including a declining unemployment rate and higher prices resulted in a modest monthly gain.

Measuring monthly retail sales

U.S. retailers reported a 1.7 percent year-over-year increase in retail sales last month, according to a Thomson Reuters survey of 25 national retail chains. The numbers are based on retail sales reported at stores open at least since last March. The metric, known as “same-store sales,” is considered a reliable measure of retail performance because sales anomalies due to store openings and closings aren’t a factor. But analysts doubt whether the March increase is a solid trend in consumer demand. Later this year, rising prices for groceries and gas are expected to impact consumer spending. Plus, only 10 percent of retailers report monthly sales figures. A better picture of the consumer economy will come into focus when companies such as Wal-Mart, Best Buy and Home Depot report quarterly sales figures.

The importance of Easter shopping

Analysts expected March retail sales to be lackluster in large part because of the Easter holiday. This year Easter falls on April 24, three weeks later than last year and the latest Easter in decades. The calendar moves Easter shopping to April from March a year ago. The fluctuating nature of the Easter holiday has led retail analysts to create a calendar period called “Mapril” in order to get a more accurate reading on year-over-year retail sales. Some in the industry expect this year’s later Easter date would give retailers an extra boost in April sales. The International Council of Shopping Centers forecasts a robust 5 percent to 6 percent April increase. But a fragile economic recovery hit by rising food, gas and commodity prices, plus a depressed housing market and tenuous employment picture could mean that Mapril retail sails will surprise analysts in the opposite direction they did in March.

Don’t get too excited about retail stock

Many other factors suggest the March retail sales increase should be taken with a grain of salt. According to Jeff Macke at Yahoo! Finance, investors should still be wary of retail stock. He cites the fact that retailers are raising prices to offset rising prices in the supply chain, which inflates sales figures but doesn’t increase profit margins. Plus, the release of winter’s grip also released pent-up consumer demand, which resulted in bigger than normal clearance sales — great for the consumer, not so great for the retailer. Finally, retail sales beating extremely low expectations doesn’t mean much. After the Easter bump, malls could empty and margins could shrink as consumers feel the pinch of food and gas inflation.

Sources

Los Angeles Times

MSN Money

Yahoo! Finance

MarketWatch

New reports on retail sales and consumer confidence present conflicting data until one reads between the lines. Image: CC Svadifari/Flickr

Retail sales and consumer confidence are key economic indicators closely watched by economists and investors. People often assume retail sales and consumer confidence would rise and fall in tandem. But separate reports released Friday show a strong 2010 retail sales trend followed by declining consumer confidence in January.

Retail sales surge in 2010

Retail sales in the U.S. increased at a greater rate in 2010 than in any year since 1999, according to the Commerce Department. From 2009 to 2010, U.S. retail sales increased 6.8 percent, the strongest growth since an 8.2 percent surge in 1999. December retail sales rose for the sixth month in a row, increasing 0.6 percent to $380.9 billion after rising 0.8 percent in November. Despite the holiday shopping season, December’s gain was less than expected, largely due to harsh winter weather. Department store sales dropped 1.9 percent, the steepest decline in two years. But online sales rose 2.6 percent month-over-month to ensure an overall monthly gain.

Consumer confidence a fickle index

Despite the strong retail sales trend, consumer confidence in January declined unexpectedly. The Thomson Reuters/University of Michigan consumer confidence index for January fell to 72.7 from 74.5 in December. A Bloomberg News survey of economists predicted a bump in the consumer confidence index to 75.5. Analysts are saying rising gas and energy prices, combined with the snail’s pace of job creation are to blame. Unemployment fell to 9.4 percent in December, but at the present rate of economic growth, the labor market will take years to recover. Higher gas prices increased sales at gas stations 1.6 percent last month. Energy prices rose 4.6 percent in December.

Data bode well for consumer spending

Consumer confidence has dropped so far this month, but economists say the consumer expectations index is a more accurate economic indicator. The consumer expectations index looks at how people feel about what their finances will look like six months down the road. The Commerce Department reports that it increased to 68.2, the highest mark since last June. The strengthening consumer expectations index bodes well for consumer spending, the lion’s share of U.S. economic output. Although recent reports offer conflicting information, the trend in retail sales appears strong enough to drive economic recovery, if not employment.

Sources

Bloomberg

Financial Times

Wall Street Journal

The East Coast Blizzard of 2010 left many shoppers and commuters stranded. (Photo Credit: CC BY-SA/Mariordo/Wikipedia)

The massive East Coast blizzard that has crippled the northeastern U.S. of late has made life difficult for many people, retailers included. According to CNN Money, retailers that were hoping for lots of shopper traffic to take advantage of after-Christmas sales and boost retail sales received a rude awakening. Because the blizzard kept shoppers at home, it has been projected that retailers lost approximately $1 billion in after-Christmas sales.

Retail sales buried by blizzard

According to ShopperTrak, a company that records retail sales and shopper traffic at more than 70,000 stores and malls, the Dec. 26 walk up shopper traffic was 11.2 percent lower than had been predicted, and the East Coast blizzard is considered the culprit. Overall, shopping traffic in the Northeast was down 6.1 percent the day after Christmas, while the following day was even worse, as thousands were completely snowbound and couldn’t  commute or travel.

Bill Martin, the founder of ShopperTrak, pointed out that the East Coast blizzard “halted nearly all retail visits and spending” at the worst possible time for retailers.

Walk-up shopper traffic much lower than last year

According to ShopperTrak figures, Dec. 27 retail shopping traffic was down a whopping 42.9 percent when compared with last year. The projected loss of $1 billion in sales will not bode well for retailers who are struggling to maintain the bottom line. While Martin and others hold out hope that the weather will clear and retailers will see more of the numbers they were expecting, there exists a great deal of uncertainty.

Will online retail sales be enough to counter the blizzard effect?

Marshal Cohen, chief retail analyst with the NPD Group, told CNN that “the loss of post-Christmas weekend is brutal” for retailers. He is unsure as to whether retailers will be able to pick up the blizzard slack in stores, although online retail sales more than likely experienced a welcome bump, thanks to snowbound shoppers.

The two-year retail sales slump brought on by the recession had lessened somewhat this year, in large part due to big Black Friday numbers. The East Coast blizzard effect is an unwelcome slowdown. Cohen predicts it will take retailers two to three weeks to regain sales momentum.

Sources

CNN Money

The retail chill

Don't leave this Bad Santa cookies – the sugar makes him hyper. (Photo Credit: CC BY-SA/Dan Century/Flickr)

As Christmas 2010 approaches, it appears that Santa’s sleigh is somewhat lighter than it has been in years past. Retail numbers have improved from those of Christmas 2009, but Santa is nervous; the Rhode Island newspaper headline “Santa Claus robs yacht club” is just another sign of the times, reports The Providence Journal.

Bad Santa robs rich yacht club

Yes, there is a Santa Claus, and that bad Santa needs spending money like you wouldn’t believe. Robbing a liquor store would be one thing, but when Santa Claus robs a yacht club, you know he’s kicking it upscale. According to Lt. Raymond Blinn of the Providence Police, a man dressed in a Santa Claus suit entered the East Providence Yacht Club on Pier Road Sunday evening at around 7 p.m. Santa’s goodie bag was empty, all the better to stuff with bills from the cash register. To make his ho-ho-holdup message clear, Kris Kringle whipped out what has been described by authorities as either a “shotgun or rifle-type gun.”

To the relief of children everywhere, no shots were fired and nobody was hurt when Santa Claus robbed the yacht club.

A potentially deadly caliber of Christmas

Buckshot is not typically associated with Santa Claus, which makes this craven display of felonious holiday cheer all the more jarring. Even if Bad Santa was merely packing rock salt, the trust of true believers may have been shaken. At least the so-called magic man dressed in red with snow-white beard was wearing jeans. That’s not elf-standard attire. Patrick Swayze would have picked up on the ruse immediately and dished out some “Roadhouse”-style justice. If it was indeed Santa, he could quickly fly up the chimney to escape a roundhouse kick.

As it stands, Bad Santa made off with some cash. Area police continue to investigate the case.

Sources

The Providence Journal

Another Santa has struck before

Retailers can celebrate, as the November haul of quick cash was better than anticipated. Image from Wikimedia Commons.

The retail industry has cause to celebrate, as the haul of quick cash was better than expected last month. November brings with it Black Friday at the end, which is when a lot of money gets spent. The retail industry has been hurting for payday cash throughout the recession.

November nets retail industry a lot of quick cash

Holidays bring with them tradition. Thanksgiving, in particular, has certain traditions like pumpkin pie and the Thanksgiving Classic series of football games, but the day after Thanksgiving, or Black Friday, is a huge shopping day. Many people spend a lot of quick cash buy Christmas presents for themselves or others, and the retail year revolves around that time period. November 2010 retail sales, according to USA Today, were even better than expected, and a better pay day for an industry in a down economy is good news, indeed. Also, since fewer shoppers are using credit cards, that means fewer installment loans are needed to cover the tab in January.

Gains posted over last year

Analysts were predicting a gain in retail sales of 3 to 4 percent in November 2010 over November of 2009, but were closer to 6 percent. That means more instant cash is going into the economy, and also reveals that consumers are feeling more confident this year. Luxury retail stores Neiman Marcus and Saks posted sales gains over 5 percent more in November 2010 than in 2009, and Abercrombie and Fitch posted a 22 percent gain in November 2010 over November 2009. These brands experienced declining sales in 2009, but have begun rebounding. This is impressive, since some items in those stores would send the average person running for payday loans to cover the bill.

Good signs

This does not exactly mean that gray skies are clearing up and happy days are here again, but it means that recovery is certainly on track. The American economy is a consumer economy, and that is where some very positive signs are coming from.

Sources

USA Today

Retail sales indicate people will spend at the pump and the dealership, but not much elsewhere. Image from Wikimedia Commons.

The U.S. Census Bureau has just released its monthly report on retail sales activity. The Census Bureau found that retail sales for July grew about 0.4 percent from June and had grown 5.5 percent since June of 2009. The increase was less than projected. Economic indicators are pointing toward a slower recovery. Consumer prices also rebounded slightly after several months of slight decline. Consumer prices are being watched closely, as increasing prices and decreasing incomes and assets are signs of deflation.

Retail sales get a slight bump

Retail sales for July saw a slight increase. The U.S. Census Bureau reports that retail sales as a whole increased by 0.4 percent for July, but that figure can be somewhat misleading. Discretionary retail spending, for goods such as furniture or electronics, fell 0.42 percent between June and July. Discretionary spending, according to the Christian Science Monitor, rose 2.77 percent from a year ago. Retail sales had fallen the previous two months, as May retail sales were down 0.3 percent from April, and June sales slid a further 1.0 percent, according to the Wall Street Journal.

Modest gains helped by auto sales

With car companies beginning to make serious gains, such as General Motors and Ford returning to profitability, the sale of cars helped retail sales figures. According to Bloomberg, the bulk of the increase was from people buying cars and, subsequently, gas. All other purchases combined for a drop of 0.1 percent. Consumer prices also rose. The Consumer Price Index rose 0.3 percent, meaning that the cost of living is increasing in an era of high unemployment.

Watching for signs of deflation

The unemployment rate is still almost 10 percent, and recovery is progressing slowly. The Federal Reserve is currently looking for signs of deflation, which is where prices of goods increases while less money is available to go around. Less wealth is held in housing, and fewer people are employed fully. Overall conditions, including an increased savings rate, indicate trepidation of consumers to spend on larger items.

Further Reading

Christian Science Monitor

Wall Street Journal

Bloomberg

Weak retail sales contrasted with a rising consumer confidence report to narrow trading and reduce stock market volatility on Friday. Flickr photo.

Retail sales dropped in May, and the stock market dropped in step with data delivered by the Commerce Department retail sales report. Stock market volatility has become the new normal. The stock market rose at the end of the day Thursday before reversing direction early Friday when the May retail sales report was released. A schizophrenic market then seesawed throughout the day as conflicted investors weighed the negative retail sales report with an unexpectedly positive analysis of consumer confidence.

Commerce Department retail sales

Retail sales derailed the optimism of a late stock market rally on Thursday. The New York Times reports that Wall Street indexes fell Friday morning after the Commerce Department reported that retail sales decreased 1.2 percent last month, the largest drop since last fall. Five of 13 retail sales figure categories in the report decreased with the largest drop in building materials at 9.3 percent. Excluding sales to commercial fleets (overall auto sales increased in May), retail auto sales were down 1.7 percent.

Stock market volatility week

Despite all the recent stock market volatility, all three major indexes closed higher for the week. Stock prices dove in the last hour Monday (jobless report), rebounded Tuesday (reassuring words from the Federal Reserve), dove again Wednesday (political pressure on BP dividends) and bounced back Thursday (overseas economic reports). The Times reports that Friday’s session, its volatility tempered by the good cop/bad cop consumer confidence and retail sales reports, made the difference for the somewhat happy ending.

Consumer confidence report beats forecast

A few hours after the May retail sales report sent investors out of stocks and into bonds, the Reuters/University of Michigan consumer sentiment index for early June came in higher than expected at 75.5, up from 73.6 at the end of May and better than the 74.5 economists had been expecting. Forbes reports that the disparity between the retail sales and consumer confidence reports signifies that many Americans still feel that their personal finances are under stress while they see the overall economy to be on the mend and hope for better days ahead.

Retail sales silver lining

A deeper analysis of the retail sales report may explain why consumers on Main Street feel better than traders on Wall Street. Frank Ahrens of the Washington Post points out that even though retail sales dropped 1.2 percent from April to May, compared with May 2009 retail sales were actually up 7 percent. Ahrens goes further to say that when excluding negative numbers from bigger pieces of the pie taken by auto sales, building materials and gasoline (down 3.3 percent) overall retail sales actually rose 0.1 percent in May.

How strong are the signs of recovery?

Small positive signs of a slow recovery continued last quarter as the service sector of the economy grew slightly, primarily due to holiday sales. The increase was so slight that it created very few new jobs. Most of the growth involved calling laid-off employees back to work or replacing positions that had been cut. The Institute for Supply Management (ISM), a private trade group, reported that agriculture and retail led the way for the modest increase. ISM tracks 18 industries and reported that seven showed signs of growth. The overall service index for the quarter was 50.1, with an index of 50 or higher indicating growth. Although the growth was small, it is considered an indicator of a continuing slow recovery.

Less loss but not more jobs

The trend continued across most sectors of the economy with a slowing in the loss of jobs, but no measurable creation of new jobs. Most analysts expect the Department of Labor to report a slight increase in unemployment in December as compared to November. The December number is anticipated to be 10.1 percent up from 10 percent and the overall job loss is expected to be approximately 8000 jobs. A report from ISM echoed that trend showing a slower drop in its employment gauge, from 41.6 to 44, for the same time period. ISM’s employment gauge hasn’t risen in two years, but the fall is slowing. All of the numbers seem to be headed in a positive direction, but ever so slowly.

Isolated growth lends caution to optimism

The economic sectors reporting actual growth were finance, retail, insurance, and public administration. This marked the first time the overall sector has grown in 13 months. The retail gain was mostly due to the addition of temporary employees for the holidays. This holiday-hiring factor, combined with how small and isolated the gains actually were, adds to the cautious optimism of economic-trend analysts. None of the indicators was significant enough to spark strong positive reaction by any industry analyst. The increase in this sector does have an important impact, however, because the service sector constitutes 80 percent of all non-farming jobs in the United States.

Financial service sector shows signs of life

Postings for jobs in the financial service sector grew 19 percent in December as compared to the previous year, according to EFinancialCareers.com, an influential site catering to finance and accounting professionals. The growth continued to be in debt-related fields, accounting, and fixed income. New orders in these areas rose for the fourth straight month. The growth was slower in November, but new orders are expected to drive up prices and revenue. These increases are expected to create more jobs in the near future.

Manufacturing limps toward recovery

ISM reported that the manufacturing sector grew again in December for the fifth consecutive month. This is a positive sign for the economy, but does not carry the impact it once did. Outsourcing has moved most jobs in this sector overseas. Manufacturing’s recovery has more of an emotional appeal than much real help in rebuilding the economy.

The 2009 Christmas shopping season got off to a mixed start according to ShopperTrak, a Chicago-based company that tracks retail sales and retail store traffic. ShopperTrak report that early information shows less than a 1% increase in sales over last year, while store traffic was down by 2.7%. While this is much better news than last year’s almost 20% drop, it’s still not the kind of recovery anxious retailers had hoped for.

Can Cyber-Santa save Christmas?

Online sales, on the other hand, rose 19.6% for “Cyber-Monday” compared to last year, according to Coremetrics, a California-based web-sales tracking company. Holiday shoppers were spending optimistically on big-ticket items like big-screen TVs and electronics, but they were also looking for bargains on more staple items like washers, dryers, and refrigerators. Analysts consider these types of big-ticket retails sales to be encouraging signs.

Increased sales at the expense of profits

One misleading idea among many others in a shaky economic recovery is that sales necessarily equal profits. Many large retailers, such as Target.com, Amazon.com, and Walmart, have increased their discounts on hundreds of popular items. These increased discounts may have boosted recent sales compared to last year, but not necessarily profits. Obviously, each dollar given away as a discount erodes the retailer’s profit margin for that item. Retail success depends on profit margins and not simply on gross sales.

Do discounts cause consumers to delay purchases?

Another issue many retailers are grappling with is the likelihood that steadily deepening discounts actually cause consumers to delay making purchases. For shoppers, the message is that there might be a better deal tomorrow, so it may be wise to wait. After all, if an item was 10% off yesterday, and is 20% of today, it very may well be 30% off tomorrow. The pricing strategies of many retailers may, therefore, actually be contributing to slow sales.

Christmas comes early at the cyber North Pole

December 14th usually marks the end of the online Cyber-Christmas buying season because that is the last day that shoppers can order products and have delivery guaranteed by Christmas. A large part of the Christmas buying-season story will be told on that day. The rest of the story will be played out  in the brick-and-mortar stores between that day and Christmas. If sales in traditional stores jump after the 14th, then it just might be a good Christmas season for retail businesses after all.

Combining on-line and in-store sales gives a truer picture

A naturally occurring phenomenon may be the growing interrelationship between on-line and in-store sales. The buying season may simply be spreading beyond Black Friday as a result of increased web retailing. Slower starts to the holiday buying season may not necessarily mean that it will be a disastrous year for retail businesses. Consumers may simply be shopping and buying in a manner different from previous years. This year’s shopper may require many combination retailers to rethink their pricing and discounting strategies to better maximize their profit margins while maintaining strong sales.

Zhu Zhu pets are like this guy, but they aren't alive. However, many thousands of kids don't care. (Photo: flickr.com)

Retail stores are getting ready for the Christmas shopping season, which means that people who aren’t compulsively early shoppers are getting ready to buy their gifts. If that means getting in touch with personal loan companies to bankroll the whole operation, so be it. What a person decides to do with their money is their own business.

If you’re wondering what the little ones on your Christmas list might be interested in this year, Zhu Zhu Pets appear to be a safe course. According to Toys R Us, that’s going to be the top toy of the 2009 holiday shopping season. For retailers in need of a good holiday season, Zhu Zhu will do for them, too.

Play Me Off, Mr. Squiggles

Don’t let that cat anywhere near Mr. Squiggles and his Zhu Zhu Pets brethren this holiday season. The kids want to keep these toys to themselves. Effectively, they’re pets without the waste products, food needs and tendency to eat homework. For little kids, I don’t see the harm, although older children would be well-served shouldering the responsibility of caring for real hamsters.

Zhu Zhu Pets Getting Hard to Find?

Zhu Zhu Pets like Mr. Squiggles are selling on Amazon for $25.95, but there are reports that Wal-Mart was selling them for as little as $8. Understandably, they’re flying off the shelves at that price. Leave it to Wal-Mart to make toy shopping an operation that doesn’t require personal loan companies.

OK, So What Does Zhu Zhu Do For You?

While it doesn’t teach you about animal husbandry, Zhu Zhu Pets do come with the prerequisite array of bells and whistles. They are programmed to make more than 40 different sound effects and display rudimentary artificial intelligence. You can either watch them zip about the house or place them in one of their accessory play sets (sold separately, of course). Most of the pre-programmed sound effects only come out when Mr. Squiggles or another of the Zhu Zhu Pets is on a play set. They you can hear both kitchen and (wait for it) bathroom noises. Poopless, kiddies – but with the flush.

Retailers Don’t Want to Be Circling the Bowl

This Christmas, there’s a greater focus on consumer value than in recent years. We have the recession to thank for that. Cautious spending tends to rule out huge purchases, so retailers are looking for at smaller hits like Zhu Zhu Pets rather than big toys that have to be cut in price before the public gives them a nibble. Market research firm NPD Group Inc. informed the Columbus Dispatch that last year’s holiday season was marked by a five percent drop in toy sales over the previous year. Needham & Co. sees a further decrease from 2008 to 2009.

I Just Want to Say Good Luck. Mr. Squiggles is Counting on You

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Surely the Zhu Zhu Pets aren’t a serious replacement for real animals, but parents will appreciate not having to clean up after the animatronic replacements. We live busy lives and don’t want to have to contact personal loan companies in order to afford the cavalcade of cleansers needed to make our homes look presentable.

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