Retail sales rose only 0.2% in November, less than half of what was expected for the traditional start of the holiday shopping season. Sales for October were revised up but not enough to offset the weakness we saw in November. A later-than-usual Thanksgiving and kickoff to the holiday season is at least partially to blame for the weakness. Cyber Monday actually occurred in December, which means that some of the holiday spending we attribute to the start of the holiday season occurred in early December instead of November.
We saw an unusual surge in storm activity during the holiday week, which not only grounded planes but also delayed the usual start of the holiday shopping season. Weather problems matter more when the days between Thanksgiving and Christmas fall in a given year - fewer chances to make a sale.
Retail sales excluding vehicle sales were even weaker, posting only a 0.1% gain during the month. The largest losses showed up in traditional department stores and clothing stores. Spending at traditional department stores alone was down 7% from a year ago, while spending at clothing and accessory stores was off 3% from a year ago. That bodes well for those looking for more discounts this holiday season but suggests another round of retail bankruptcies in early 2020 as the broader retail market continues to adjust to consumers’ shifting preferences for online instead of in-store shopping.
Big-box discounters fared much better, with gains both during the month and compared to a year ago. We saw some increase in spending on furniture and appliances, which is to be expected given the recent bounce in home sales. The gains in spending on furniture were somewhat tempered by heavy tariffs; tariffs on furniture are some of the few to make it onto store shelves so far. People also opted to entertain at home instead of stepping out. Higher prices at the gas pump have put a crimp in discretionary spending at restaurants and bars in recent months.
Spending online remained solid and continues to grow at a double-digit pace from a year ago. The gains moderated a bit from October. Again, this likely reflects the late timing of Thanksgiving and the shift in Cyber Monday to December. Much of what usually shows up in November will be showing up in December. Year-over-year gains in December are expected to be pronounced because consumers literally disappeared during the height of the holiday season and trade war scares last December. Those fears have abated with the prospects for a mini-deal on trade with China and delays in additional tariffs scheduled to go into effect on December 15.
Bottom Line
Christmas will come late for many retailers this year, which means more discounts for consumers and another rash of retail bankruptcies in early 2020. The consumer should look a lot stronger in December, too late for many retailers to move the needle on margins, which are already razor-thin.
Copyright © 2019 Diane Swonk – All rights reserved. The information provided herein is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic, financial, investment or any other decisions. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.
