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Feb. Retail Sales Take Sharp Drop

Dragged down by recessionary trends, overall retail sales in February fell steeply. Apparel and accessories stores gained but department stores didn't fare...

WASHINGTON — Dragged down by recessionary trends, overall retail sales in February fell steeply. Apparel and accessories stores gained but department stores didn’t fare as well.

February sales for all retail and food services decreased a seasonally adjusted 0.6 percent after rising 0.3 percent in January, the U.S. Commerce Department said Thursday.

Apparel and accessories stores were up 0.2 percent versus January, but department stores dropped 0.2 percent for the month.

Specialty store sales increased 2.3 percent to $18.9 billion compared with February 2007, and department stores declined 4 percent to $16.9 billion.

“The takeaway from [February sales] is that the near-term prognosis for consumer spending is poor, owing to steeper energy prices, higher food costs, fewer job opportunities and declining home prices,” said John Lonski, chief economist for Moody’s Investor Services. “The report is very much in keeping with the sense that the U.S. is already in a recession.”

Labor Department employment figures last week showed signs confirming recession fears, as retailers and manufacturers reported steep job losses. The overall economy lost 63,600 jobs last month, the worst drop in five years.

February same-store sales reported last week also were weak. Specialty chains tracked by WWD fell 0.9 percent and the department store sector declined 4.6 percent.

Lonski said apparel and general merchandise sales were as expected in February, but sales in other retail categories, especially automotive sales, came in well under expectations and stifled overall results.

Experts also warned that sales in the apparel and accessories categories could have come at a cost, with many retailers relying on deep discounts to drive sales.

“February was a transitional month for retailers,” said a spokesman for the National Retail Federation. “Consumers are holding back on discretionary spending and focusing on necessity.”

Year-over-year numbers are somewhat misleading for clothing stores, the spokesman added. The prior year comparison was an easy one for apparel retailers, who struggled in February last year as indications of the housing slowdown and unseasonable weather led to tepid retail sales.

Economists said the outlook for the next few months will be the same, with expectations that the U.S. is headed into a mild recession in the first half of the year, said Brian Bethune, U.S. economist with Global Insight.

“We are expecting pretty sharp declines in durables in the first half on the consumption side,” Bethune said. “Services will continue to chug along. Overall, we will end up with real consumption just inching forward.”

Slower employment growth, high gas prices, food price inflation, household net worth declines and falling home prices will continue to be a drag on retail sales and consumer spending, economists said. Retailers will look to early Easter sales and hope for seasonal weather to drive consumers into stores in March.