Retailers’ attempts to end the fiscal year with sales increases and clean inventories keep hitting snags, and not all related to wintry weather.
The International Council of Shopping Centers expects an increase of between 3 and 3.5 percent in comparable-store sales for January while Retail Metrics expects a 2.7 percent advance among the relatively small sample of stores scheduled to report their monthly sales results on Feb. 6.
Ken Perkins, president of Swampscott, Mass.-based Retail Metrics, expects Gap Inc. to report a 0.3 percent decrease in January comps, its first decline since September and only its second of the fiscal year, and L Brands Inc., parent of Victoria’s Secret, to “squeak out” a 0.8 percent gain. Throughout retailing, “promotions have remained heightened” as retailers look to clear their shelves and make way for spring merchandise, Perkins said.
If RM’s January expectations are realized, fourth-quarter comps for the more substantial sample of public companies reporting results will be up just 0.7 percent, 1 percent excluding Wal-Mart, with apparel retailers up 1 percent and the struggling teen apparel sector down 7 percent for the three months ending later this month.
ICSC reported a 1.9 percent drop in retail sales for the week ended Saturday, Jan. 18, compared to the prior week. It was the third consecutive week of declines in sequential sales, following a 1 percent decline for the week ended Jan. 11 and a 5.4 percent decline in the week ended Jan. 4.
On a year-over-year basis, sales last week were up 0.9 percent from its 2013 counterpart. While positive, the prior-year comparison has been deteriorating since 2014 began. Starting with a 3 percent increase for the week ended Dec. 28, the increase fell to 1.7 percent for the week ended Jan. 4 and to 1.3 percent for the week ended Jan. 11.
“Traditionally January is a clearance month for retailers,” commented Michael Niemira, vice president of research and chief economist for the ICSC. “However, even with widespread sales incentives, consumers held back their spending this past week. As the industry heads into the final weeks of January and the fiscal year for most retailers, the snowstorm in the East will likely curb sales in the coming week.”
ICSC conducts its weekly survey of chain-store sales in collaboration with Goldman Sachs.
Despite the deceleration in sales momentum, ICSC expects same-store sales for January to increase between 3 and 3.5 percent, slightly lower than the December increase.
Craig Johnson, president of Customer Growth Partners, expects overall sales increases for the November-December holiday period, excluding automotive, gas stations and restaurants, to be closer to 3 percent when government data are adjusted.
While not disputing the effects of inclement weather and the abbreviated holiday calendar on the season, Johnson believes a more fundamental challenge exists within the wallets of consumers as improvements in real disposable income have been virtually nonexistent in recent months. The Commerce Department’s Bureau of Economic Analysis reported growth in disposable personal income of 0.1 percent in November versus a decrease of 0.2 percent in October.
“If there’s no real disposable personal income growth, you will never have strong retail spending growth,” he noted, pointing out that the metric ran above 3.5 percent in the middle of the last decade.
He sees consumers shifting their spending “from wants to needs” and into areas providing experiential value, such as to cable and telecommunications providers. And, with inventories growing faster than comps at retail, promotional proclivity has lingered, driving down dollars per transaction and further tamping down revenue gains.
Even e-commerce, the fastest-growing element of retail in general and for omnichannel retailers in particular, will fall short of double-digit growth in the fourth quarter and is expected to grow about 9.8 percent, he said.
In a research note entitled “Frozen by Polar Vortex, Slow Economy,” Jharonne Martis, director of consumer research at Thomson Reuters, noted that “pre-announcements” among retailers who will begin reporting fourth-quarter results next month have been weighted heavily in favor of downward revisions. Of 92 companies weighing in against previous guidance, 74 have lowered projections, 15 have lifted them and three have said they would report in line with previous expectations.
The disappointing finish to the retail year hasn’t been lost on investors either. Since Dec. 31, the S&P 500 Retailing Industry Group has declined 3.2 percent to 909.84 while the S&P 500 is off a relatively modest 0.2 percent to 1,844.86.