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Small Store Growth Slows in September

Increases still outpace those of larger retailers, according to SpendingPulse survey.

Small retailers felt signs of an autumnal chill in their September sales results but still managed to post better numbers than their larger competitors.

The monthly SpendingPulse for Small Business survey showed year-on-year sales gains for last month slowing to 5.6 percent, down from their 6.8 percent gain in August and 5 percent below August levels in a month-to-month comparison.

Although the September advance is the smallest posted by the group this year, it continued a more than yearlong trend in which smaller stores outperformed overall retail results, which moved up 4.1 percent.

Michael McNamara, global solutions leader for MasterCard SpendingPulse, said growth in specialty apparel, including both independents and larger chains, slowed to 3.7 percent last month from 7.1 percent in August, consistent with the trend seen when major retailers filed same-store sales results for September on Oct. 4.

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The survey is conducted by MasterCard Advisors in collaboration with Wells Fargo. “Small” is defined as having less than $35 million in annual sales and a payroll of less than 200. Excluding automobiles, small stores in the U.S. generate more than $100 billion in annual retail sales.

McNamara noted that apparel retailers and those in other sectors included in the survey last month faced a series of tough challenges, ranging from difficult year-ago comparisons to “a macroeconomic environment that one can’t classify as being robust. The smaller stores as a group were up against a very tough year-ago number — they were ahead 9.4 percent in September 2011 — and they’ll face the toughest comp of the year in November, when the 2011 increase was 10.5 percent.”

The December increase last year was only a slightly less buoyant 9.3 percent.

“Small retailers in apparel will have it even harder,” he noted. “The December 2011 increase in apparel is 11 percent versus 9.5 percent in September. October is an easier number — 4.8 percent — but the figures get more difficult after that.”

McNamara said that jewelry sales in September were up 2.2 percent, with the smaller independents up 5 percent, “one of the larger discrepancies [between overall sales and those for smaller stores] of any category.”

Apparel retailers and broadline retailers generally saw weaker increases in September than they did in August. “Spending seems to be very seasonal and focused around events lately,” McNamara said. “People will take out their wallets for Valentine’s Day, Mother’s Day, back-to-school and holiday, and then put them away or shift to another category. In August, apparel was strong on back-to-school selling, but that shifted more towards home in September.”

He also noted that smaller stores tend to feel the effects of economic downturns and recoveries somewhat later than larger stores. “The strong numbers we’ve seen in the past year might represent something of a late small-business bounce,” he said.