WASHINGTON — Uneven December retail sales results did not give apparel stores, or Wall Street, a green light to celebrate.
This story first appeared in the January 15, 2010 issue of WWD. Subscribe Today.
Department store sales were flat compared with November and declined 1.2 percent to $15.74 million compared with a year earlier, the Commerce Department said Thursday. Specialty store sales dropped 0.6 percent for the month, but rose 5 percent to $17.46 million year-over-year.
The industry’s less-than-stellar sales result helped push retail stocks down 0.5 percent Thursday.
“There is a gloom that is still sitting in our consumer economy,” said Kevin Regan, senior managing director and retail industry expert with FTI Consulting. “We’re going to be in a slow recovery. December was a good omen, but I’m not convinced that it is a sign of a trend.”
While the macroeconomy struggles with 10 percent unemployment and housing foreclosures, it would be risky for stores to be aggressive, he said.
“Retailers view the spring with caution,” Regan said.
Retail associations said they saw signs of improvement through the holiday season as merchants focused on inventory management and discounting.
“With an eye on managing inventory and maintaining lower price points, retailers did a tremendous job of planning for the holiday season,” said Rosalind Wells, chief economist for the National Retail Federation. But, she cautioned, “while the consumer appears to be spending again, double-digit unemployment numbers will remain an impediment to maintaining this momentum.”
The Retail Industry Leaders Association described December sales results as “subdued.”
December retail sales of all goods and services in the U.S. fell 0.3 percent compared with the previous month, but were up 5.4 percent from a year earlier to $353 billion. Total sales for 2009 declined 6.2 percent compared with 2008.
“While the overall trend is in the right direction, today’s retail sales data show that we have more work to do,” said Commerce Secretary Gary Locke.
In New York on Thursday, the S&P Retail Index slid 1.95 points to 409.43 as the Dow Jones Industrial Average inched up 0.3 percent, or 29.78 points, to 10,710.55. Tokyo turned the strongest performance among the major international markets, with the Nikkei 225 rising 1.6 percent to 10,907.68.
Target Corp. ran countertrend among U.S. retail stocks and rose 1.5 percent to $50.10 after restarting its stock buyback program. The cheap-chic retailer has about $5.1 billion left under its $10 billion buyback program, which was put on hold in November 2008 to protect the firm’s liquidity position and debt rating.
Although overall apparel sales are still not great, the trendline is much better than it was during the financial crisis and recession. That normalization has helped stabilize vendor performance and pushed Moody’s Investors Service to raise its credit outlook for U.S. apparel producers to “stable” from “negative.” Moody’s cited the industry’s efforts to cut costs and control inventories, which should lessen markdown exposure and aid profitability. The credit rating agency also said firms focusing on moderate price points would outperform those in the luxury tier.
“The consumer’s not great, but there’s nothing that I see that says we’re falling off a cliff,” said Scott Tuhy, a Moody’s debt analyst.
Tuhy said the industry had a “sharp, quick fall” and will have “slow sluggish growth out.”