The National Retail Federation believes the industry is gaining momentum and poised for a good year, despite a government report Thursday that retail sales declined in January.

The NRF projected that U.S. retail sales (which exclude automobiles, gas stations and restaurants) will increase 4.1 percent, up from the 3.5 percent growth seen in 2014.

The 4.1 percent increase would mark the biggest annual growth since 2011, when retail sales for the year increased 5.1 percent.

NRF also projected non-store sales in 2015 to grow between 7 and 10 percent, and noted that with the online base increasing, it’s becoming harder to sustain the double-digit gains of recent years.

“Already facing far fewer obstacles than this time last year in terms of growth opportunities, retailers are optimistic about the potential that exists for healthy growth in retail sales and consumer engagement in 2015,” said NRF president and chief executive officer Matthew Shay. “While our outlook for the year ahead is positive, we aren’t quite out of the woods; in order to see continued momentum we need a commitment from our leaders in Washington to pass legislation that will encourage investment, create jobs and set us on the path towards sustained, long-term economic growth.”

The U.S. Department of Commerce reported Thursday that sales at apparel and accessories stores dropped a seasonally adjusted 0.8 percent to $21.2 billion compared with December levels, while sales at department stores declined 0.7 percent to $13.8 billion. Sales at general merchandise stores, a category that includes discounters and department stores, rose 0.1 percent to $55.3 billion.

Shay said the 4 percent growth seen last November and December “is a very positive foundation” putting retail “in very good shape as we go forward.” He added that the government’s January retail report “doesn’t look quite as good as we hoped. But we still feel we are on the right track to continue forward momentum. Obviously, there are still long-term challenges in our economy. But we think the consumer is feeling a bit better,” Shay said, citing improving prospects for job and wage growth, and low gas prices.

NRF chief economist Jack Kleinhenz cited accelerating consumer confidence, plummeting energy costs, and gains in equities and home prices as playing a role in producing “healthy prospects for 2015,” and said that about 220,000 jobs are being created each month. Unemployment should be down to the 5 percent range towards the end of the year, he added. “We probably will see more emphasis on wage growth towards the end of the year,” Kleinhenz said. “Inflation will start to pick up a little bit going into 2015.”

The labor slowdown at the West Coast ports where management and dockworkers can’t reach common ground in contract talks is impacting business. “Retailers and other businesses across the supply chain are feeling this every single day,” Shay said, adding that deliveries that typically take a couple of days are now taking weeks. He said 42 percent of all container traffic comes to the U.S. through West Coast ports. This week, the Pacific Maritime Association again suspended for four days unloading ships at West Coast ports due to its contract dispute with the International Longshore and Warehouse Union.

“It’s difficult to estimate the impact of these delays,” Kleinhenz said. “It’s not going to throw a real monkey wrench into the [industry’s] growth path, but it’s more than a minor speed bump. It’s putting sands in the gears of the engine.”

Other negatives, or “wild cards” cited by the NRF executives include China’s slowing economy, some European nations near recession, and the strength of the dollar impacting exports and foreign tourism to the U.S.

Seventy percent of the economy is consumer spending. Of consumer spending, 35 percent is spent on goods; 65 percent on services.

In the overall economy, the government said retail sales fell 0.8 percent in January to $439.8 billion. But retail sales excluding autos and gasoline increased 0.2 percent last month.

“The fact that retail sales minus gas station sales were flat suggests that consumers are not taking their savings from the gas pumps and going out and aggressively spending it, at least at apparel retailers,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics. “Some of the [decreased spending from falling gasoline prices] will be saved and some may be used to purchase services or electronics.”
Hoyt noted that there has been weakness at specialty stores and department stores for several months, though on a year-over-year basis, sales at apparel and accessories stores were up 2.7 percent in January, while sales at department stores were 0.3 percent higher and sales at general merchandise stores were up 1.8 percent.

“The thing to keep in mind about the year-over-year comparison is those numbers are somewhat inflated,” Hoyt said. “January of last year had huge winter storms and consumers were not able to shop. The fact that retailers are posting such weak numbers against what should have been a relatively easy comparison makes those numbers [for January] even weaker than they seem.”

Still, Hoyt said Moody’s expects “things to pick up” in the first half. “With job growth remaining strong…we think the prospects are good going forward, broadly speaking. Can apparel retailers figure things out and win back some of the share of that spending they seem to be losing right now, or will they continue to be lower on the totem pole? It’s hard to say.”

 

load comments
blog comments powered by Disqus