Although varied weather patterns across the U.S. triggered mixed traffic results at retail last week, mild temperatures in certain regions helped boost sales at mass and department stores. Looking at the broader economy, several factors –— including slower job growth and decelerating manufacturing production — are expected to result a more stagnant gross domestic product, according to the S&P.
For the week ended Saturday, April 9, the Retail Economist-Goldman Sachs Weekly Chain Store Sales Index showed a 1.3 percent increase over the prior week. Year-over-year sales rose 2 percent, which was more robust than the index had been trending in the past few weeks.
Michael Niemira, chief economist of The Retail Economist LLC, said “weather was cold in the East and hot in the West, which seemingly added to a mixed performance by retail segments and regionally.” He added that “echoing the unevenness in business, department-store business was relatively strong over the past week, while online-only retailer business was especially weak.”
Regarding last month, Deborah Weinswig, managing director at Fung Global Retail & Technology, said in her market report that it was the second-warmest March in 55 years in the U.S., which favored certain retail channels.
“Home centers and mass merchants benefited the most from the warm weather, with retail foot traffic increasing by 2.1 percent and 1.2 percent for the respective segments, over the previous year,” Weinswig said citing estimates by Planalytics. The analyst also said the weather helped boost foot traffic, which gained 10 percent, at Dillard’s during the month.
RetailNext’s Retail Performance Pulse report for March noted that overall, store traffic was down 9.7 percent, which compares to a 6.6 decline in February. Sales at physical stores for March fell 7.8 percent in March, which compares to 6.9 percent in the prior month. Conversions were up 0.4 percent in March, which compares to a 0.2 percent gain in February.
With the GDP, Robert Keiser, vice president of S&P Global Market Intelligence, said in the firm’s most recent research note that adding projected employment data along with the Supply Management’s Purchasing Managers’ Index create “regression models [that] indicate that economic growth should be between 2 percent and 2.5 percent for the first quarter.” Keiser described the first quarter GDP as stagnant growth.
In the fourth quarter of 2015, economists were expecting GDP growth of about 3.5 percent, which was at the top end of Keiser’s 3 to 3.5 percent gain. But the revised numbers showed just a 1.4 percent increase.
Meanwhile, as retailers ready for shareholders’ meetings, analysts at Telsey Advisory Group have been studying the shareholder letters and some clear outlook trends are emerging.
Companies are looking to “reinvestment in the base business” while also earmarking funds “to enhance the digital platform,” Telsey analysts noted, adding that supply chain and “seamless capabilities” are also a priority as “consumers become more channel agnostic.”
“Companies have the ability to know their customer even better, and data analytics is of even greater importance in the allocation of capital as it will allow for the ability to generate higher sales and profits,” the analysts said. “Strengthening the existing offering and expanding into new areas, including adding new categories, growing overseas, and developing new brands are [also] avenues for growth.”