Spring is in the air, and it is driving shoppers into stores.
For the week ended Feb. 27, the Retail Economist-Goldman Sachs Weekly Chain Store Sales Index fell 0.2 percent compared with the prior week, but on a year-over-year basis, sales showed a gain of 3.2 percent. The jump follows a January retail sales report from the government that revealed an increase across retail segments.
The rise in sales comes at a time when retailers have posted weak fourth-quarter results, which was impacted by warm weather, steep markdowns and an ongoing consumer preference for buying experiences over “things.” Still, there have been bright spots such as Target Corp. and J.C. Penney & Co. as well as off-price retailers such as TJX Cos. Inc. and Ross Stores Inc.
In the fashion apparel segment, retailers are pushing spring merchandise — and consumers seem to be responding. The weather is cooperating and consumers are now beginning to get their tax refunds, which they may be itching to spend.
Michael P. Niemira, chief economist of The Retail Economist LLC, noted that “mild February weather helped to drive interest in spring clothing over the past week and overall sales were especially helped by easy comparisons with the harsh winter weather in February 2015.”
The analyst said “if that warmer weather hangs around during March, spring and Easter-related apparel demand is likely to get an expected lift, especially given the early Easter this year — March 27 versus April 5, 2015.”
Weather researchers and retail market analysts at Planalytics Inc. said today that “spring demand” is expected to be triggered by warming weather trends.
“Next week, markets in the Great Lakes, Midwest and Ohio Valley will see the greatest warmth compared to normal,” Planalytics said. “These conditions will reach the mid-Atlantic and Northeast regions later in the week and into the weekend. The warmth will kick spring purchasing into high gear. Expect large demand spikes in these regions for lawn and garden categories, sporting goods, spring apparel and warm weather products such as sun care, bottled water, allergy relief and insect repellents.”
Meanwhile, retailers reporting same-store sales tomorrow are expected to post gains in comparable-store sales of at least 0.1 to 0.5 percent. And in the apparel sector — excluding Gap Inc. — comps are pegged to rise 3.7 percent. The teen apparel retailers are pegged to show an aggregate drop of 5.4 percent for the month, according to Thomson Reuters.
Ike Boruchow, senior analyst at Wells Fargo Securities, said “February ended on a solid note, as traffic picked up and markdown activity ticked down.”
“Following very sharp traffic declines in the last two weeks of January and the first two weeks of February — according to same-store data from ShopperTrak, store visitation was down 8 to 10 percent year-over-year each of these four weeks — trends improved significantly at the end of February,” Boruchow said adding that tax refunds are now beginning to “flow to consumers” while the warmer weather and spring goods are driving traffic.
Nariman Behravesh, chief economist at IHS, said from a global perspective, the U.S. is a “bright spot in the global economy and, within the U.S., it’s the consumer that is the bright spot.” Behravesh described consumer spending as “extremely strong in January, but even over a three-month period consumer spending has been strong.”
Again, as other economists and analysts have previously noted, the spending has been on bigger-ticket items and on dining out as well as on experiences versus buying goods, particularly apparel (although activewear remains strong). Additionally, consumers are seeing more of their household dollars go toward health care and housing as well as transportation — despite cheap gas.
But Behravesh notes that “income growth is good, job growth is good and interest rates are low, which is helping to support these sectors of the economy.”
From a broader economic view, Behravesh said “there are negatives, three of them that are worth mentioning — one of which is trade. The dollar is strong, which means trade is a drag on U.S. growth. Another is this very dramatic plunge in capital spending in the energy sector due to the huge drop in oil prices — capital spending is half of what it was two years ago. And finally is that we seem to be in the middle of an inventory cycle.”