Based on data reported by the U.S. Commerce Department, November GAFS retail sales, which include most general merchandise categories, rose 4.7% over last year. The National Retail Federation said that November sales were in line with their forecast of 4.5% growth in Nov/Dec holiday sales to $219.9 billion.
“Consumers are still in the game, with many splurging on high-end merchandise,” said NRF Chief Economist Rosalind Wells. “November sales are an indicator that the holiday season is off to a good start.”
Clothing and Clothing Accessories stores rose 4.7% over last year, but Shoe store sales were not available for the month. General merchandise stores, including department stores, also saw increases of 4.6% over las year.
Sporting Goods stores sales, which are lumped together with Book and Music stores rose just 1.0% versus November last year after gains of 3.5% in October and 2.3% in September. The numbers here are tough to read as more people rely on downloads for music and the Internet becomes the largest bookseller.
A recent report by Deloitte Research is supporting the positive outlook for the season and the coming year, citing falling oil prices that are expected to increase real wages and consumer purchasing power in the new year. Consumer spending is expected to grow at a healthy pace through spring 2005, according to Deloitte Research’s Leading Index of Consumer Spending.
“Discount retailers have not performed as well as anticipated throughout this holiday season because of low real wages, but they should see a turnaround in the coming months as falling oil prices lead to lower prices at the pump, putting more cash into consumers pockets,” says Carl Steidtmann, Deloitte’s chief economist and author of the monthly index. “Strong income growth will continue to drive robust retail sales for luxury retailers this holiday shopping season.”
D&T also cited the sharp increase in real home prices, which saw double-digit gains over 2003, creating a pool of future cash from which consumers can draw upon through mortgage refinancing. But the report also said that the positive impact of tax reduction efforts that continue to fuel the upward momentum in the Deloitte index now show signs of slowing. The tax burden has risen slightly since March as continued economic growth pushes some households into higher income brackets.
The index, comprising four components — tax burden, initial unemployment claims, real wages and real home prices — rose in November to 5.28%, up from an upwardly revised gain of 5.25% in October. The rebound in the index over the past two months reflects the continued strength of the housing market and diminishing effects of the early fall hurricanes.
The Retail Outlook: Holiday 2004 Update from the Equity Research Services at Standard & Poor’s suggested that retail profitability may be a concern in Q4, but did reaffirm its 3% top-line growth estimates. The report said that November sales were modestly disappointing, with few exceptions, causing many retailers to increase promotional activity and some to lower earnings guidance. But S&P’s equity analysts believe that the season is far from lost since December represents as much as 50% to 55% of fourth quarter sales for retailers.
Early December results through December 5 as detailed by Visa USA were encouraging, with overall sales volume on Visa-branded payment cards up 19% year-over-year and other data suggest that Black Friday weekend sales may not be the bellwether it once was as sales drift closer to Christmas. A look at holiday weekly spending in the past few years suggests that as much as 72% of business has yet to be rung up with as much as 35% occurring in the last two weeks of the year. Since 2000, retailers have experienced increased last minute shopping following a lull early in December.
Another key piece to reported sales is the move to Internet sales and gift cards. Internet sales, which has seen an estimated 25% increase in sales, are generally not reported in the monthly chain store sales reports and gift cards, which were nearly 10% of sales in 2003 and should be in the 11% to 13% range this year, are not recognized until they are redeemed. This new reality continues to make January an even larger piece of fourth quarter and the year.
The International Council of Shopping Centers appears to be the lone dissenter on the season, reducing its forecast for a 3% to 4% November/December sales gain to a 2.5% to 3.0% range.
