Retail Sales Rise as Shoppers Brave the Storms
The U.S. Commerce Department retail and food services sales tally for February rose to $355.5 billion, up 0.3% from January and 3.9% from February 2009. Excluding auto sales, totals were up 4.2% from the year-ago month and retail sales only were up 4.4%. Auto sales were up 2.1% above February 2009.
The increases were a surprise, since most analysts had expected sales to come in flat to down a few fractions of a percentage point, due to inclement weather and record snows in large swaths of the country.
Individual tallies from major chain retailers released last week hinted at a stronger-than expected-month, but the Commerce Department's count is far more accurate, since it includes gas, food and auto sales, as well as the results of Wal-Mart Stores (WMT), the world's largest retailer, which doesn't publicly report monthly sales.
"February could be the direct result of cabin fever with consumers eager to get some fresh air and enjoy a day of shopping," said Rosalind Wells, chief economist of the National Retail Federation, in a statement. "We expect sales increases to continue but high unemployment and other economic factors will restrain consumers' ability to splurge on discretionary items."
E-tailers Continue to Gain
Gas stations were up 24.6% above the year-ago month, thanks to a sharp increase in gas prices over the last six months. The biggest surge among merchants was -- again -- non-store retailers, a category dominated by online stores. Non-store sales rose 11.8% from February 2009; as consumers continue to shift their shopping online, e-tailers keep gaining, and the winter weather gave them an added push from snow-bound shoppers.
Food and drink establishments were down 0.3% from the year-ago period, their first drop in months. This was likely due to the weather, but also because eateries and bars were among the retail establishments that held up their sales over the past year, making the month a tougher comparison.
The usual suspects remained down, but by smaller amounts: building and garden supply stores (down 3.9% from Feb. 2009), furniture and home furnishings retailers (down 2.1%) and electronics stores (down 1.6%). As the housing market stabilizes, merchants have reported slightly improving hardware and housewares sales in recent quarters, but also homeowners who remain wary of big-ticket renovations. Meanwhile, electronics sales remain strong, but totals are depressed by falling prices for top-shelf equipment, especially flat-screen TVs.
Some previously battered sectors also appear to be improving. Apparel retailers were relatively flat, up only 0.1% above the year-ago period, but rose 1.1% in February over the month before. Apparel stores continued to see-saw, down 0.7% from February 2009, but up 0.6% over this January. February is typically a slow month for those retailers, after the post-holiday clearances and before the Easter season perks up sales of Spring merchandise.
So shoppers are slowly coming out of their recession depression, but most experts caution retailers not to become overconfident. The percentage increases are partly thanks to an easy comparison with the weak sales of a year ago, and with unemployment hovering around 10%, consumer confidence is still iffy. The experts warn that shoppers are still careful with their spending, regardless of any "frugal fatigue" they may feel, so merchants should hold down prices and inventories for a while longer.
Consumers Now Focus on Value
One survey found shoppers have changed their habits during the recession and are looking at product and price, with an eye to get the biggest bang for the buck. Consultants AlixPartners quizzed 7,700 U.S. consumers about their attitudes towards 135 top retailers and found that, while they are not as anxious as last year, shoppers are now driven primarily by value and saving money.
The study concluded a "shift to thrift" has made service and store experience fall behind price in shoppers' priorities and they are willing to settle for something "good enough" if it's a decent value for the price. The researchers noted that 15 retailers in the study who saw their stock rise 40% last year met or beat those shopper expectations.
Another study found the Generation X and Y shoppers, whose spending will lead the recovery, have a thriftier mindset than the Boomers that led the economy out of the last two recessions. They shop around more, look for more deals and engage in less conspicuous consumption than their parents, according to the findings of The New Consumer Behavior Paradigm: Permanent or Fleeting? by consultants from PricewaterhouseCoopers and Retail Forward.
"Although we're starting to see signs of shoppers getting tired of trading down, they remain cognizant of today's economic realities and need to balance that with personal desires to reward themselves," said Mary Brett Whitfield, senior vice president at Kantar Retail, Retail Forward's parent. She suggests retailers need to offer lower-priced, do-it-yourself alternatives to more expensive items such as at-home spa treatments or gourmet takeout to reach those post-recession shoppers.
"Retailers and suppliers must realize that there will not be a wholesale return to previous shopping patterns and behaviors," said Lisa Feigen Dugal, PricewaterhouseCoopers' U.S. retail and consumer practice leader. "To succeed during the recovery, they will need to recognize that some shopper segments will still be in a 'recession' shopping mode."