Retail Sales Confirm Slowing Holiday Season

Includes: PMR, RETL, RTH, XRT
by: Alhambra Investment Partners

By Jeffrey P. Snider

We already know what the holiday season looked like in certain retail segments from ShopperTrak's first estimates of mall sales and traffic. As it turns out, the broader retail sales data from the Census Bureau is not really that much different. There was a rather large downward revision to November's results, making the December values somewhat suspect (and candidates for revision themselves). Given that was the opposite pattern of 2012, it makes the single month comparisons "less precise."

Even with that in mind, December was as bad as the last few months. The comparisons and context remain close (worse) to the 2007/early 2008 period rather than anything remotely like a recovery or sustainable growth. Again, absent autos and the bifurcated "wealth effect", retail sales would be much worse.

The growth rates in recent months in overall retail sales have been only a bit better than the early half of the Great Recession. Subtract food and auto sales, however, and the growth rate is back down to recovery lows and well below the pre-collapse period of the Great Recession.

Stuck on the "wrong" side of that wealth effect divide, general merchandise store sales are tracking very close to per capita income. There was no appreciable growth in the holiday season, as December Y/Y was just 0.03%.

There is no doubt that some migration is taking place to online shopping, but it is still not nearly enough to offset that wealth divide. The holiday season including online shopping was below last year's anemic pace, and only slightly better than 2009 (and below 2007). That comports pretty well with the ShopperTrak picture.

Those comparisons were rather consistent across the retail segments; below 2012, only slightly better than the recessionary 2009 pace, and quite a bit below 2007.

Again, the Christmas season failed to match expectations. Worse than that, consumers again are not gaining enough to help push the economy forward to that mythical recovery trajectory. Instead, the lack of income growth for most of the spectrum is still dragging the economy lower in a slow fade.