Retail sales gained by 1.1% in September, enthusing stocks. The SPDR S&P 500 (SPY), SPDR Dow Jones Industrial Average (DIA) and the PowerShares QQQ (QQQ) were each up robustly Monday on the news. The growth in sales offered reassurance about an economy that was recently drawing questions about its health. However, a special factor may have offered a temporary lift for the month and should play a smaller role moving forward.
The government said retail sales rose 1.1% in September, and August was revised higher by three-tenths of a point to +1.2%. At first brush, one would expect the gain came from the significant auto segment or on higher gasoline prices. However, when excluding autos, sales were also up by 1.1%, and when excluding autos and gasoline, sales increased by 0.9%, exceeding economists' consensus expectations for growth of 0.5%. That's impressive.
Closer inspection of the data shows that motor vehicle sales increased by a robust 1.3% rate, boding well for automakers Ford (NYSE: F), General Motors (GM), Toyota (TM), Daimler AG ADRs (DDAIY.PK), Honda Motors (HMC) and Nissan - some more than others. Auto shares were higher on the day, with Ford and GM lagging their foreign competitors' gains. Auto sales were already reported for September, and so the gains in these stocks are also attributable to the general message conveyed by the overall sales growth.
Gasoline stations did see above average growth of 2.5% on the month, given the rise of gasoline prices, especially in California. The shares of Pantry Inc. (PTRY), an important operator of gas station and mini-market stores, are higher by 1.5% on the news. The shares of major oils Exxon Mobil (XOM) and Chevron (CVX) are up a half point each on the news, as well as on news that Iran is contemplating causing a large oil spill in the Strait of Hormuz.
The special driver last month was found in sales at Electronics and Appliance Stores, which increased 4.5% over August. The gain was the largest of any segment, and was directly attributable to Apple's (AAPL) iPhone 5 introduction on the twelfth of the month. Apple sold five million of its new phones just through the first weekend of its availability. This certainly drove traffic into stores other than Apple's, both at street level and on the web. Best Buy (BBY), for instance, should have seen higher foot traffic and likely generated sales of products other than the iPhone as well as on discounted legacy Apple phones and on competitively priced competitor gear.
Sales of non-store retailers, which include catalog but also sellers on the web, increased by 1.8% in September. Though some of these retailers were not selling the iPhone 5, they still benefited from traffic to their sites and on the re-sales of Apple products and the sales of older Apple and competitive products through the month. Thus, the Amazon.com's (AMZN) of the world, along with eBay (EBAY) and others benefited indirectly.
Food and beverage store sales increased 1.2%, likely on price increases in agriculturally based goods. Sellers like Kroger (KR), SuperValu (SVU) and Wal-Mart (WMT) also make a good deal of money from the use of food stamps.
Building material and garden equipment and supplies dealers saw a 1.1% sales increase through September, as the construction industry benefits from the lack of supply of new homes and the building of rental properties to meet the demand of our new "renter nation."
Sporting goods, hobby, book and music stores saw sales increase 0.8%, likely on seasonal demand related to the start of school. Yet, clothing and clothing accessories stores only saw a 0.6% increase in sales, while general merchandise stores like Wal-Mart, Target (TGT) and Sears (SHLD) only saw a 0.3% increase. Department stores like J.C. Penney (JCP) marked a sales decline of 0.2%, as they continue to lose share to discounters and warehouse club stores like Dollar Tree (DLTR) and Costco (COST).
Another measure of economic health tied to discretionary spending offered a different message than the electronics stores. Food services and drinking places only marked sales growth of 0.4% in September, offering an ominous perspective on the perhaps short-lived nature of iPhone sales. While the celebration today is understandable, investors should take into account that temporary short-term iPhone boost.