NRF: Strongest holiday since end of Great Recession
Low unemployment and confident consumers helped fuel one of the most robust holiday shopping seasons retailers have seen in years.
Retail sales during the combined November and December period jumped 5.5% in 2017 to $691.9 billion, the largest increase since the 5.2% year-over-year gain in 2010 after the end of the Great Recession, the National Retail Federation said. The total, which excludes restaurants, automobile dealers and gasoline stations, includes $138.4 billion in online and other non-store sales, which were up 11.5% over the year before.
The results topped the NRF’s forecast of $678.75 to $682 billion, which would have represented a 3.6% to 4% increase. NRF had forecast that non-store sales, would grow between 11% and 15% to between $137.7 billion and $142.6 billion.
With unemployment at a 17-year low, a pickup in income, strong consumer confidence and a rising stock market, NRF chief economist Jack Kleinhenz said a number of factors provided a strong base for spending during the holidays. The season also came on the heels of the three strongest monthly year-over-year gains for retail sales since the fourth quarter of 2014.
“The economy was in great shape going into the holiday season, and retailers had the right mix of inventory, pricing and staffing to help them connect with shoppers very efficiently,” Kleinhenz said. “The market conditions were right, retailers were doing what they know how to do, and it all worked. We think the willingness to spend and growing purchasing power seen during the holidays will be key drivers of the 2018 economy.”
NRF’s numbers are based on data from the U.S. Census Bureau, which reported Friday that overall December sales – including automobiles, gasoline and restaurants – were up 0.4% seasonally adjusted from November and 5.4% year-over-year.
There were increases in every retail category except sporting goods during the holiday season, which NRF defines as Nov. 1 through Dec. 31. Specifics from key retail sectors during November and December combined include:
• Building materials and supplies stores increased 8.1% unadjusted year-over-year.
• Furniture and home furnishings stores increased 7.5% unadjusted year-over-year.
• Electronics and appliance stores increased 6.7% unadjusted year-over-year.
• General merchandise stores increased 4.3% unadjusted year-over-year.
• Clothing and accessories stores increased 2.7% unadjusted year-over-year.
• Health and personal care stores increased 2.2% unadjusted year-over-year.
• Sporting goods stores were down 0.5% unadjusted year-over-year.
Analysis: Retail growth in 2018 will be ‘above average’
Over the past week, the welter of holiday trading updates has hinted that retailers enjoyed a robust December. Today’s strong retail sales numbers lend weight to that view.
At total level, year-over-year growth of 4% in December does not seem all that impressive. Indeed, it is a little way below the average monthly rate for 2017 and quite a bit below the 6.6% uplift recorded in November.
However, the figure is affected by weak sales of autos which were up by only 0.4% over the prior year. When this, and other non-core categories are removed, pure retail sales increased by 4.6%. This represents a significant increase over the average monthly 3.8% uplift for 2017 and puts December as the third best month for retail growth of the year.
Growth within retail was broad-based with most categories performing well. Home and furniture stores led the way with 7.5% growth over the prior year. Some of this is a consequence of a robust housing market, which continues to spur home spending, but some is also the result of more gifting of home products. Our consumer data showed that small home-related items like decor and accessories were one of the most popular gifting categories this holiday season.
Electronics, which has been relatively flat for most of 2017, ended the year with a flourish. The 5.7% growth rate the category enjoyed is largely thanks to a much better line up of consumer electronics products, including the latest iPhones and a host of new Amazon devices. Strong promotional activity, especially on products like home speakers, stimulated consumer interest and drove volume across many retailers.
Notably, both home and electronics are categories where individual items can be expensive. That they did well underlines the fact that consumer confidence across the period was very strong. Our weekly tracker shows consumers ended the year on a high for sentiment about their household finances and the economy in general. This was extremely helpful in driving trade over the holiday period.
Smaller ticket sectors like clothing did reasonably well, although growth of 1.1% puts the sector near the bottom of the holiday league table. Given that the cold weather was mostly helpful to retailers over December, the issue in apparel is that consumers are bored with offers that appear samey and undifferentiated and so they are not driven to buy. This, in turn, leads to excessive discounting which reduces sales values and growth.
In keeping with its status across most of 2017, sporting goods remained a challenged part of the market with sales declining by 1.5% on a year-over-year basis. Except for Lululemon and a few other players, there was a lack of inspiration and excitement in the segment this holiday which made it easy for consumers already saturated with sports apparel and footwear to either shun making purchases or to do so at generalist players like department stores.
After a strong end to the year, all eyes now turn to 2018. From a confidence point of view, the year has started well with consumer optimism rising further. In our opinion, bonuses and raises which have come off the back of the tax cuts will likely support spending through the early months of the year. Growth may drop back from holiday levels but will remain above average.
Walmart confirms Sam’s Club closings
Walmart officially confirmed it is reducing its Sam’s Club real estate portfolio.
The discounter announced it will close 63 Sam’s Club stores across the United States, with the balance of the facilities closing during the next few weeks. The closings will leave the company with 597 Sam’s Clubs locations.
In addition, Walmart said it will convert up to 12 of the impacted clubs to e-commerce fulfillment centers in a move designed to speed delivery of online orders. The first of the converted online fulfillment centers will be located in Memphis, Tennessee.
Walmart said the decision to close the clubs came after a thorough performance review.
“Transforming our business means managing our real estate portfolio and Walmart needs a strong fleet of Sam’s Clubs that are fit for the future,” said John Furner, president and CEO of Sam’s Club. “We know this is difficult news for our associates and we are working to place as many of them as possible at nearby locations.”
Walmart said it will provide support and resources to those associates who are affected, including the bonus announced on Thursday and 60 days of pay, as well as severance to those eligible.
“We need great people to help lead us into the future and we hope that many of them will stay with the company at either a local store or club,” Furner said. “Change is never easy, but we’re making these decisions as part of running a healthy business.”
The company will record a “discrete” charge of approximately $0.14 per share related to these actions, with the vast majority of this in its fourth quarter. Further details will be shared, as appropriate, when the company releases quarterly results on February 20, 2018.