Sales at US clothing retailers continued to recover from the impact of the coronavirus pandemic in July, albeit growing more slowly than the month before.
According to data released today (14 August) by the US Census Bureau, sales at clothing stores increased by 5.7% month-on-month but were down 20.9% year-over-year.
Overall retail sales during the month were up 1.2% seasonally adjusted from June and up 2.7% year-over-year. That follows an 8.4% month-over-month increase in June. Retail sales have been climbing back up after a record 14.7% drop in April, the first full month that most stores were closed under stay-at-home orders imposed to try to halt the spread of Covid-19.
Ken Perkins, president of research firm Retail Metrics, notes July consumer spending came in lower than the Street expectation of a 2.3% rise. “This was the third straight monthly increase but represented a significant sequential slowdown from June’s upwardly revised 8.4% month-on-month gain.”
He adds the first half of 2020 has “been a nightmare for non-essential retailers. A stream of high-profile retail bankruptcies, store closures, historically high unemployment levels, retail worker furloughs, permanent job cuts, dwindling foot traffic, reductions in store capacity due to social distancing requirements, accelerating consumer e-commerce adoption, and rising costs associated with sanitising have hammered an already beleaguered industry.
“Numerous chains were forced into bankruptcy as levered retailers were steamrolled by a mandated store closure tsunami. In July alone, Lucky Brands, Brooks Brothers, New York & Company (parent RTW Retailwinds), and AnnTaylor parent Ascena Retail Group all filed for bankruptcy protection.”
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By GlobalDataNational Retail Federation (NRF) chief economist Jack Kleinhenz adds: “Retail sales are starting the third quarter on a solid footing considering the nosedive we saw this spring, but we have to remember that there’s uncertainty about economic policy and that the resurgence of the virus is putting pressure on the fledgling recovery.
“While households are spending, they are anxious about their health and economic well-being, so they are being pragmatic. The amount of uncertainty about forecasting is huge as we look toward the second half of the year, and what happens with the economy comes down to what the coronavirus allows us to do.”
NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants in order to focus on core retail – showed July was up 1% seasonally adjusted from June and up 10% unadjusted year-over-year. The difference between the Census Bureau and NRF numbers is because the categories NRF excludes were among those most affected by the shutdowns.
The July numbers were part of a strong trend: NRF’s numbers were up 7.1% unadjusted year-over-year on a three-month moving average and up 4.7% for the first seven months of the year.
Just over half of retail categories saw month-over-month gains and three-quarters saw year-over-year increases. The biggest monthly gain came at electronics and appliance stores, which are selling more computers for home offices and online learning because of expected school closings, along with more appliances associated with home improvement spending and higher home sales.
Clothing and clothing accessory stores were up 5.7% month-over-month seasonally adjusted, but down 19.6% unadjusted year-over-year, according to the NRF’s figures. Sporting goods stores were down 5% month-over-month seasonally adjusted but up 18.9% unadjusted year-over-year.
Online and other non-store sales edged up 0.7% month-over-month seasonally adjusted and surged 25.8% unadjusted year-over-year.
Apparel poor performance continues
Neil Saunders, managing director of GlobalData Retail, notes that overall, July was another very satisfactory month for retailers, with total sales rising by 3.8% over the prior year. Pure retail sales – which exclude automotive, gasoline and foodservice – increased by “a very robust 10%.”
“At an overall level, spending was aided by enhanced unemployment benefits which were in place for most of July. This put more money into the hands of consumers, many of whom have been actively spending a proportion of the proceeds on retail products. While unemployment remains historically high, an improvement in job numbers also helped to build confidence which fuelled spending.”
However, Saunders says where shoppers elected to spend their money remains very uneven, and the dramatic pandemic-created shifts in the fortunes of different retail sectors remains firmly in play. While sales at food stores and on home improvement were up, “sales at apparel stores plunged by 19.6%, continuing the run of poor performance.
“While online apparel is performing very well, visits to clothing shops, especially those located in malls, are extremely suppressed. Impulse buys are down and spending on certain categories, like workwear, has all but been wiped out. This trend supports the view that apparel will be one of the most distressed parts of retail as we move through and beyond the pandemic.”
Looking at channels, online continues to grow at pace, as indicated by the wider non-store sales figures which rose by 25.8% year-over-year. However, Saunders says it is worth noting that online growth has slowed since last month and penetration remains steady, having already fallen from its peak during the April lockdown. “This supports our contention that, contrary to many predictions, online is not going to soar much further nor will it dominate or decimate physical retail.”
He adds: “If the dose of positivity from the retail sales figures seems at odds with other general trends in the economy and with the progression of the pandemic, it is because consumers have been largely shielded from economic realities by the various stimulus and benefit programmes. However, many of those advantages expired at the end of July, and August will be the first month when the chill winds of economic turmoil hits many households.
“Our tracking data already show that spend moderated in the first month of August and that confidence around personal finances dipped sharply. Until and unless enhanced benefits are redelivered to households, we believe that solid performance of retail will continue to wane over the remainder of this year.”
