September Shows Improvement in Retail Sales

The U.S. Department of Commerce reported that U.S. September retail sales rose by 0.6 percent from its prior month on a seasonally-adjusted basis following a 0.7 percent rise in August.

Total retail sales (not including motor vehicle and gasoline) rose by 0.4 percent in September following a 1 percent gain in August. Shopping-center sales—derived from these data by ICSC Research—rose by 0.4 percent in September compared with a gain of twice that pace in August. The Commerce Department figures were presented by  the International Council of Shopping Centers.


“On a month-over-month basis, strong sales gains for motor vehicles, which rose by 1.6 percent, and electronics up 1.5 percent helped to lift the overall pace, but there were solid across the board gains in most of the categories,” ICSC said. “On the weak side, were clothing and department stores—both off in September—and likely negatively affected by abnormally warm weather curbing demand for seasonal merchandise.”

On a year-over-year basis, total retail sales rose by a strong 7.3 percent in September, the strongest monthly performance since March. Excluding motor vehicles and gasoline, retail sales were up 5 percent for the month. Shopping-center sales in September rose by 3.5 percent.

2010 Holiday Sales Expected to Rise

After two anemic years of retail sales for the November-December holiday season, two retail associations are predicting a modest improvement in retail sales this year.

Holiday sales are expected to increase 2.3 percent this year to $447.1 billion, according to the National Retail Federation. While that growth remains slightly lower than the ten-year average holiday sales increase of 2.5 percent, it would be a marked improvement from both last year’s 0.4 percent uptick and the dismal 3.9 percent holiday sales decline retailers experienced in 2008.

Meanwhile, the International Council of Shopping Centers predict that holiday sales this year will rise 2.5 percent over last year’s season, a considerable improvement over last holiday season’s 0.5 percent gain.

“While many consumers will be wishing for apparel and electronics this holiday season, retailers are hoping the holidays bring sustainable economic growth,” said Matthew Shay, NRF president and CEO. “Though the retail industry is on stronger footing than last year, companies are closely watching key economic indicators like employment and consumer confidence before getting too optimistic that the recession is behind them.”

As in previous years, retailers are expected to focus on supply chain efficiencies and inventory control this holiday season to limit their exposure to excess merchandise and unplanned markdowns, the NRF said. Companies are also expected to leverage new channels—like mobile—to drive sales and provide added service to customers who want to shop anytime, anywhere.

“While consumers have shown they are once again willing to spend on what’s important to them, they will still be very conscientious about price,” said Jack Kleinhenz, NRF chief economist. “Retailers are expected to compensate for this fundamental shift in shopper mentality by offering significant promotions throughout the holiday season and emphasizing value throughout their marketing efforts.”

The ICSC say that much of the growth will be led by discounts.

“Prices and uncertainty will weigh heavily on the holiday outlook,” said Frank Badillo, an economist with consulting firm Kantar Retail. “Ongoing price competition among retailers, led by Walmart, is more likely to take a toll on sales gains than boost unit demand among shoppers who remain value conscious. We expect shopper demand to remain modest as job and income gains remain constrained by reluctance among firms to invest and hire amid an uncertain outlook. If that uncertainty turns to confidence in the weeks ahead, however, then holiday sales could climb more than forecast.”

The soft-sales trend will continue into the first half of 2011, Badillo says.