Retail Sales Fall for the First Time in Six Months

The consumer caution that has been ricocheting around the fashion world is showing up more in retail at large.

October retail and food service sales fell a seasonally adjusted 0.1 percent from September — the first decline since March, according to the Census Bureau’s monthly reading of sales on Wednesday.

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The decline was actually less than the 0.3 percent economists projected, according to FactSet, but still a sign that the Federal Reserve’s campaign to bring prices down by raising interest rates is cycling through the economy.

Compared with a year earlier, sales were up 2.5 percent, showing a loss of momentum from the 4.1 percent year-over-year increase in September. Overall, the industry lost ground last month to inflation, which increased 3.2 percent over the past 12 months, according to the Consumer Price Index, more than erasing the sales increase.

A strong wage and labor market across all consumers give the confidence and ability to spend for the holiday season and beyond.”

Mike Graziano, RSM U.S.

Absent the impact of inflation, apparel and accessories specialty stores held their own or better, coming in flat compared with September and up 0.8 percent from a year earlier. Harder hit were department stores, where sales were down 1.2 percent from September and off 4.1 percent from a year earlier.

For the first 10 months of the year, retail and food service sales gained 3.1 percent, while fashion specialty stores were up 1.3 percent and department stores were down 2.3 percent.

The declines at department stores mirror — indeed, have been largely responsible for — the repeated reports of weakness in North America from high-profile fashion brands such as Ralph Lauren to more mass ones like Levi Strauss.

That weakness followed the slowdown that was first felt among the more value oriented players.

Target store
Outside a Target store in Minnesota.

Target Corp. continues to feel the pinch, reporting a 4.9 percent drop in comparable sales for the third quarter with weakness in discretionary, although that is giving back some of the much bigger gains seen over the pandemic.

But it’s also a climate that some value players have been able to navigate.

Offprice giant The TJX Cos. Inc. said its third-quarter comp sales increased by 6 percent, above the company’s plan and “driven entirely by customer traffic.”

PARIS, FRANCE - JANUARY 23: A guest wears a beige blazer jacket, black flared pants, a white long scarf, a brown LV monogram print pattern Speedy handbag from Louis Vuitton, ring, outside Wooyoungmi, during Paris Fashion Week - Menswear F/W 2022-2023, on January 23, 2022 in Paris, France. (Photo by Edward Berthelot/Getty Images)

Luxury companies, including leader LVMH Moët Hennessy Louis Vuitton, have also reported weakness in the U.S., although that consumer continues to have money to spend.

Many still believe shoppers can continue to push through.

Mike Graziano, consumer products senior analyst at RSM U.S., said: “Clearly the consumer hasn’t shut down all spending and is in a strong position, and viewing the consumer as a bifurcated group continues to be critical — understanding which income levels are in the best position to spend through the rest of the year.

“Excess savings levels for top income tiers and a strong wage and labor market across all consumers give the confidence and ability to spend for the holiday season and beyond,” Graziano said.

The latest reading of Alvarez & Marsal’s Consumer Sentiment Survey, released on Wednesday, showed that the holiday will push through the shakiness, but that all is not well.

Chad Lusk, managing director at Alvarez & Marsal’s Consumer and Retail Group, said, “This cycle’s survey showed us that while consumer outlook was more favorable in spring 2023, consumers are more pessimistic going into the winter months and plan to be more cautious with their spending. Despite this, we are seeing a year-over-year benefit in that consumers are still planning to participate more in holiday shopping when compared to fall 2022.”

Alvarez & Marsal found that 67 percent of consumers believe that prices will continue to rise and that 65 percent see the U.S. economy slipping into a recession within the next year.

Even if the Fed succeeds in pulling off a “soft landing” and bringing down inflation without a recession, the inkling that a recession is in the offing could cause shoppers to pull back further at retail.

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