The North American retail same-store industry
The Bloomberg industry outlook along with First Data Merchant outlines major themes and trends that are shaping the North American retail same-store industry. The bull case, meaning the index is positive, calls for continued sales growth, fueled by the U.S. economic rebound. While the bear case, meaning that the index is declining, contends high unemployment and reductions in discretionary spending. This may hurt margins and share price growth of major retailers including Wal-Mart Stores, Inc. (WMT), Kohl’s Corporation (KSS), and Macy’s Inc. (M) to name a few. We’ll examine the impact on the particular stocks in the subsequent parts of this series.
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The Bloomberg Shopper-Trak is a compilation of sales and traffic data from devices in stores and receipt information, primarily from mall-based sellers of general merchandise, apparel, furniture, and electronics. As observed in the chart above, the U.S. store traffic plunged by 13.4%, for the month ended March 31, 2014, marking a ninth consecutive monthly decline. The apparel and accessories store traffic continued its string of declines, despite the discounts being offered by retailers like Macy’s, Inc. (M), Fred’s (FRED), and Kohl’s Corporation (KSS). A steep fall was noticed in the mid-teens group—normally a crowd puller, which declined by the 25% year-on-year basis for the month of March 2014. The subdued retail mall traffic was primarily due to the shift in this year’s Easter to 20th April from 31st March last year.
However, as you can also observe in the chart above, the spending growth index compiled by First Data Merchant has arrested the decline at 1.0%, after a sharp fall in February at a negative 2.3%. The lower decline is possibly because of the rise in the consumers’ personal disposable income as reported by Bureau of Economic Analysis, which grew by 0.3% to $39,977 a year in the month of February 2014. Since the data is the representation of the amount of money available for discretionary spending after meeting the income tax obligation, it has an undulating effect in the consumer spending.
With a combination of the First Data Merchant Spend Trend economic analyses and Bloomberg Shopper-Trak, along with the same-store sales data compiled by the Redbook Index and ICSC-Goldman Sachs (GS) Index, investors can analyse the trend in the retail industry.
The next part of the series discusses how the last week’s Redbook and ICSC-Goldman Sachs Indices corresponded with the U.S. same-store sales traffic and spending data.