June retail sales and reports
This week, three major retail reports were released. The U.S. Census Bureau released the monthly retail sales report for June on Tuesday, July 15. The weekly ICSC-Goldman Same Store Sales and the Johnson Redbook indices were also released the same day. While the former report provides a detailed monthly overview of the retail sector in the U.S., the latter two indices are issued weekly based on data that is representative of ~10% of the total retail sales in the U.S.
U.S. Census Bureau reports retail sales for June
The U.S. Census Bureau estimated advance U.S. retail sales at ~$439.9 billion for June, 2014. This represented a 4.3% and 0.2% increase on a year-over-year (or YoY) and month-over-month (or MoM) basis. The sales figure fell short of consensus estimates. Markets had expected a 0.6% monthly spike in sales. Retail sales for the 2Q14 were up 4.5% over 2Q13.
Healthy revision in retail sales for May
The report’s silver lining was the revision in retail sales for May. May sales were revised upwards to $438.8 billion, from last month’s estimate of $437.6 billion. This constituted a 0.5% MoM increase over April, 2014.
Key drivers for retail sales in June
Non-store retailers, continued to power ahead, growing 8.1% and 0.9% YoY and MoM, respectively, to ~$40 billion. This category includes ecommerce sales made by companies like Amazon (AMZN).
Companies in the online retail business like Amazon (AMZN) are benefiting from the overall trend for online sales, which keep trending upwards. Brick-and-mortar retailers have seen their sales cannibalized due to this trend. Online retailers also have lower costs and higher margins than their physical counterparts, which are a key component of their business strategy.
Health and personal care retailers show strong growth
Health and personal care stores also reported strong sales growth at 7.9% and 0.9% YoY and MoM, respectively. This category includes pharmacies, drug stores, and pharmacy chains like Walgreens (WAG).
Healthcare businesses like WAG are likely to benefit as the baby boomer generation ages. Also, the healthcare business is defensive and not nearly as prone to cyclical upturns and downturns as most retail businesses, which depend a lot on the health of the overall economy and the financial prospects of the consumer.
Clothing retailers change sales direction
The clothing and clothing accessories category, which had declined by 0.5% MoM in May, reversed last month’s trend, growing 0.8% in June on a MoM basis. This category includes apparel store chains like The Children’s Place.
Disappointments in the retail report for June
Auto and motor vehicle dealer sales, which had been a key driver for retail sales since March this year, were disappointing. This category decreased by 0.2% over May to come in at ~$88 billion. However, growth over last year was positive though at 6.4%.
Excluding this segment, retail sales in June grew 0.4% over May to $359.1 billion compared to $350.6 billion in May.
The highest monthly drop was recorded in the building materials and garden equipment and supplies dealers segment, which declined by 1% over May, 2014. This category had also shown strong growth over the past few months and the June sales were disappointing.
ICSC-Goldman and Redbook retail indices
In the next section, we’ll discuss the results of the weekly retail reports ICSC-Goldman Same Store Sales and the Johnson Redbook indices as well as the impact of retail sales on exchange-traded funds (or ETFs) like the State Street SPDR S&P Retail ETF (XRT), the SPDR Consumer Discretionary Select Sector Fund (XLY), and the S&P 500 Index (SPY).
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