Key retail sales releases
Both the International Council of Shopping Centers (or ICSC) Goldman Sachs Store Sales report and the Johnson Redbook Index report for the week ended April 5 will be released on Tuesday, April 8.
What is the Johnson Redbook Index?
This index is a weekly measure designed to capture same-store sales growth at chain stores, discount stores, and departmental stores. The index provides guidance on retail sales trends, but it covers only about 10% of the total retail sales in the country.
What is the ICSC-Goldman Sachs Retail Chain Store Sales Index?
This index measures the change in same-store sales based on a sample that includes major retail chains that are statistically representative of sales in the retail industry. The index reading doesn’t include vehicle and restaurant sales. Like the Johnson Redbook Index, it covers only about 10% of the total retail sales in the country.
Highlights from last week’s retail sales reports
Both indices gave similar readings in terms of trends for the week ended March 29. Retail sales growth slowed to 2.3% from 3.1% on a year-on-year basis as per the Redbook Index, while the ICSC-Goldman Sachs Index reported year-on-year sales growth of 0.6%—down from the 1.7% reported the previous week. However, the ICSC-Goldman Store Sales Index rose 3.6% on a week-on-week basis. The slower annual growth was attributed to unfavorable comparisons with last year’s sales due to the Easter week falling in March compared to this year’s April.
Retail sales outlook
Temperatures in the last week of March were cooler (thought to be the coldest in 23 years!) and sales for spring apparel are likely to be postponed as consumers wait for warmer weather. This factor, along with Easter week coming three weeks later, in April this year from March last year, should see both indices spike this month. ICSC projects same-store sales increases of ~3% this March, compared to 2.2% in February.
Increases in apparel sales are likely to boost revenues and earnings for major apparel chains The Gap (GPS), Urban Outfitters (URBN), and Fossil, Inc. (FOSL). All three retailers (GPS, URBN, and FOSL) are part of the S&P 500 Index (VOO). The Vanguard S&P 500 ETF (VOO) is one ETF that tracks the S&P 500 Index (VOO). Another way of gaining exposure to the retail sector is by investing in ETFs like the State Street SPDR S&P Retail ETF (XRT), which tracks the S&P Retail Select Industry Index. The top ten holdings in XRT include national retailer Walgreens (WAG), at 1.19%, and teen apparel retailer Abercrombie & Fitch (ANF) at 1.24%.
As these are weekly releases, they’re less likely to impact fixed income ETFs like the Core Total U.S. Bond Market ETF (AGG), which tracks the Barclays U.S. Aggregate Bond Index, and equity (VOO) markets—unless the indices report very sharp reverses.
To find out whether consumer spending will be supported by a recovery in labor, continue to Part 6 of this series.