Retail trade data
In the last part of this series, we saw that GDP (gross domestic product) was lower-than-expected during 4Q14. This should also reflect in business, especially retail trade. The US Census Bureau releases monthly retail trade data on food services and drinking places. It collects the data from retailers. Retailers provide their sales and inventory dollar value data at the end of the month.
Food and drinking sales rise
Food services and drinking places—including restaurants—and grocery store sales data are two sub components of retail trade data. They’re more relevant for investors focusing on the food industry. For example, restaurant stocks—like Chipotle Mexican Grill (CMG)—are included in the Consumer Discretionary Select Sector SPDR (XLY). XLY holds ~1% of Chipotle Mexican Grill and ~4% of McDonald’s (MCD). The iShares Global Consumer Discretionary ETF (RXI) holds about 2.5% of McDonald’s.
Food services and drinking places’ sales grew 7.7% in February 2015—compared to 3.4% in the same month in 2013. Grocery store sales grew 3.4%—compared to 1.4% in the same month in 2013. As we can see in the above chart, food services and drinking places’ sales grew more than grocery stores YoY (year-over-year) since February 2014.
Month-over-month, food services and drinking places’ sales declined by 10.1%. Grocery sales increased by 2.7%. This indicates consumer concerns about the economy in February.
Between 1945 and 2009, the US experienced 11 business cycles—according to the National Bureau of Economic Research. To soften the negative impact during recessionary cycles, restaurants may consider entering grocery channel development. Starbucks (SBUX), Dunkin’ Donuts (DNKN), Taco Bell—under the umbrella of Yum! Brands (YUM), and Burger King (QSR) already did this by selling coffee and branded products through grocery chains.
There are two indicators for retail sales—the ICSC-Goldman Store Sales Index and the Johnson Redbook Retail Sales Index. In the next part of this series, we’ll look at how they performed.