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March Retail Sales Prove Bullish for Most Categories

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Attributing US retail sales growth in March

Out of the 13 reporting categories in the March 2015 advance retail sales report, all save four posted gains. Major categories clocking gains include:

  • motor vehicles and parts dealers – up 2.7% over February 2015 and 5.2% over March 2014
  • building materials and garden equipment and supplies dealers – up 2.1% over February 2015 and 6.3% over March 2014
  • furniture and home furnishing stores – up 1.4% over February 2015 and 3.8% over March 2014
  • clothing and clothing accessories – up 1.2% over February 2015 and 2.7% over March 2014
  • food services and drinking places – up 0.7% over February 2015 and 7.7% over March 2014
  • sporting goods, hobby, book and music stores – up 0.2% over February 2015 and 5.1% over March 2015
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Auto sales lead

Motor vehicle and parts dealer sales are the largest category in the retail (XRT) sales report. They accounted for 20.8% of total retail sales in March. They also accounted for the largest monthly percentage gain. Auto and motor vehicle parts dealer sales grew 2.7% month-over-month in March 2015. The category rebounded after posting a 2.1% decline in February. In March, auto manufacturer Ford (F) reported its best US retail sales figures in nine years.

As you’ll read in Part 5 of this series, lower gasoline prices and an improving labor market were major factors contributing to the increase. Another reason is possibly the expectation of an increase in interest rates by the Fed later this year. An increase in rates would make auto financing more expensive and would spur higher vehicle sales in anticipation of a further rate increase.

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Home improvement retailers

Building materials and garden equipment and supplies dealers accounted for ~6.4% of March retail sales. Home furnishing and furniture stores accounted for ~2% of sales. Building materials and garden equipment and supplies dealer sales rose 2.1% month-over-month in March. Home furnishing and furniture stores were up by 1.4%. Home furnishing companies Mohawk Industries (MHK) and Leggett & Platt (LEG) stocks were up by 0.5% and 0.8%, respectively, on April 14.

Growth in these categories is also an important indicator for sales gains at major home improvement retailers such as Home Depot (HD) and Lowe’s (LOW). Home Depot and Lowe’s together constitute 6.2% of the SPDR S&P Homebuilders ETF (XHB). XHB also provides exposure to other home furnishing and building products firms including Restoration Hardware (RH), Williams-Sonoma (WSM), Masco (MAS) and Bed, Bath & Beyond (BBBY).

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