January retail sales plummet

Dive Brief:

Retail sales fell 0.3% in January from December, but rose 3.9% from the year-ago period to $492 billion, the U.S. Commerce Department reported Wednesday.
Taking out auto and fuel sales, retail sales fell 0.2%. The previous month’s sales were revised down from rising 0.4% to flat, the government also said.
E-commerce sales were flat last month from December and up 10.2% year over year, as some sectors fared better than others. Furniture sales fell 0.4% (but rose 4.7% year over year), health and personal care stores fell 1.2% (but rose 0.5% year over year) and sporting goods stores fell 0.8% (7.1% year over year). Department store sales rose 0.8% from December and 0.4% from the year-ago period.

Dive Insight:

Several news reports on Wednesday noted that retail sales suffered their worst drop in 11 months — an alarming stat. But, with January traditionally a more muted sales period after the holiday rush, the key is to look at the year-over-year number, according to Naveen Jaggi, JLL president of Retail Brokerage and Capital Markets, who in an email to Retail Dive noted the December-to-January drop as "unsurprising."

"While sales compared to December dropped, on a year-over-year basis they were quite strong," he said. "All of the factors that lead to the best holiday shopping season since the Great Recession were still predominantly in place for January – consumer confidence in particular remained strong, rising above economist expectations."

The rise in popularity of gift cards as holiday gifts have boosted January store traffic in recent years, although Retail Metrics analysts found a mixed bag. "January started off well with consumers utilizing gift cards and exchanging holiday gifts, but bitter cold temps in the East and South inhibited traffic," Retail Metrics Ken Perkins said in a note emailed to Retail Dive. "Martin Luther King weekend promotions generated a modest traffic bump but the back half of January relatively sluggish. Off-mall big box continues to outpace mall-based specialty apparel and department stores."

Flooding in the Western states likely also contributed to additional retail spending on supplies and replacement of items that were destroyed, Jaggi also said.