As we had seen with the monthly retail sales numbers in the recent past, the retail picture may not be as bad as the dismal labor market would indicate. In a happy development for some if not all retailers, retail sales data released this morning indicates that consumers spent 3.6% more on holiday shopping this year between the critical Thanksgiving and Christmas Eve period than they did last year.
The retail sales period in question had an extra day this year. And last year’s holiday shopping season was particularly bad, when overall sales dropped 3.4% amid a very uncertain financial backdrop.
Despite these caveats, today’s retail sales numbers are positive and welcome. They add to the growing list of favorable newsflow on improving fundamentals of the underlying economy. With the labor market expected to turn the corner in the not-too-distant future, the outlook for the retail sector may be growing positive.
Some groups stand out in this holiday shopping season’s numbers. Sales at e-commerce retailers are up 15.5%, as the online operators gain market share from their brick-and-mortar peers. Retail sales at electronics, jewelry and footwear retailers have also been strong this holiday shopping year — up 5.9%, 5.6% and 5% from the year-earlier period, respectively. However, department stores and apparel have been under pressure, with year-over-year retail sales declines of 2.3% and 0.4%.
Amazon.com (AMZN) appears to be a clear beneficiary of the online shift. The online bookseller is also benefiting from the popularity of its e-book reader, the Kindle. While a number of other operators such as Barnes & Noble (BKS) have also jumped into the fast-growing e-book market with their own digital devices, Amazon appears to have maintained its dominant market position.
Amazon’s online retail sales dominance has recently attracted the unwanted attention of off-line giant Wal-Mart (WMT), resulting in a pricing war in the books category. Despite Amazon’s online pre-eminence, there is no reason to believe that entrenched brick-and-mortar merchants such as Wal-Mart, Target (TGT) and Best Buy (BBY) cannot make it in the online realm.
A number of retailers went into this year’s holiday shopping season with very lean inventories, expecting this year to be no different from last year — and have been surprised by the retail sales strength. These retailers may find it difficult to lure shoppers back into stores next month for gift card-related sales. Retailers typically get a boost from gift card-related post-holiday shopping season sales, which makes January a very important month in the overall retail sales holiday shopping picture.
We wouldn’t get a complete picture of this year’s holiday shopping scene until we get the January retail sales numbers. But the overall improving holiday shopping trend is absolutely clear from the retail sales numbers released to date.
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