December’s retail sales drop misses big picture

Consumers didn’t end 2020 with a bang, Commerce Department retail sales figures show. But the unusual dynamics of a year defined by the pandemic — which gave rise to trends such as shoppers buying Christmas gifts earlier and shifting their spending from experiences to goods — meant a December pullback didn’t stop the retail industry from enjoying a solid holiday season.
Data revealed that retail sales sank 0.7% in December from a month earlier, a weaker-than-expected result reflecting renewed caution among shoppers in a month when cases of Covid-19 exploded and the economy shed 140,000 jobs. This is something to watch. But a look at the entire holiday season on a year-over-year basis offers a much sunnier picture: Excluding categories such as motor vehicles, the National Retail Federation reported that sales in the period were up 8.3% from 2019, a booming increase that far exceeded the trade group’s own forecast and several others. The result is consistent with behaviour consumers stuck to throughout 2020: With limited opportunity to spend on vacations, theatre tickets and other services, they poured their money into goods.
Among major companies that have reported holiday results in recent days, there were predictable camps of winners and losers. Target Corp, which has been on a rocket ride throughout the pandemic, again posted strong results, saying comparable sales rose 17.2% in November and December from a year earlier, thanks to increases in both traffic and average amount spent per transaction. Other stores that carry general merchandise, Five Below Inc and Big Lots Inc, also reported healthy holiday sales gains, adding to evidence that consumers are choosing one-stop shops to reduce store trips and thus potential exposure to the virus.
Lululemon Athletica Inc, a retailer that thrived in 2020 as consumers lived in athleisure wear, told investors that its fourth-quarter sales increase would likely come in at the high end of the range it previously offered as guidance. But it was a rare bright spot in the clothing business. Shares of Urban Outfitters Inc were hammered this week after it announced sales dropped 8.4% from a year earlier for the November-through-December period. Meanwhile, Nordstrom Inc announced a grisly 22% drop in sales from last year, a tough result that underscores what a devastating year 2020 was for department stores overall.
The weakness at clothing stores during the holiday season is likely to be a last straw of sorts for some fragile companies, prompting fresh rounds of store closings and, potentially, sending some chains into bankruptcy. Christopher & Banks Corp, a women’s clothing chain with tiny revenue but a portfolio of nearly 450 stores, said this week that it had filed for bankruptcy and intends to close “a significant portion, if not all” of its physical locations.
—Bloomberg