Author: katiecmorgan

Retail Sales Figures

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Retail-sales figures

WASHINGTON

Nonseasonally-adjusted May retail sales increased 5.6 percent year-over-year and seasonally adjusted sales increased 0.7 percent over April, the National Retail Federation announced.

“The economy is looking strong and households have a solid financial foundation on which to base their spending,” said NRF Chief Economist Jack Kleinhenz.

He noted increased take-home pay due in part to tax cuts, low unemployment, and high availability of consumer credit as factors.

“We have seen ongoing momentum over the last several months and believe sales growth should remain health and consistent with our 2018 outlook,” he said. “Nonetheless, inflation and rising oil prices are complicating the picture. And new tariffs or a trade war would certainly be negatives that would increase prices and reduce both consumer purchasing power and consumer confidence.”

Staff/wire reports

Youngstown Vindicator

2017 Crystal Ball Award Winners

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For the majority of U.S. households, residential real estate is the single-largest asset on the balance sheet. Prevailing home equity levels–and expected home value changes–can have out-sized influence on consumer spending and behavior (i.e., wealth effects). As an asset class, U.S. housing has an aggregate value of almost $30 trillion. For these and other reasons, the home value expectations of experts bear watching, and forecasters with the most outstanding performance deserve recognition.

In every year since 2010, Pulsenomics has recognized the most accurate and reliable forecasters of U.S. home values with a Crystal Ball Award. More than 100 experts who participate on our panel vie for the honor in a variety of award categories by predicting the future path of the Zillow Home Value Index.

This year, Jack Kleinhenz (pictured), who heads Kleinhenz & Associates and also serves as chief economist of The National Retail Federation, earned first-place in two prize categories, including one that is arguably the most challenging: the five-year horizon. Jack won this prize in an especially impressive fashion. The actual cumulative change in U.S. home prices for the five-year period ended Dec. 2017 was 32.9%; back in 2013, Jack predicted prices would increase 32.8% over that period. That’s not a typo. Drop the mic, Jack!

Pulsenomics’ Top Ten panelist rankings include details of forecast accuracy in each of 11 categories. Please join me in congratulating all of our 2017 honorees!

Retail decline in region is ‘a permanent shift’

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As more people do their shopping online, retailing in Northeast Ohio is changing. And while most brick-and-mortar stores are not in danger of going the way of the dinosaur, in a region where the population isn’t expanding, every online sale has a cost in the malls, in the storefronts and in jobs lost.

By more than one estimate, including by local economist Jack Kleinhenz, the chief economist for the National Retail Federation, online sales now make up 10% of retail sales. Sales, buoyed by rising prices, continue to grow modestly, though accurate regional sales figures are not available.

“The decline in store traffic is not a trend anymore. It’s a shift, a permanent shift,” said Elad Granot, dean of the Dauch College of Business and Economics at Ashland University. “So brick-and-mortar retailers have to figure out what they can offer that Amazon can’t, and it’s getting to be a shorter and shorter list.”

Granot was referring to online retailer Amazon.com‘s move into the grocery business with its purchase of Whole Foods, and its expanding role in logistics. The logistics push includes a growing fleet of cargo airplanes and its fulfillment centers, such as the ones it is building in North Randall and Euclid, on sites of former shopping malls.

Granot said some retail categories are relatively safe. He said, for example, that shopping for makeup can entail trying out different products with an in-store stylist — what he calls an experience. The categories that should be worried about Amazon, he believes, are the categories that have no experience attached to consumption.

“If I need Band-Aids, I’m not going to wait until the next time I’m at CVS, I’m going to order them on Amazon right now,” Granot said, noting that he recently was on a flight of stairs with a student who was ordering a pair of sneakers online as they walked. “CVS provides me with no experience when I shop for Band-Aids.”

According to the Ohio Department of Jobs and Family Services, the retail trade in the seven-county Cleveland metropolitan area lost 8,758 jobs, 5.9% of total jobs in retailing, in the decade between 2006 and 2016. During the same time period, the number of retail establishments dropped 6.5%, a net loss, since new stores keep opening, of 601 establishments.

Much of that loss was in Cuyahoga County as new retail developments sprout up in neighboring counties. Over the decade, the core county lost 5,927 jobs, or 8.6% of its retail jobs, and 464, or 10%, of its retail establishments.

And the decline is continuing, according to preliminary jobs numbers for 2017.

While employment in major Northeast Ohio sectors such as manufacturing, financial services and education and health services held steady or rose, the region continued to lose retail jobs between January 2017 and January 2018, according to the state data.

Regional retail sales are growing, according to Alex Boehnke, manager of public affairs at the Ohio Council of Retail Merchants (OCRM), though regional sales are not well tracked.

The best estimate of the trend in retail sales in Ohio and its metropolitan areas is done by the Economics Center at the University of Cincinnati for OCRM. In November, as the holiday shopping season was beginning, the center estimated that retail sales in the Cleveland metropolitan area for the 2017 holiday season would grow only 3.1%. Sales in the Akron metro were expected to grow only 1.2%. Estimates of national holiday sales growth ranged from 4% to 6%.

“We don’t have the population coming in,” Kleinhenz said. “The pie is not growing.”

CBRE, a national real estate brokerage with a large Cleveland operation, calculates that only two metropolitan areas have more retail square feet per person than Northeast Ohio, where there is 29.9 square feet of retail for every person in the area. In its August 2017 report, “Dead Malls: a boost for retail?,” which is subtitled, “Is retail in Cleveland dying, or is it just overbuilt,” Cleveland-based research analyst Brandon Isner found that only Orlando, with 30.4 square feet per resident (a deceptive figure for a tourist city), and Atlanta, with 30 square feet per resident, top Cleveland.

“It is clear that Cleveland has a supply issue in regard to retail real estate,” Isner wrote. “(W)ithout the population growth that other metro areas have enjoyed, extra retail will weaken what remains.”

In Cuyahoga County, retailers in two mixed-use developments will be opening their doors in the coming months. Opening in the spring, Pinecrest, in Orange Village, has lured several dozen retailers, including Whole Foods, Pottery Barn and Williams Sonoma. In Shaker Heights, the Van Aken District will add about 100,000 square feet of retail space come summer.

Similarly, retail building booms in Avon in Lorain County and in and around the site of the former Geauga Lake amusement park in Geauga County have cost Cuyahoga County retail sales.

“There is no doubt there is a shift going on,” Kleinhenz said. “Are we overstored? In many cases, that is accurate. It’s just that it’s not necessarily that retail is declining broadly.”

Joseph Khouri, a real estate broker with CBRE in Cleveland, agrees with Granot. He, too, believes the retailers who survive will be the ones who sell an experience and activity related retail. He pointed to Toys R Us, which recently announced it was closing all of its stores nationwide after declaring bankruptcy.

“They didn’t differentiate themselves from online sellers,” he said. “People are gravitating toward experiential retail. Specialty food retailers, arts and crafts, home goods products that you have to touch and feel — unique offerings that are hard to mimic online.”

That ability of local retail to be an experience leads Granot to say that he believes local, boutique retailers can also survive.

“Shopping local, especially in Northeast Ohio, is a point of pride,” he said. “There is a lot of room for local retailers to do well, as long as they offer an additional benefit beyond the actual product and price, because it’s going to be increasingly harder to beat Amazon.”

Jay Miller

Crain’s Cleveland

Toys “R” Us to start liquidation sales; economist says closings don’t represent entire industry

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CLEVELAND, Ohio – This week, while Toys “R” Us is expected to start liquidation sales and Claire’s announces filing for Chapter 11 bankruptcy protection, Cleveland-based chief economist for the National Retail Federation says the overall retail landscape continues to shift but is looking healthier than last year.

Jack Kleinhenz, Ph.D and chief economist for the world’s largest retail trade association, said while the rash of reported national retail store closings and job losses are real, he wouldn’t say they are a direct indication that the retail industry is moving backward.

“I think there is misinformation or a misunderstanding about the health of the retail industry,” said Kleinhenz, who is also principal and chief economist of Kleinhenz and Associates, a Cleveland-based registered investment advisory firm that specializes in financial consulting and wealth management services.

“We recognize these store closings are happening, but overall we’ve got to be careful to not focus just on store closings because other areas are performing,” he said, noting that in February, according to the Bureau of Labor Statistics, 50,000 jobs were added in retail nationwide including auto sales and gas sales. “If we take out those two categories then, still 46,000 retail jobs were added in the month of February.”

However, according to U.S. Labor Department data, job loss can’t be ignored. Between 2001 and 2016, jobs at traditional department stores fell 46 percent. For perspective, that’s a bigger drop than other troubled industries such as coal mining (32 percent drop) and factory employment (25 percent drop) during the same time span.

MarketWatch reported that in 2017, department stores alone lost 29,900 jobs, while general merchandising stores cut 15,700 workers. In addition, last year’s BLS data also showed retail discharges and layoffs grew to a total of 212,000 nationwide – the highest level in nearly two years.

Kleinhenz said based on all of the area data he’s analyzed and the NRF’s forecast, they still believe 2018 will be a stronger year for retail.

Some department stores are moving toward cost fulfillment centers, while other e-commerce retailers, discount stores, luxury goods, and even some small businesses with specialized niches are growing.

In Northeast Ohio for instance, Amazon is building a fulfillment center in Euclid in what once was a retail strip that included a shuttered Toys “R” Us. The dead mall will be replaced by an Amazon fulfillment center, scheduled to open in 2019.

A similar, but larger, project is under construction and set to open next year in North Randall, where Randall Park Mall once stood. Between the two Amazon facilities, the company will employ more than 3,000 people.

“The landscape is changing and the way the industry is operating is changing. They’re looking to be more cost efficient. Ultimately retailers want to deliver good price and value, which is no different than any other industry,” he said.

“Undoubtedly they’re facing significant competition and consequently they need to change the way they’re operating given the environment.”

RETAIL CLOSINGS

The national retail landscape is changing rapidly with a great deal of upheaval as brick-and-mortar stores continue to struggle to change and adapt in the highly competitive digital age.

Claire’s Chapter 11 bankruptcy filing on Monday, is the latest in a string of mall-based stores shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.

But mall-based stores aren’t the only casualties of consumers increasingly more comfortable ordering products online. Toys “R” Us, another company left deep in debt from a leveraged buyout, said last week that it was liquidating its 735 stores in the United States. The bankrupt retailer is closing one-fifth of its U.S. outlets, which could end up being more than 180 stores including locations in Mentor, Western Hills, Dayton and Dublin, Ohio. Liquidation sales were to begin Thursday, but were delayed this morning until possibly Friday or later.

In 2017, nearly 9,000 stores closed across retail sectors. Cushman & Wakefield said that number will be between 10,000 and 11,000 doors this year–and that’s fewer than the 13,000 the analysts initially forecast, thanks in part to Simon Properties’ legal action attempting to block Starbucks from closing Teavana locations.

“Not everyone is shrinking! Off-price apparel, discounters, warehouse club stores and dollar stores will continue to post record growth,” Garrick Brown, vice president of Retail Intelligence for the Americas, said in a January blog.

“Grocery stores and most restaurants will continue to account for growth, even as the weakest concepts will increasingly struggle with a saturated marketplace,” he said.

Still, last year was a record year for both store closings and retail bankruptcies. Dozens of retailers including Macy’s, Sears, and J.C. Penney shuttered thousands of stores — far exceeding recessionary levels — and 50 chains filed for bankruptcy.

The commercial real estate firm CoStar has estimated that nearly a quarter of malls in the U.S., or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor tenant. Chains that have confirmed they will be closing locations in 2018 include Bon-Ton, Gap, Sears-Kmart and Walgreens.

In January, Walmart announced plans to close 63 Sam’s Club stores across the U.S. including one in Cincinnati.

Teen retailer Abercrombie & Fitch is bouncing back by cutting its stores. The New Albany, Ohio-based company was praised by analysts easier this month after it announced positive same-store sales growth in its fourth-quarter results. Same-store sales were up 9 percent overall at the company, boosted by 11 percent growth at Hollister and 5 percent at the Abercrombie brand itself.

But at the same time, the company also announced it would be closing up to 60 Abercrombie and Hollister stores in 2018. Closing store locations have not been identified yet.

By Marcia Pledger, The Plain Dealer

cleveland.com

Retailers are hiring more people. One reason: Home renovations.

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The nation’s unemployment rate remained unchanged in February, but there was one bright spot many economists weren’t expecting: an influx of retail jobs.

In all, retailers added 50,300 jobs in February — four times the number from the month before — even as the U.S. unemployment rate stayed steady at 4.1 percent.

One reason for the gains, economists said: Americans are increasingly renovating their homes instead of buying new ones, helping create thousands of retail jobs at companies like Home Depot and Lowe’s.

Building-material stores hired more than 10,000 workers in February to keep up with booming demand, according to data from the Bureau of Labor Statistics. Those positions accounted for more than one-fifth of the total retail jobs added last month.

The gains are part of a larger trend. Building-material and garden supply stores have added roughly 49,000 jobs in the past year.

“This is a housing repair and remodeling story — and not just because of the recent hurricanes and fires,” said Diane Swonk, chief economist at professional-services firm Grant Thornton. “In many cases, people are realizing it’s cheaper and easier to add on to their homes than to buy new ones.”

Low housing supply and high costs, particularly in larger cities, are prompting prospective buyers to think twice before buying a house, Swonk said. Other factors, such as rising interest rates and changes to mortgage-related tax credits, are also contributing to their decisions.

“Add to that the housing stock is older and more decrepit than it used to be, and you’re seeing a boom in remodeling,” Swonk said, adding that she is in the process of replacing the roof on her Chicago-area home.

Homeowners are projected to spend $340 billion on home improvements and repairs this year, up 8 percent from last year, marking the highest increase since before the Great Recession, according to Harvard University’s Joint Center for Housing Studies.

Increased demand is also helping create new jobs, albeit low-wage positions that are often seasonal. Home Depot announced plans to hire 80,000 workers last month, while Lowe’s said it would hire more than 53,000 seasonal employees to prepare for spring.

“What’s striking about these numbers is that they are unaffected by online retail,” said Jed Kolko, chief economist at the online jobs site Indeed. “Most people aren’t buying their lumber or potting soil online.”

But wages remain low: The median pay for retail workers is about $11.01 per hour, or $22,900 a year, according to BLS data.

The jump in employment is a departure from recent months: The retail sector lost 25,900 jobs in December but added 14,800 in January. (Warehouse jobs, which are not counted in the retail figures, grew by about 400 positions in February.)

“I did not expect a large increase in February, in all honesty,” said Jack Kleinhenz, chief economist for the National Retail Federation, a trade group that lobbies on behalf of the industry. “This was a substantial increase at the industry level.”

General-merchandise stores such as Walmart, Target and Costco added 17,700 jobs, while clothing and accessories stores hired 14,900. A number of those newly created positions, economists said, were probably focused on retailers’ growing online and mobile businesses.

Walmart, for example, has hired more than 18,000 personal shoppers in recent years as it builds up its shop-online, pick-up-in-store service, executives said on a Tuesday call with reporters.

“Companies are putting more people on the floor,” Swonk said. “We don’t have a handle on whether they’re hiring for online operations vs. in-store, but we know they’re hiring.”

By Abha Bhattarai

The Washington Post

5 Things Consumers Are Buying More of Despite Slowing Retail Sales

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Consumer spending, which accounts for two-thirds of U.S. economic activities, slowed down in the first two months of 2018 after a booming quarter at the end of 2017. The U.S. retail sales in February missed economists’ forecasts by 0.5 percent and came out 0.1 percent lower than January, according to the monthly retail sales report released by the Commerce Department on Wednesday.

It is also the first time since April 2012 that retail sales have declined for the third straight month.

The decline in February was mainly triggered by slowing sales in automobiles (down 0.9 percent), gas (down 1.2 percent) and department stores (down 0.9 percent).

However, there are five categories where spending grew against the trend. Spending in building material and home improvement supplies was up by 1.9 percent; sporting goods, books and music products were up by 2.2 percent; online retailers overall saw 1.0 percent growth; clothing and accessories were up by 0.4 percent; and restaurants and bars were up by 0.2 percent.

While spending growth in some of these categories may be simply due to seasonal factors, such as sporting goods and restaurant spending, others signal bigger changes in consumer spending trends.

“Month-to-month trends are really hard to interpret, because seasonal factors can cause biases. It’s the year-over-year numbers that are more important,” said Jack Kleinhenz, chief economist at the National Retail Federation.

“What’s going on in furniture and home building material, as well as electronics and appliances, is reflecting the activities in the housing market,” Kleinhenz told Observer. “People are in the process of renovating their homes. Sales of newly built homes and existing homes have both increased in the last year, and they need to be outfitted with new furnishing and new appliances. So those categories are often correlated.”

Sales for existing homes grew by 2.6 percent in 2017 from 2016, according to the National Association of Realtors, continuing an upward trend since 2009. New home sales also increased by nine percent in 2017 from 2016, according to Census data.

Stimulus in home-related spending has also fueled sales at major home improvement chains like Home Depot and Lowes, both of which saw growth in same-store sales over the latest quarter.

By  • 

The Observer

Retail Jobs Increased by over 46,000 in February

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WASHINGTON–(BUSINESS WIRE)–Retail industry employment increased by 46,400 jobs in February over January, the National Retail Federation said today. The number excludes automobile dealers, gasoline stations and restaurants. Overall, the economy added 313,000 jobs, the Labor Department said.

“This substantial gain in retail jobs is a significant positive sign regarding the health and viability of the industry,” NRF Chief Economist Jack Kleinhenz said. “It is stronger than expected and there were broad gains across most retail sectors. Beyond retail, labor markets continued to strengthen in all industries in February, and more jobs throughout the economy will mean more consumers shopping in retail stores. With tax reform in effect, consumer confidence increasing and strong underlying economic fundamentals, 2018 is off to a good start and we expect a prosperous year ahead.”

The February increase was more than four times the gain of 10,800 jobs seen in January over December. The three-month moving average in February showed an increase of 10,600 jobs.

General merchandise stores were up by 17,700 jobs, fueled mostly by gains at warehouse and supercenter stores, while clothing and accessories stores were up by 14,900 jobs and building materials stores were up by 10,300 jobs. There were declines totaling 5,400 jobs spread across health and personal care, sporting goods and miscellaneous stores.

Kleinhenz noted that retail job numbers reported by the Labor Department do not provide an accurate picture of the industry because they count only employees who work in stores while excluding retail workers in other parts of the business such as corporate headquarters, distribution centers, call centers and innovation labs.

Economy-wide, average hourly earnings in February increased by 68 cents – 2.6 percent – year over year. The Labor Department said the unemployment rate was 4.1 percent, unchanged for the fifth straight month.

About NRF

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.

PERMALINK

Contacts

National Retail Federation
J. Craig Shearman, 855-NRF-PRESS
PRESS@NRF.com

Americans Spend More Than Expected as Holiday Season Heats Up

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November retail sales up 0.8% from prior month; economists saw 0.3% increase

Customers checking out at a Target store in Alexandria, Va., in November.
Wall Street Journal

 

Americans are spending more than expected this holiday season, fueled by income gains, confidence in the economic outlook, buoyant financial markets and modest inflation.

The boost includes in-store and online spending at brick-and-mortar retailers such as Wal-Mart Stores Inc. and Nordstrom Inc., which clocked the largest year-over-year November sales increase in seven years. Home-furnishing stores and electronics-and-appliance stores also logged strong spending numbers, despite competition from online-shopping websites, which also posted robust gains.

“It’s an impressive start to the holiday season and probably the best in the last few years,” said Jack Kleinhenz, chief economist at the National Retail Federation, a group that represents retail stores. “When you put the pieces together, job and wage gains, modest inflation, healthy balance sheet and elevated consumer confidence…there’s an improved willingness to spend.”

Altogether, sales at online retailers, brick-and-mortar stores and restaurants rose 0.8% in November from the prior month, well above the 0.3% increase economists surveyed by The Wall Street Journal had expected. That was up 5.8% from a year earlier, the largest yearly November increase since 2011. Despite their woes from online competition, general merchandisers such as department stores fared well, registering a 3.6% sales increase from a year earlier, the best November performance since 2010.

“Overall these data are much stronger than expected,” said Ian Shepherdson, an economist at Pantheon Macroeconomics, in a note to clients. “People have the inclination and the wherewithal to continue spending at a robust pace.”

Taken altogether, the data suggest the U.S. is on track for robust growth in the fourth quarter. Macroeconomic Advisers, a forecasting firm, estimated the economy is growing at a 2.8% annual pace in the October-to-December period, up from a 2.6% forecast before the retail-data release. The Federal Reserve Bank of Atlanta estimated a 3.3% growth rate.

One caveat: Spending is so strong it is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.

Spending comparisons to last year were boosted by a weak holiday season in 2016 for retailers, which were plagued by high inventories and a slowdown in purchases by international tourists amid a rising dollar.

This year, some brick-and-mortar stores appear to be better managing their inventory. In their most recent quarter, both Macy’ s Inc. andKohl’s Corp. said their stores had less excess merchandise to clear out at steeply reduced prices. “We don’t have the albatross of a lot of extra inventory like we did last year,” Macy’s Chief Executive Jeff Gennette said in an interview on Black Friday. That, in turn, resulted in less discounting, Mr. Gennette said.

Mr. Kleinhenz said increasingly sophisticated website and app advertising is helping brick-and-mortar retailers too. “It’s a combined strategy that retailers have developed that integrates the use of the internet with the brick-and-mortar shopping approach,” he said.

A Brief History of Retail

The retail industry is undergoing another major shift — to e-commerce. How did we get here?

Since Nov. 1, online revenue has risen 24% compared with the same period last year, said Slice Intelligence, a research firm that tracks online purchase receipts. Online sales at Target Corp. ,Kohl’s Corp. and Costco Wholesale Corp. rose the fastest, the firm said, though Amazon continued to grow rapidly from a larger sales base.

Better-than-expected quarterly results were reported by some mall stalwarts that have been battered, including Macy’s Inc. and Gap Inc. “There is a consolidation taking place” in the apparel market, Gap CEO Art Peck told analysts on Nov. 16. “Almost regardless of consumer sentiment, we’ve got an opportunity to drive growth and gain market share,” Mr. Peck said, as the company closes stores, remodels others and speeds up its product pipeline.

 The closure of thousands of stores this year could be giving those left standing a boost.

“On an overall basis, a portion of our improvement in our sales trend is attributable to our targeted efforts to capture share from competitive store closures in some of our trade areas, and we expect this will continue, if not accelerate, through the holiday season,” Kohl’s CEO Kevin Mansell told analysts in November.

Some businesses, meanwhile, are feeling a boost from the stronger labor market. Pete Benck, owner of Madison, Wis.-based vintage clothing store Good Style Shop, said this holiday season’s business has been stronger than last year’s.

“We have had a lot of foot traffic, and I think there’s a lot of confidence in our consumers lately,” Mr. Benck said.

The National Retail Federation expects consumers nationwide to spend about 4% more during the holiday shopping season than they had in 2016. That would make 2017 the strongest holiday season since 2014. Mr. Kleinhenz said the U.S. appears to be on track to meet that goal.

—Sarah Nassauer contributed to this article.

Write to Sharon Nunn at sharon.nunn@wsj.com

Photo credit: Customers checking out at a Target store in Alexandria, Va., in November. PHOTO:REYNOLD/EPA/SHUTTERSTOCK

Retailers Are Hoping For the Best Christmas Sales Since the Recession

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With consumer spending surging, retailers are hoping for something they haven’t seen since the last recession began a decade ago: a truly great Christmas.

The Commerce Department reported better-than-expected U.S. retail sales for November and revised its October figures upward, bringing a fresh wave of optimism to a long-embattled industry.

Holiday shoppers are snapping up Nintendo Switch devices and Fingerlings toys as their disposable income grows, according to Craig Johnson, head of the Customer Growth Partners. His research firm just boosted its forecast for holiday sales to 5.6 percent, well above the 4.3 percent it had targeted earlier.

“We think this marks the beginning of a real and sustained rebound,” Johnson said in an interview. After tracking the 50 largest retailers across 90 major shopping venues, he believes that spending will grow more this season than in any holiday since before the Great Recession began in 2007.

“It’s all demographics, and it’s geographically widespread,” he said.

Austin Kreitler, a 21-year-old college student in New York, is one shopper who is ready to open his wallet this holiday season.

“I definitely spent more this year than I have in previous years,” he said during a visit to Bloomingdale’s in Manhattan. “I got some novelty things, but I also got my mom a pearl necklace and earring set.”

E-Commerce Growth

The spending uptick is good news for retailers of all stripes, but some are faring better than others. Online spending growth is expected to outpace brick-and-mortar expenditures, and plenty of companies are still struggling.

Pier 1 Imports Inc., the home-furnishings chain, saw sales weaken in the first two weeks of December. The slow start to the holiday season weighed on the company’s fourth-quarter forecast, sending the shares on their worst rout in almost three years Thursday.

Traditional retailers are increasingly chasing online dollars. Wal-Mart Stores Inc. has acquired web brands such as Jet.com and Bonobos, and it’s offering two-day free delivery to entice shoppers. Target Corp., meanwhile, agreed to buy e-commerce startup Shipt Inc. this week for $550 million, aiming to challenge Amazon.com Inc.

The greater emphasis on online orders may be one reason why a rosier holiday season isn’t translating into traffic gains at many malls. During Black Friday, foot traffic was down slightly for the second year in a row, according to data compiled by Prodco Analytics and Bloomberg.

Genevieve Domingo, a shopper who was trying on boots at Bloomingdale’s, said she’s getting most of her gifts online this year, including a Game of Thrones drinking horn and a DNA kit for her brother.

Broad Gains

Merchants without physical stores saw their biggest sales gain last month since October 2016, the Commerce Department reported on Thursday. But retail growth was broad-based, with 11 of 13 categories posting increases. Apparel sales had their third straight uptick, the longest such stretch since mid-2014.

The numbers indicate that household spending, which accounts for about 70 percent of the economy, is picking up during the final stretch of the year. The job market remains strong, with solid hiring and an unemployment rate that’s the lowest since December 2000. In addition, stock-market gains and rising home values are boosting household wealth.

If this season’s sales reach Customer Growth Partners’ target, it would be the best holiday performance since 2005. The industry posted a 6.1 percent increase that year, when the economy was still booming and a red-hot housing market was fueling spending.

Tax Cut?

One wild card is the tax bill wending its way through Congress. The legislation promises to to lower the burden for households by doubling the standard deduction, but consumers who can’t withhold as much of their state and local taxes could lose some spending power.

The National Retail Federation, the industry’s biggest trade group, has argued that consumers are spending more this season because they anticipate a tax cut. About 174 million Americans shopped during the long Thanksgiving weekend, 10 million more than expected, the organization said.

“All in all, it’s really portending for a very solid and maybe one of the best holiday seasons that we’ve seen in years,” Jack Kleinhenz, the NRF’s chief economist, said in an interview. “We’ll have to wait and see how December plays out.”

— With assistance by Matthew Townsend, and Sho Chandra

Bloomberg

Photo credit: Pedestrians view a holiday window display at a department store in New York.Photographer: Victor J. Blue/Bloomberg

Americans Spend More Than Expected as Holiday Season Heats Up

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Shoppers

 

Americans are spending more than expected this holiday season, fueled by income gains, confidence in the economic outlook, buoyant financial markets and modest inflation.

The boost includes in-store and online spending at brick-and-mortar retailers such as Wal-Mart Stores Inc. and Nordstrom Inc., which clocked the largest year-over-year November sales increase in seven years. Home-furnishing stores and electronics-and-appliance stores also logged strong spending numbers, despite competition from online-shopping websites, which also posted robust gains.

“It’s an impressive start to the holiday season and probably the best in the last few years,” said Jack Kleinhenz, chief economist at the National Retail Federation, a group that represents retail stores. “When you put the pieces together, job and wage gains, modest inflation, healthy balance sheet and elevated consumer confidence…there’s an improved willingness to spend.”

Altogether, sales at online retailers, brick-and-mortar stores and restaurants rose 0.8% in November from the prior month, well above the 0.3% increase economists surveyed by The Wall Street Journal had expected. That was up 5.8% from a year earlier, the largest yearly November increase since 2011. Despite their woes from online competition, general merchandisers such as department stores fared well, registering a 3.6% sales increase from a year earlier, the best November performance since 2010.

“Overall these data are much stronger than expected,” said Ian Shepherdson, an economist at Pantheon Macroeconomics, in a note to clients. “People have the inclination and the wherewithal to continue spending at a robust pace.”

Taken altogether, the data suggest the U.S. is on track for robust growth in the fourth quarter. Macroeconomic Advisers, a forecasting firm, estimated the economy is growing at a 2.8% annual pace in the October-to-December period, up from a 2.6% forecast before the retail-data release. The Federal Reserve Bank of Atlanta estimated a 3.3% growth rate.

One caveat: Spending is so strong it is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.

Spending comparisons to last year were boosted by a weak holiday season in 2016 for retailers, which were plagued by high inventories and a slowdown in purchases by international tourists amid a rising dollar.

This year, some brick-and-mortar stores appear to be better managing their inventory. In their most recent quarter, both Macy’s Inc. and Kohl’s Corp. said their stores had less excess merchandise to clear out at steeply reduced prices. “We don’t have the albatross of a lot of extra inventory like we did last year,” Macy’s Chief Executive Jeff Gennette said in an interview on Black Friday. That, in turn, resulted in less discounting, Mr. Gennette said.

Mr. Kleinhenz said increasingly sophisticated website and app advertising is helping brick-and-mortar retailers too. “It’s a combined strategy that retailers have developed that integrates the use of the internet with the brick-and-mortar shopping approach,” he said.

The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press Related Video

Since Nov. 1, online revenue has risen 24% compared with the same period last year, said Slice Intelligence, a research firm that tracks online purchase receipts. Online sales at Target Corp., Kohl’s Corp. and Costco Wholesale Corp. rose the fastest, the firm said, though Amazon continued to grow rapidly from a larger sales base.

Better-than-expected quarterly results were reported by some mall stalwarts that have been battered, including Macy’s Inc. and Gap Inc. “There is a consolidation taking place” in the apparel market, Gap CEO Art Peck told analysts on Nov. 16. “Almost regardless of consumer sentiment, we’ve got an opportunity to drive growth and gain market share,” Mr. Peck said, as the company closes stores, remodels others and speeds up its product pipeline.

The closure of thousands of stores this year could be giving those left standing a boost.

“On an overall basis, a portion of our improvement in our sales trend is attributable to our targeted efforts to capture share from competitive store closures in some of our trade areas, and we expect this will continue, if not accelerate, through the holiday season,” Kohl’s CEO Kevin Mansell told analysts in November.

Some businesses, meanwhile, are feeling a boost from the stronger labor market. Pete Benck, owner of Madison, Wis.-based vintage clothing store Good Style Shop, said this holiday season’s business has been stronger than last year’s.

“We have had a lot of foot traffic, and I think there’s a lot of confidence in our consumers lately,” Mr. Benck said.

The National Retail Federation expects consumers nationwide to spend about 4% more during the holiday shopping season than they had in 2016. That would make 2017 the strongest holiday season since 2014. Mr. Kleinhenz said the U.S. appears to be on track to meet that goal.

Sarah Nassauer Wall Street Journal

Yahoo Finance!

Write to Sharon Nunn at sharon.nunn@wsj.com

Photo credit:Black Friday shoppers sort through their purchases while waiting for their rides at The Mall at Turtle Creek in Jonesboro, Ark. Americans, by most measures, appear ready to shop this holiday season. (Staci Vandagriff/The Jonesboro Sun via AP, File)