Retail Sales in a Single Table

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With December retail sales in the rear view mirror (+0.23% sequentially, ahead of expectations and +4.2% year over year, still below the ’13 average), we can take a look at how the year finished up by category.

While there were some spending headwinds that won’t be repeated in 2014 (payroll tax increase), there are a number of puts and takes that make disposable income trends in ‘14, and by extension, retail sales, uncertain:

  • Reduction in SNAP (food stamp) benefits
  • Elimination of long-term unemployment benefits
  • Lower gasoline prices year over year
  • Continued modest employment growth
  • Impact of the Affordable Care Act (ACA)

Food and beverage stores were the big winner during the month, with sales increase +2.0% sequential, likely due to inclement weather.  On the other side of the food coin, restaurant (food service and drinking places) trends remained lackluster.  Packaged food and grocery stores might get a temporary lift on these results, but we are wary of this simply being a stock up trade.

Clothing and clothing accessories posted a very good month relative to the performance in the balance of the year, likely driven by holiday promotions.

December dealer promotions couldn’t keep motor vehicle and parts dealers’ sales from a meaningful sequential deceleration (-1.85%).

Electronics and appliance stores were weak as well (SHLD, BBY).

No surprise we saw some weakness in building materials, garden equipment and supplies sales given the weather and likely economizing behavior on the part of the consumer buying gifts for Christmas.

The unsteady marriage of modest growth in disposable income and robust valuations across consumer staples and consumer discretionary sectors force us into a continued cautious profile.  We will continue to monitor the data as, mentioned above, the U.S. consumer faces a difficult and shifting landscape as we enter into ’14.

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