As previewed, after a better July and back-to-school season, it looks like retail sales slowed in the second half of August by about -200 basis points, with notable step-downs in furniture & furnishings, home improvement, sporting goods, e-commerce, and restaurants. It’s even impacting liquor stores as shown in Placer. (While we are on the topic of liquor stores, Total Wine & More announced that it was planning on 20 new locations in 2024, which is less than we would have expected given that typical store footprint matches Bed Bath & Beyond. Moreover, some of these will be smaller format locations such as a 8,900 square foot store in Saint Louis Park, MN. For those interested in the brand and category, find our overview report here.)
Why the downshift in retail sales? As we discussed last week, we suspect several reasons: (1) thrift and frugality for spending on goods are still top of mind for consumers and as we moved out of back-to-school, there is not an event/need to go to stores like we saw with Valentine's Day, Mother’s Day, and 4th of July earlier in the year; (2) higher gas prices and persistently high grocery prices may have taken some added wallet share; (3) excess household savings that were accumulated during the pandemic are running out; (4) consumers continue to prioritize in-person experiences such as travel and entertainment (i.e., Barbenheimer), which may have come at the expense of spending on goods; and (5) the impact of hurricanes hitting Florida and California.
Should these reasons be accurate, we would expect retail sales for September and early October to remain at a more subdued level, both on an absolute and relative basis. However, once we get into November, the year-over-year trend should pick up as last November meaningfully slowed compared to 2021 and versus pre-pandemic level. (You can find our report here about that period.)
