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Retail Sales Say Economic Slowdown Could Become Reality for the U.S. Lombardi Letter 2019-01-11 09:23:15 economic slowdown retail Retailers in the U.S. economy posted weak and anemic sales during the 2018 holiday shopping season. It tells that an economic slowdown could be brewing in the country. Analysis and Predictions,U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2019/01/Retail-Sales-Say-Economic-Slowdown-Could-Become-Reality-for-the-U.S.-150x150.jpg

Retail Sales Say Economic Slowdown Could Become Reality for the U.S.

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Retail Sales Say Economic Slowdown Could Become Reality for the U.S.

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Major Retailers Report Dismal Sales, Foretelling an Economic Slowdown

The U.S. economy may not be in great shape; an economic slowdown could be on the horizon. The financial results coming from retailers are making a strong case for this.

Retail companies in the U.S. are facing a lot of headwinds. They have been reporting anemic sales and a dismal outlook.

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What do weak retail sales tell us? They essentially mean that American consumers may not be spending as much.

This shouldn’t be taken lightly, since consumer spending makes up a huge portion of U.S. gross domestic product (GDP). So, if consumer sales decline a little, the U.S. economy will witness an economic slowdown.

Look at Macy’s Inc (NYSE:M) to get some perspective. Recently, the company reported that comparable sales at its stores increased by just 1.1% in November and December 2018, when compared to the same period in the previous year. (Source: “Macy’s, Inc. Announces November/December 2018 Sales Results,” Macy’s, Inc., January 10, 2019.)

Mind you, that period is one of the busiest times for retailers in the U.S. economy.

In addition to this, the company lowered its 2018 earnings outlook.

Investors aren’t loving Macy’s stock these days; the share price has been cratering. In August 2018, it traded as high as $41.00. Now it’s at about $26.00. This represents a decline of close to 37% in a matter of months.

Chart courtesy of StockCharts.com

Kohl’s Corporation (NYSE:KSS) is another retailer that’s painting a gruesome picture for the outlook of the U.S. economy.

For the 2018 holiday selling period, Kohl’s reported an increase in sales of 1.2%. This is significantly lower than the seven-percent increase it reported in the same period a year earlier. (Source: “Retail shares slide as otherwise strong consumer spending didn’t boost holiday sales enough,” CNBC, January 10, 2019.)

Kohl’s stock price has been facing scrutiny as well, as the following chart shows.

Chart courtesy of StockCharts.com

In November 2018, KSS stock traded as high as $82.00. Now it trades around $65.00. This is a decrease of about 20% in just a couple of months.

U.S. Economic Outlook for 2019: Economic Slowdown Could Be Brewing

Dear reader, I know what you could be thinking: “The way we buy things is changing; we shouldn’t be looking at the brick-and-mortar retailers to get an idea of where the U.S. economy is headed. Online sales is where we get a better idea.”

Let me tell you this: surely, online sales are growing, but they still don’t account for too much, compared to overall sales.

(Source: “E-Commerce Retail Sales as a Percent of Total Sales,” Federal Reserve Bank of St. Louis, last accessed January 10, 2019.)

Look at the chart above. In the third quarter of 2018, e-commerce sales amounted to just 9.8% of the overall retail sales.

This means that more than 90% of retail sales in the U.S. economy are done in brick-and-mortar stores. So, looking at the retailers that have a brick-and-mortar presence still makes sense when assessing the state of the economy.

I will conclude with this: dismal sales figures at major U.S. retailers during the holiday season is saying something. They are telling us that the U.S. economy is heading the wrong way. Americans are pulling back on spending, and they are not optimistic. Dismal sales numbers foretell an economic slowdown.

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