Inside This Issue - News
Payroll tax hike takes toll on January sales
February 25th, 2013
NEW YORK – Retail sales limped ahead last month as consumers adjusted their spending in response to the increase in payroll taxes and rise in gasoline and energy prices.
According to the National Retail Federation (NRF), January retail sales (excluding automobiles, gas stations and restaurants) increased 0.3% seasonally adjusted from December and 5.4% unadjusted year over year.
The figures "continue to indicate a stable yet fragile economy," NRF president and chief executive officer Matthew Shay observed.
"Consumers are continuing to hold back on spending just as our economy is held back by political brinkmanship in D.C.," said Shay. "The failure to address the critical challenges confronting our economy will continue to dampen consumer confidence, which will in turn mute sales and growth. The economy will continue to limp along until our politicians finally address our tax and spending challenges and put forward a pro-growth, pro-jobs agenda."
Among retailers, Target Corp. beat Wall Street’s estimates with a 3.1% same-store sales gain. Analysts had forecast a 1.7% rise.
"January comparable-store sales were in line with our expectations as guests responded to clearance prices on holiday inventory," said chairman, president and CEO Gregg Steinhafel. "Our guests continue to shop with discipline in the face of a slow economic recovery and new pressures, including recent payroll tax increases. As a result, we remain focused on providing unbeatable value combined with a superior guest experience in both our stores and digital channels."
Costco Wholesale Corp.’s 4% same-store sales gain was in line with the consensus estimate of 4.1%. The growth was spread across the store, said Willam Blair & Co. analyst Mark Miller, with fresh food, hard lines, major electronics and soft lines all up in the mid-single-digit range.
At Walgreen Co., growth in the pharmacy business, fueled by the severe flu season, helped boost same-store sales 3.7%.
The increase turned around a same-store sales drop of 6.1% in December and ended a year of monthly same-store declines. The chain had last reported a monthly same-store sales gain in December 2011, when results were up 0.4%. The declines resulted from the retailer’s exit from the Express Scripts Inc. pharmacy network over a contract dispute. Walgreens rejoined the network in mid-September.
The prescription count at comparable stores jumped 13.6% in January and was up 11.6% on a day-fall adjusted basis. Flu shots administered at pharmacies and clinics season-to-date came in at nearly 6.9 million, compared with 5.5 million last year.
The retailer noted that the percentage of Express Scripts customers filling prescriptions in its pharmacies continued to rise during January.
The Department of Commerce reported total January retail and food services sales (which include non-general merchandise categories such as automobiles, gasoline stations and restaurants) increased 0.1% seasonally adjusted month to month and increased 4.7% adjusted year over year.
"With the return of healthy housing prices, stronger employment statistics combined with historic highs on Wall Street at the end of 2012 and in 2013, consumers seem a bit more confident these days," NRF chief economist Jack Kleinhenz remarked. "Even though retail sales were relatively modest in January, consumers seem to have adjusted accordingly to rising taxes and energy prices. Far from secure, consumer confidence continues to be shaky."
In late January NRF released its annual retail sales forecast. The organization estimates that retail industry sales (excluding automobiles, gas stations and restaurants) will increase 3.4% this year, with online sales set to grow between 9% and 12%.
ShopperTrak predicted sales will continue to improve intermittently through the first half of 2013. It estimates that during the first quarter national retail sales will increase 3.2% and retail foot traffic will increase 3.5%, when compared to the same period last year. The company estimates that during the second quarter national retail sales will increase 2.9%, though foot traffic will remain flat.
"This year is starting strong," commented ShopperTrak founder Bill Martin. "Indeed, the first quarter will not only include the usual sales events for Valentine’s Day and Presidents Day, but also grab Easter sales, as the holiday falls earlier in the calendar this year. This activity will cause a spike in the first quarter and a lull in the second, for which retailers need to prepare."