Retail-Sales Growth Slows to a Halt

Retail sales growth took a pause in April.

Retail sales growth took a pause in April, according to the Census Bureau report on the subject on Wednesday. There was an average of no retail sales growth in April: adjusting for seasonal variation and holiday and trading-day differences, but not for price changes, sales were $436.8 billion, a 0.0 percent change from the previous month. But at least the change from a year earlier was an increase of 0.9 percent, which is probably a more meaningful number, since monthly changes tend to be noise. On the other hand, take out car sales and the annual increase in retail sales was also 0.0 percent.

What does it mean for retail real estate? Sluggish sales can’t be good for the sector, though it’s hard to generalize. A grocery-anchored center with necessity-based retailers is likely to turn in better sales than a department store-anchored mall from the ’60s in a tertiary market whose employment base isn’t growing. The retail component of a mixed-use property in a walkable urban area favored by tech companies and their workers is likely to attract more investor interest than an exurban shopping center haunted by the ghosts of its big box tenants (that is, no one has filed that box yet).

Despite the lackluster averages, some categories of retail are still doing well, year over year. Restaurants, for instance — “food service and drinking places,” according to the bureau, enjoyed an increase in sales of 8.5 percent for the year. One thing that people spend more money on in a time of job growth (though not necessarily wage growth) is the everyday pleasure of eating out. Other categories that did well in April include sporting goods, hobby, book and music stores, up 6.4 percent for the year; building material and garden equipment and supplies, up 4.1 percent; and miscellaneous store retailers (Walmart and its ilk), up 4.2 percent.

Something that doesn’t particularly bode well for physical stores: the continuing, absolutely persistent growth in Internet-based retail sales. It was up 0.8 percent for the month in April and 6.3 percent for the year. Since day one of online sales sometime in the murky 1990s, such sales have always increased. Even the Great Recession didn’t slow things down much. Presumably Internet sales will reach a ceiling someday in terms of absolute sales and as a percentage of total retail sales, but that day hasn’t come yet. Till then, it should worry some kinds of retailers more than others. Video stores, for instance, were right to be worried about online competition; food and drink places, on the other hand, probably don’t have that much to worry about.