January Sales Bump Not to Be Dismissed

Many economists warn against reading too much into last month’s surprising increase in retail sales, arguing that the data could be a mere blip on the way to the next round of bad news about consumer fears. But at least one top executive suggests that the results could actually be a genuinely, if modestly, positive sign.“I don’t think you can throw the January report out the window,” said Terry Brown, CEO of Edens & Avant, which operates 130 lifestyle centers, power centers and neighborhood centers in 14 East Coast states. “It does create a slight bit of optimism when there is very little good news.” To start with, the Department of Commerce’s monthly survey, released on Feb. 12, indicated that a variety of retail categories enjoyed a boost. For example, sales at electronics and appliance stores were up 2.6 percent compared with December. Sales at clothing and accessory stores rose 1.6 percent, general merchandise outlets 1.1 percent, food service and drinking establishments 0.8 percent and grocery stores 2.2 percent.Sales at furniture and home furnishings stores, however, slipped 1.3 percent during January. Sporting goods, hobby stores and bookstores lost 0.5 percent in sales in January. And January’s overall retail sales still came in 9.7 percent lower than January 2008’s.Nevertheless, Brown gave much of the credit for the broad-based month-over-month improvement to retailers’ sound management of inventory. By offering attractive discounts, retailers have reduced their stock significantly. Brown thus does not expect retail sales to keep climbing every month, but he suggested keeping an eye on another benchmark. “The retailers should be more profitable,” he said. Improved cash flow and liquidity will allow more stores to stay open.Though a rash of bankruptcies and store closings has spread across the country, anecdotal evidence in Edens & Avant’s portfolio backs up Brown’s contention. Unexpected non-chain store closings appears to have decreased markedly from this time last year, especially in Florida. If such trends hold, they may indicate that the retail sector is close to bottoming out, Brown noted.