RetailSails

The third week of January continued the trend of low volume and sporadic activity, as retailers focus on clearing inventory and transitioning to spring merchandise. Limited clearance merchandise, along with gas prices which are creeping nearly 50% higher than a year ago continue to hold back sales.

The International Council of Shopping Centers (ICSC) reported that chain store sales for the week ending Jan 23rd fell by 2.5% from the prior week on seasonally low-volume, while sales were up 1.9% from a year ago. In a reverse from last week, department stores reported improved business activity while discount stores were down relative to last year. Though consumers are feeling relatively better about their personal financial situations, ICSC cited a recent Gallup poll showing that 70% are still cutting back on their weekly spending. ICSC Research expects total sales for January to rise about 1% from a year ago as limited clearance inventory holds back sales.

Redbook Research reported that same-store sales rose 1.0% for the third week of January compared to last year, while month-over-month sales dropped 1.4% relative to December. The trend of small volumes and volatile conditions continues, as retailers focus on clearance and inventory reshaping. “Some merchants claimed to detect a brisk tone during the Martin Luther King holiday,” said Catlin Levis, Redbook analyst. “As most retailers enter the final week of the fiscal year, inventories are reported to be clean, easing the transition of spring merchandise.”

Earlier today, the National Retail Federation (NRF) projected that retail sales (excluding automobiles, gas stations, and restaurants) would rise 2.5% in 2010. While this would represent an improvement over the 2.5% drop in 2009 and 1.3% increase in 2008, it would still mark the 3rd-lowest year-over-year increase since 1995, when the trade group began tracking such figures. The forecast is heavily dependent on continued improvement in the housing and job markets, which the NRF believes will help bolster consumer confidence throughout the year.

January and February are typically the two lightest months of the year in terms of sales volume, so we are less inclined to read too much into weekly sales changes. Instead, we will be watching closely over the next few weeks as a flurry of year-end earnings reports are scheduled to be released.