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Big Store Sales Plunge 7.7% During Holiday 2016

Retailers whose fortunes rest on apparel continued to suffer from the widespread shifts in consumer shopping preference during the just-ended holiday season.

The U.S. Census Bureau’s advance monthly report released last week reported that total retail sales, which include gasoline, groceries and automobiles, were $469 billion in December—an impressive 4.1% increase over December 2015’s $450.5 billion. On a 12-month smoothed basis, sales rose 5.4%, the biggest jump in the measure since August 2014.

The biggest driver of sales growth in December was in the automobile sector, where sales grew by almost 11 percent on a 12-month smoothed basis, its biggest increase in more than three and a half years.

However, apparel-oriented channels once again failed to benefit from the retail sales gains.

Although clothing and accessories store sales managed to eke out another 0.9% year-over-year increase to $21.4 billion, sales at department, chain and discount stores fell by a staggering 7.5% to $12.5 billion, bringing down the collective channel total—a reliable barometer of apparel retail sales—by 2.4% to $33.9 billion from $34.7 billion a year ago. On a 12-month smoothed basis, department store sales fell by 7.4% percent, and specialty store sales rose by nearly 1 percent, bringing the collective decline to 2.2%.

Sales at non-store retail, which includes pure-play e-commerce, increased by 13.2% in December to almost $49 billion. This of course was driven primarily by Amazon.

For the two months of November and December, sales fell 7.7% for department, chain and discount stores, rose 0.6% for apparel specialty, and dropped 2.6% for the combined channels. In the same two-month period, non-store retail sales rose 12.8%.

Retail inventories, which were under control for most of the year after wreaking havoc on earnings in 2015, are moving in the wrong direction again due to the disappointing holiday sales at traditional retail channels. Inventories at department stores inventory fell by 5.9% in November (the most recent month for which data are available) compared to the same month last year. However, specialty store inventory rose 1.2%, which may result in bigger-than-expected clearance sales in the channel. Inventory-to-sales ratios increased slightly for both the department/chain/discount and specialty sectors.