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Retail Sales Recover in July, but Apparel Growth Still Sluggish

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Retail sales recovered in July, sending an encouraging sign that the improving job market and declining oil prices might be stimulating consumer spending.

Within key apparel channels, however, department stores suffered another drop, while specialty store sales rose, resulting in a slight increase for the overall sector.

Total retail sales rose by 2.4% compared to last July, to $446 billion, according to data recently released by the U.S. Department of Commerce. On a 12-month smoothed basis, sales were up by 3.4%, helped by a still-robust automobile sector, where sales increased by over 7 percent. Excluding autos, retail sales grew by 2.5%. Sales at restaurants enjoyed the biggest increase, up 8 percent on a 12-month smoothed basis.

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Sales at department, chain and discount stores dropped by 2.4% on a smoothed basis, a much steeper decline than June’s 1.3% drop and May’s decline of 0.9%. Department stores continue to lose share to other channels, particularly in apparel, where specialty stores and e-commerce retailers are experiencing above-average growth.

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Apparel specialty stores sales rose by 3.6% on a smoothed basis. Though this was a bit better than June, it was a much smaller gain than May’s 5.8% increase. Declining prices are no doubt playing a big role here, given the increasingly promotional environment and rising influence of fast fashion players, which are included in this channel.

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For the combined department and specialty sector, a barometer of overall apparel sales, sales increased by 1.2% in the month, consistent with signs over the past several months that indicate the apparel market will grow at between 1 and 2 percent this year.

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In June, the most recent month for which inventory information is available, inventory levels rose across all key retail sectors, with specialty apparel inventory levels up the most, at 7.6%, driving up that channel’s inventory to sales ratio from 2.45 to 2.48. Department, chain and discount store inventory to sales ratio rose from 2.09 to 2.1.

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