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U.S. Retailers Have Strong November, but Apparel Sales Slowed

U.S. retail had a good month in November, capped off by very healthy gains for Thanksgiving week, though apparel sales slowed compared to previous months, as consumers concentrated their shopping on electronics and other non-apparel categories.

Total U.S. retail sales grew by 4.8% in the month on a 12-month smoothed basis, the second in a row of accelerating growth, according to just-released data from the Department of Commerce. Strong demand for automobiles is still a big factor; taking car sales out of the mix, retail sales increased in November by only 3.8%, the third straight month of ever-larger sales growth for the non-auto sector. Other retail channels with above-average growth included electronics stores, eating and drinking establishments, toy and sporting goods stores, and furniture retailers.

Total retail inventory rose by a surprising 6.6% in October (the most recent month for which this measure is available), more than September’s 6% increase. Rising retail inventories have been a concern for many industry analysts, who fear a glut of merchandise in stores may result in intensified promotions, which would, in turn, erode fourth quarter gross margins.

The department, chain and discount stores sector, which combines traditional department stores like Macy’s and Dillard’s with national chains Sears, Kohl’s and JC Penney and discounters like Walmart, Target and Kmart, suffered its twentieth straight month of declining sales. Seasonally adjusted revenues, though better than October’s 2.6% plunge, dropped 1.5% on a 12-month smoothed basis in November. Big store inventory jumped only 1.4% in October, down from its 1.9% increase in September, and causing the inventory-to-sales ratio to edge down slightly. If sales continue to decline at a slower rate in this sector, big retailers could finish the year with relatively clean balance sheets.

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Apparel specialty store sales rose by 3.9%, lower than last month’s 5% spike for this channel, which includes chains like Gap, Men’s Wearhouse, Chico’s, and Talbots, small chains, and independent boutiques. Apparel specialty chains continued to erode department and discount store market share, though at a slightly slower pace than it had been. Specialty store inventories rose by 1.3%, and their inventory-to-sales ratio declined slightly from the month prior.

Sales at the combined department, chain, discount and apparel specialty retail sectors, a traditionally reliable barometer of total apparel sales, edged up by a mere 1.7% on a 12-month smoothed basis, lower than last month’s growth, due to the specialty store slowdown. September inventories for the combined sectors advanced 1.6%, driving inventory-to-sales ratio down very slightly to 2.23%.