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Retail Sales Rose in August, But Department Store Sector Still Troubled

Department store sales are still feeling some pain, but apparel specialty stores saw some good news in August.

Retail sales rose 4.6 percent in August from a year ago, but just 0.4 percent on a seasonally adjusted basis from July, according to data from the U.S. Census Bureau released Friday. The computation excludes automobile dealers, gasoline stations and restaurants. Online and other non-store sales were up 14.3 percent from last year, and rose 1.6 percent month-over month. Apparel and accessory stores saw sales climb 2.3 percent year-over-year, but fell 0.9 percent on a month-over-month basis, seasonally adjusted. For the general merchandise category, sales at department stores fell 4.8 percent.

“Trends remain strong, but August grew somewhat slower than July, which could reflect consumers’ concerns about the unpredictability of trade policy,” Jack Kleinhenz, chief economist at the National Retail Federation, said.

Despite a challenging and highly competitive retail environment, Moody’s Investors Service vice president Mickey Chadha said, total retail sales are expected to grow roughly 4 percent in 2019, driven largely by strong topline growth at larger, “well capitalized retailers with strong e-commerce capabilities” and those that offer a “compelling value and convenience proposition to consumers.”

“Continuing momentum in retail sales which grew better than expected–0.6 percent in July and 4.6 percent year-over-year–as reported on Friday by the U.S. Department of Commerce demonstrates that consumers are still opening their wallets as low unemployment, and high consumer confidence coupled with better wages, is driving increased consumer spending,” Chadha said.

While retail sales data point to solid consumer spending in the third quarter, Wells Fargo Securities senior economist Tim Quinlan said individual categories did suggest that apparel and general merchandise stores “all stand out as places where goods could be impacted by tariffs.” He also cautioned that a “pumpkin smashing mood could hit” in the fourth quarter when October tariffs “bite harder.”