Retail Sales Were Puzzling and Ugly. Don’t Panic.

(Bloomberg Opinion) -- If I had to sum up the Commerce Department’s latest retail sales report in two words, they would be, “Huh? Yikes.” The data showed that retail sales sank 1.2 percent in December from the previous month, a surprisingly dismal result that makes for the steepest decline since 2009.

Retail Sales Were Puzzling and Ugly. Don’t Panic.

The plunge was so steep, Bloomberg News reported that it left analysts skeptical about the data. And yet, even if there weren’t any glitches, I don’t think it’s time to go into panic mode just yet.

December offered some unsteadying events: The stock market whipsawed in the final days of 2018, and a government shutdown created a cloud of uncertainty, both when it merely loomed and when it ultimately took effect. These factors together might have created temporary shock from which consumers will quickly move on. 

For those questioning the data, I can understand that posture because we simply haven’t seen many signals suggesting retailers were in for a weak holiday season. Forecasts from industry groups and analysts had called for shoppers to be out in force. Consumer sentiment measures looked upbeat, and the job market continued to look healthy. And we saw plenty of retailers deliver robust holiday sales reports, which followed generally strong results heading into the season.

Retail Sales Were Puzzling and Ugly. Don’t Panic.

Target Corp. has reported that comparable sales rose 5.7 percent from a year earlier in the November and December shopping rush, while Urban Outfitters Inc. said sales by that measure than rose 3 percent in the holiday quarter. After the season wrapped, Lululemon Athletica Inc. raised its guidance for the full quarter, now forecasting a “mid-to-high teens” increase in comparable sales. Other industrywide analyses pointed to a strong season, such as Mastercard SpendingPulse’s report that found retail sales increased a robust 5.1 percent during the holiday season. 

And it doesn’t appear a sharp pullback is on the immediate horizon. The National Retail Federation’s 2019 forecast, issued just last week, calls for retail sales growth between 3.8 percent and 4.4 percent from the previous year.

Still, the ugly numbers do make me somewhat more sympathetic to retailers that struggled during the holiday season, such as Macy’s Inc. and J.C. Penney Co. And the surprise is a stark reminder of a dynamic I’ve noted before: Even if 2019 isn’t going to be completely bleak for retailers, it is probably going to be choppy. Tariffs on some goods from China are set to rise, even as talks between the U.S. and China continue. This is creating serious ambiguity for retailers about how to manage their supply chains and whether and when to raise prices.

Consumer-products giants have already raised prices on items such as diapers and paper towels due to higher commodity costs, and we have yet to see how that is going to sit with shoppers over an extended period of time.

We know retailers won’t be handed easy wins in 2019. But that’s not the same as saying things are going sour. And this latest report shouldn’t leave us thinking things are more dire than a broad view of the industry and the economy would suggest.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

©2019 Bloomberg L.P.