Retail Sales Fall In February: Brace For More Coronavirus Pain

Consumer spending activity, which remains one of the pivotal factors driving the economy, has somewhat slowed down. This was clearly evident from U.S. retail sales data for the month of February that shows the biggest drop since December 2018. Industry experts are seeing more pain ahead as Americans are restricting their purchases to essential items amid coronavirus outbreak and avoiding public places like restaurants, theaters and malls.

Certainly, these raise concern about the U.S. economy losing momentum in the first quarter. Meanwhile, fears of a possible recession have also started to grip the stock market. In a bold move, the Federal Reserve announced a massive quantitative easing program and slashed the benchmark interest rate to a range of 0-0.25%, down from a range of 1-1.25% to safeguard the economy.

Retail Sales Topple

The Commerce Department stated that U.S. retail and food services sales in February fell 0.5% to $528.1 billion, following an upwardly revised reading of 0.6% gain in January. Notably, retail sales improved 4.3% from February 2019.

The report suggests that sales at motor vehicles and parts dealers fell 0.9%, while the same at electronics & appliance stores decreased 1.4%. Meanwhile, sales at furniture & home furnishing stores sales declined 0.4%. Meanwhile, receipts at gasoline stations tumbled 2.8%, reflecting lower gas prices.

We note that sales at health & personal care stores fell 0.1%, while sales at sporting goods, hobby, book & music stores inched up 0.1%. Meanwhile, sales at clothing & clothing accessories and department stores decreased 1.2% and 0.2%, respectively. Again, sales at food services & drinking places and building material dealers slid 0.5% and 1.3%, respectively.

Nonetheless, sales at non-store retailers climbed 0.7% and also improved 7.5% from the prior-year period.



More Pain Ahead

COVID-19 has rattled the global economy. The retail sector, in particular, remains under pressure due to major supply-chain bottlenecks, reduced traffic, an increasing number of store closures and limited hours of working. This will not only hurt sales and productivity but is also likely to aggravate these companies’ cost burden as many retailers said that they will continue to give full payments and benefits to their employees during the temporary closure.

Luxury accessories and branded lifestyle product retailer, Tapestry (NYSE:TPR) has temporarily closed all directly operated Coach, Kate Spade and Stuart Weitzman stores in North America and Europe till March 27. Athletic footwear manufacturer NIKE (NYSE:NKE) has shut all company-owned stores in various countries like United States, New Zealand, Western Europe, Canada and Australia till March 27. Talking about restaurant operators, McDonald's (NYSE:MCD) has closed dining areas across its company-owned U.S. restaurants for the time being.

The devastating impact of the deadly coronavirus has led to lower demand for several commodities. However, the demand for toilet paper, disinfectants, masks, gloves, packaged water, medicines and related food staples is rising in the wake of the fast-spreading coronavirus. Per media reports, Walmart (NYSE:WMT) , Target (NYSE:TGT) and Costco (NASDAQ:COST) are witnessing huge footfall. Further, e-commerce bellwether Amazon (NASDAQ:AMZN) is registering bulk orders mainly food and hygienic items as more people prefer staying home amid the outbreak. Moreover, online grocery apps like Instacart and Shipt are witnessing record downloads.

Coronavirus-led damage has been done and the situation is getting worse. Consequently, investors should brace for soft sales numbers in the coming months.

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