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So much for record Thanksgiving sales reports. U.S. Retail sales came in up only +0.2% vs. 0.6%E and ex-Auto +0.2% vs. +0.5%E on a sequential basis in November and up +6.8% yy. The continued sequential deceleration since July is consistent with what we heard out of retailers regarding November sales and the takeaway is the same as well – the U.S. consumer is weaker than many headlines suggest.

Among the key callouts from today’s retail sales report is the sharp deceleration in apparel to +3.7% down from +5.3% for the second consecutive month. Yes, that category alone it accounts for only 7% of PCE, but general merchandise stores (e.g. department and warehouse stores) had a similar deceleration. Combined the two represent over 25% of total PCE – that’s noteworthy.

Below is a table of the key categories that constitute ~70% of the retail sales number. Here are a few additional callouts:

  • Top-line yy trajectory is decelerating sequentially in all core categories with the exception of auto and electronic/appliance stores.
  • Food and Gas stores (~1/3 of total sales) were down -0.2% and -0.1% each sequentially underperforming all other categories
  • Electronics/appliance stores were the best performing for the second consecutive month.
  • Department stores declined -3% from -0.5% sequentially reflecting an even sharper deceleration than SSS trends suggest (+0.5% in November from +2%). At roughly 10x the size of the SSS sample set, this too is worth noting.

So what does it mean for Q4? The reality is that consumers are now lapping tougher retail sales compares through the 1H of ’12 with fewer levers to pull in order to sustain 7%+ growth rates. We continue to expect the greatest pressure on the consumer will be realized in the mid-tier department stores into the 1H of F12.

Slowing Apparel Retail Sales - Retail sales chart


Slowing Apparel Retail Sales - Retail sales table

Casey Flavin