For the first time in almost three years, the growth in total retail hires has turned positive. This shouldn’t come as a surprise given the positive sales recovery that has been in place for two quarters, but it’s worth noting for a couple of reasons:
First, the productivity gains we’ve seen across most of the space have in some part been at the expense of headcount reductions and reduced store labor hours. This is evident in the charts below, although what stands out to us is the duration of the prolonged hiring malaise. Clearly retail hiring has been in a multi year secular decline until now.
Secondly, in looking ahead we’d note that this is a clear sign that retailers are feeling better (and understaffed). While it makes perfect sense to see hiring pick up against a commensurate rise in sales, we do wonder how much further the hiring will actually go. The risk of staffing up against a still uncertain topline is one of the bigger risks we see. This especially holds true after such a short and unprecedented period of EBIT expansion driven in large part by cost containment.
With cost of goods also creeping higher, this is just another sign that peak EBIT margins may be unsustainable if sales don’t remain robust.