U.S. Ready To Wear Retailers In October Sales Showed A Downward Trend

U.S. retail sales grew for the sixth consecutive month in October, but overall retail growth slowed down as consumer demand for ready-made clothes slowed down.

U.S. ready to wear retailers reported a 4.2% drop in sales in October. Compared with September, the sales of the segment, like sporting goods stores, showed a serious decline in overall sales. According to the data released by the US Census Bureau, the annual growth rate of clothing store sales in October 2020 decreased by 12.6% year-on-year.

On a seasonally adjusted basis, U.S. retail sales rose slightly by 0.3% in October compared with September, but increased by 5.7% compared with the same period last year. In contrast, the updated monthly sales growth rate in September was 1.6% and the annual sales growth rate was 5.4%. Since June, monthly sales are improving month by month, and the year-on-year portion is growing month by month, after a record drop in monthly revenue this spring.

Ken Perkins, President of retailmetrics, a market research firm, pointed out that consumers and retailers encountered significant resistance in October, including a 6.9% unemployment rate, a fierce presidential election, and, most importantly, rising pneumonia infection and mortality, sales will continue to move to digital channels. The lack of progress in the government's stimulus package is also worrying.

Jack Kleinhenz, chief economist of the National Retail Federation (NRF), said retail sales were on track in October, even though the new crown pneumonia pandemic continued to affect households and businesses.

In recent weeks of November, with these abnormal economic conditions and the increasing number of cases, retail sales have been expanding steadily, which is good news. The shopping season promotion seems to have boosted October sales. The growing number of new cases of pneumonia is still the key to affect consumers' views, emotions and spending on shopping. If we can't stop the latest wave of epidemic, we may adopt layoffs to reduce expenditure. Still, retailers are ready to safely go through the shopping season's product list, and so far, the results show that October's performance has been surprisingly good.

According to the NRF's calculation of retail sales (excluding auto dealers, gas stations and restaurants, focusing on the core retail sector), compared with September, after seasonal adjustment, the annual growth rate of sales was as high as 10.6%. In contrast, the monthly growth rate of sales in September was 0.9%, and the annual growth rate was 12.9% year-on-year.

The NRF figures show a 10% increase over the same period last year on a three-month average, excluding seasonal adjustments.

Sales growth in October was mainly driven by online sales, with a monthly growth rate of 3.1% and an annual growth rate of 26.3%, mainly due to Amazon primeday and related online promotion activities, which started in July and ended in October. Sales of 7 out of the 9 categories of retail sales grew compared with the same period last year.

After seasonal adjustment, the monthly growth rate of clothing and accessories sales decreased by 4.2%, and the annual growth rate of sales without seasonal adjustment decreased by 11.3%.

After seasonal adjustment, the monthly growth rate of sales of sporting goods also decreased by 4.2%, while the annual growth rate of sales without seasonal adjustment increased by 14.1%.

There is still a long way to go to achieve a meaningful recovery

Neil Saunders, general manager of global data retail, said that overall, retail sales continued to be strong, indicating that the consumer economy maintained a good level of activity.

But compared with the same period last year, the annual growth rate of sales has decreased, he said. And it doesn't show that stimulus measures are beginning to take off, as they did in the early days. This is particularly true among the lower income groups, which have seen the biggest drop in spending in the past few months.

There are obvious differences in the consumption trend between food and non food. The growth rate of food retailers' sales in October was almost unchanged compared with September, which makes sense, as the food sector is one of the last things consumers cut back on. But for non food retailers, consumers are more concerned about spending. Compared with September last year, the annual sales growth rate dropped by nearly 3 percentage points year on year.

Compared with the same period last year, the decline rate of ready-made clothing was more than 11%. Given that October was the month when consumers started buying heavy clothes to prepare for the coming cold season, the numbers turned out to be a bit disappointing. We believe that this has shown that the clothing industry is still a long way from any meaningful recovery.

All in all, Saunders said the message into the shopping season was clear: consumers were still spending and there was still an influx of money from other sectors of the economy, which helped retailers. This year will come to a solid end, and it will not be able to achieve the prosperity of the past unless it reinforces stimulus. If market conditions continue to slow, the outlook to early 2021 looks less optimistic.