Retail Channel $ Update – February Monthly & March Advance

In March, YOY Commodities’ inflation slowed to 0.05% from 0.6%. Even with a very low inflation rate, high cumulative inflation vs 21 can still impact consumer spending and slow $ales growth.  We saw more evidence of this in March. Total Retail $ were +4.2% vs 24, -16% below the average 92>24 change of +5.0%. Relevant Retail was worse, +3.4%, -29% below the March average of +4.8%. The situation is complex, but the recovery is slowly restarting. We’ll continue to track the retail market with data from 2 reports provided by the Census Bureau and factor in a targeted CPI.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the Monthly reports. The biggest difference is that the full sample in the Monthly report allows us to “drill” a little deeper into the retail channels.

We will begin with the February Monthly Report and then go to the March Advance Report. Our focus is comparing to last year but also 21 & 19. We’ll show both actual and the “real” change in sales as we factor inflation into the data.

Both reports include the following:

• Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
• Individual Channel Data – This is more detailed in the Monthly reports, and we’ll focus on Pet Relevant Channels.

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

• Current Month change – % & $ vs previous month
• Current Month change – % & $ vs same month last year and vs 2021.
  • Current Month Real change vs last year and vs 2021 – % factoring in inflation
• Current Ytd change – % & $ for this year vs last year, 2021 & 2019.
  • Current Ytd Real change % for this year vs last year and vs 2021 and 2019
• Monthly & Ytd $ & CPIs for this year vs last year and vs 2021 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the February Monthly. All were down from January and there were 5 actual YOY sales drops – all vs 24. We should note: Gas Stations are selling less product Ytd than in 2021 & 2019. No group is “all positive” – a significant change from 4 in January. Relevant Retail has been all positive in 11 of the last 15 months and in 7 of the last 9. ($ are Not Seasonally Adjusted)

The February Monthly is $2.7B more than the Advance report. Restaurants: +$1.0B; Auto: -$1.1B; Gas Stations: +$0.2B Relevant Retail: +$2.6B. Relevant Retail was the driver in the $ales decrease vs January, but all big groups were down. A Jan>Feb decrease in Total Retail  has happened in 64% of the years since 1992. However, the -3.5% drop was 7 times the -0.5% average. There were 5 YOY drops in actual sales vs none in January. There were 8 “real” sales drops (only 2 in Jan) and no group was “all positive”. Restaurants still have the biggest increases vs 21 & 19 but Relevant Retail stayed at the top of “real” performance vs 2019. However, only 54% of their growth is real.

Now, let’s see how some Key Pet Relevant channels did in February (81% of Feb Rel Retl $)

Overall– All 11 were down from January. Vs Feb 24, 5 were actually and 4 “really” up. Vs Feb 21, 11 were up but only 6 were real increases. Vs 2019, The only negative was Off/Gift/Souv. They were actually & really down.

• Building Material Stores – The pandemic focus on home has produced sales growth of 32.1% since 2019. Prices for the Bldg/Matl group have inflated 19.9% from 21 and 22.0% from 2019 which is having an impact. Sales vs January were -4.4% for HomeCtr/Hdwe and -3.4% for Farm Stores. Vs other years, actual $ are only down monthly vs 24 for both & Ytd vs 24 for HomeCtrs. In Real $, both are up vs 2019 and Farm Stores are up Ytd vs 24. Plus, only 16% of the Building Materials group’s 19>25 lift was real. Avg 19>25 Growth: HomeCtr/Hdwe: 3.9%, Real: 0.5%; Farm: 5.4%, Real: 1.9%
• Food & Drug – Both are truly essential. Except for the pandemic food binge buying, they tend to have smaller changes in $. In terms of inflation, the Grocery rate is now 17% lower than the rate for Drug/Med products. Drug Stores are positive in all measurements and 62% of their 2019>25 growth is real. Supermarkets’ actual $ are up in all comparisons. They are only “really” down monthly vs 2024 & 2021 and Ytd vs 2021. However, only 14.1% of their 19>25 increase is real growth. Avg 19>25 Growth: Supermarkets: +5.1%, Real: +0.7%; Drug Stores: +4.7%, Real: +3.1%.
• Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are down -3.7% from January, and their only positives are actual and real vs Feb 21 & 2019. Prices are still deflating, -5.3% vs 24. Deflation started in April 23 and is a big change from +1.1% in 22>23 and +7.9% in 21>22. The result is that 72.4% of their 36.2% lift since 2019 is real. Avg 19>25 Growth Rate is: +5.3%; Real: +4.0%.
• Gen Mdse Stores – All actual & real sales were up for Club/SupCtrs. $ Stores are only actually & really down vs Feb 24 and really down Ytd vs 24. Discount Dept Stores are only actually up vs 2021 & 2019. Real sales are only positive vs 2019 & only 3% of their growth since 2019 is real. The other channels have an average of 49.5% in real growth. Avg 19>25 Growth: SupCtr/Club: 5.9%, Real: 3.1%; $/Value Strs: +5.5%, Real: +2.8%; Disc. Dept. Strs: +1.7%, Real: 0.1%.
• Office, Gift & Souvenir Stores – After a -33% drop last month, sales fell -6.5% from January. However, they are only actually & really down vs 2019 & vs Feb 24. They are also really down vs Feb 21. Their recovery started late, but their progress may be slowly restarting again. Avg Growth Rate: -0.4%, Real: -1.9%
• Internet/Mail Order – Sales are -4.9% from January but still set a new February record of $103.2B. All measurements are positive, but their YOY growth, +3.5%, is only 24% of their average since 2019. However, 83.8% of their 128.4% growth since 2019 is real. Avg Growth: +14.8%, Real: +12.9%. As expected, they are by far the growth leader since 2019.
• A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb 23, grew Mar>May, fell Jun>Aug, rose Sep>Nov, fell Dec>Jan 24, grew Feb>May, fell Jun>Sep, grew Oct, fell Nov, rose Dec, then fell Jan>Feb. All measurements are again positive and they are in 2^nd place, behind the Internet, in the % increase vs 19 and vs 21. Also, 79% of their 74.9% growth since 2019 is real. Average 19>25 Growth: +9.8%, Real: +8.0%

Feb had its usual drop vs Jan, but the Relative Retail drop was 2.4 times bigger than the avg. All big & small channels were down. The YOY Feb lift of +0.5% was 90% below avg for Relevant Retl and 6 smaller channels and all big groups were down. Prices are deflating in 5 channels (7 in Jan) but cumulative inflation still impacts $ as only 6 channels were really up vs Feb 21. The Retail Recovery has paused. The Feb commodities CPI was 0.6% but slowed to 0.05% in Mar. Let’s see if it impacts Retail.

Feb>Mar sales were up for all. A Feb>Mar Total Retail lift has happened every year but 2020 since 1992 and the 14.9% lift is 11.7% above avg. There were 2 YOY $ drops. There were 5 in February. $ for all Big Groups but Gas Stations were up vs Mar 24, but the Total Retail lift of 4.2% vs Mar 24 was 15.7% below their +5.0% 92>24 avg. The Relevant Retail 3.4% increase vs 24 was also significantly below their +4.8% avg (-29%). Inflation is still a factor. The CPI for all commodities slowed to 0.05% but it is 16.7% vs 21. The inflation surge was just beginning back then. There is some other pretty good “real” news. 6 “real” measurements were down. In February, there were 8. Also in February, no group was all positive. In March, Total & Relevant Retail are both all positive. That’s 8 of the last 10 months for Relevant Retail.

Overall Inflation Reality– The Total Retail CPI fell to +0.05% but the $ lift vs 24 was -16% below avg. Restaurant inflation grew to +3.8% and their sales lift was 30% below avg. Gas prices fell to -9.8%, but they are still in turmoil. Auto inflation rose to 0.3% but it is still +18.9% vs 21. Their sales grew 9.8% vs 24 (79% above avg – pre-tariff buying). Inflation rose to 0.7% for Relevant Retail. Their YOY lift was 29% below avg but they are again all positive. Slow progress has restarted.

Total Retail – Since Jun 20, every month but Apr 23, Jun 24 & Feb 25 has set a monthly $ales record. In 2023>24, Sales were on a roller coaster. Up Jul>Aug, down Sept, up Oct>Dec, down Jan 24, up Feb>Mar, down April, up May, down Jun, up Jul>Aug, down in Sep, up Oct>Jan 25, down in Feb>Mar. Prices are +0.05% but YOY sales are +4.2%, 15.7% below the 92>24 avg change of +5.0%. However, 42.1% of the 19>25 growth is real. Inflation is low but cumulative inflation is still having an impact. Growth: 24>25: 2.8%; Avg 19>25: +6.4%, Real: +2.9%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, exceeding $1T for the 1^st time in 2023. March $ are up vs 24 and they have the biggest lifts vs 21 & 19. Inflation rose to 3.8% in March and is now +25.3% vs 21 and +30.3% vs 19. Their 4.2% YOY lift is 30.1% below their +6.0% 92>24 avg. Only real Ytd vs 24 is negative, but just 35.7% of their 56.6% growth since 2019 is real. They are 3^rd in performance behind Relevant & Total Retail. Recovery started late but inflation started early. Growth: 2.8%; Avg 19>25:+7.8%, Real: +3.1%.They just account for 13.7% of Total Retail $, but their strong growth has helped Total Retail.

Auto (Motor Vehicle & Parts Dealers) – They worked to overcome the stay-at-home attitude with great deals and advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 22, sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual $. Their YE real 2022 sales numbers were even worse, -8.2% vs 21 and -8.9% vs 19. 2023 started a true sales rollercoaster but the $ set a new record, $1.595T. $ fell in Jan 24, grew Feb>Mar, fell Apr, grew May, fell June, grew Jul>Aug, fell Sep, grew Oct, fell Nov, grew Dec, fell Jan>Feb, then grew in Mar. Mar $ were +9.8% vs 24. (79% above avg – pretariff buying). Only real $ monthly & Ytd vs 21 are negative, but only 31.3% of 19>25 growth is real. Growth: 4.9%; Avg 19>25: +5.8%, Real: +2.0%

Gas Stations – Gas Stations were hit hard by “stay at home”. They started recovery in Mar 21 and inflation began. Sales got on a rollercoaster in 22 but set a record, $583B. Inflation started to slow in Aug and prices slightly deflated in Dec & Feb 23, then strongly fell in Mar>Jul to -20.2%. In Aug they rose to -3.7%. In Sep they were +2.7% but began deflating to -4.2% in Feb 24. In Mar>May their $ grew, fell June, rose July, fell Aug>Dec, rose Jan, fell Feb>Mar. In Mar, $ are -4.5% vs 24 and only up vs Mar 21 & Ytd vs 21 & 19. Real sales are down vs Mar 21 & Ytd vs 21 & 19. Growth: -2.0%; Avg 19>25: +3.9%, Real: -0.6%. They show the cumulative impact of inflation and how deflation can be both positive and negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for ≈60% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. Their only down month until Feb 25 was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022, but all months set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, the roller coaster continued. A December lift set a new monthly record of $494.7B & an annual record of $4.997T. Sales fell Jan>Feb 24, rose in Mar, fell in Apr, rose in May, fell in June, rose Jul>Aug, fell Sep, rose Oct>Jan 25, fell in Feb, then rose in Mar. The Mar 3.4% YOY lift is 29% below their 92>24 avg of +4.8%. However, they are all positive again and 54% of their 47.0 % 19>25 growth is real – #1 in performance. Growth: 2.6%; Avg 19>25: +6.6%, Real: +3.8%. In 2024 their inflation rate dropped from 3.2% to 0.1%, stabilized at 0.5% Dec>Jan, then rose to 0.6% in Feb & 0.7% in Mar. Inflation is low but its cumulative impact slows growth and can even cause drops. We saw this in Feb>Mar. We’ll see what happens in the upcoming months.

Inflation has slowed, but its cumulative effect can be negative. In Feb, 6 actual YOY $ comparisons for all big groups were negative. In Mar, only 2 were down. In Feb, there were 8 real drops. In Mar, there were 6. In Feb, all were down in YOY lifts vs 24. In March, only Gas Stations were down, but the lifts for all but Auto were significantly below avg. Finally, in Feb, no big group was all positive in YOY comparisons. In Mar, Total & Relevant Retail were all positive. Relevant Retail has now been all positive in 8 of the last 10 months. February was very bad. March was markedly better, but the recovery is still slow.

Here’s a more detailed look at March by Key Channels (98% of Ytd Rel Retl $)

• Relevant Retail: Growth: +2.6%; Avg: +6.6%, Real: +3.8%. All 11 were up from Feb. Vs Mar 24: 10 were up, Real: 9, Vs Mar 21: 6 were up, Real: 5. Vs 19: Only Dept Stores were down – both actually & really.
• All Department Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Sales are +12.6% from February but only their actual Ytd numbers vs 21 are positive. Their -5.5% Mar YOY drop is 20 times bigger than their -0.3% avg decrease. Growth: -4.0%; Avg 19>25: -0.4%, Real: -2.0%.
• Club/SuprCtr/$- They fueled a big part of the recovery because they focus on value which has broad consumer appeal. $ales are +13.5% from Feb, and they are positive in all measurements. However, only 48.1% of their 39.5% 19>25 lift is real. Their 1.5% YOY Mar lift is -82% below their 92>24 avg of +8.4%. Growth: 2.8%; Avg 19>25: +5.7%, Real: +2.9%.
• Grocery- They depend on frequent purchases so their changes are usually less radical. Actual $ are +8.6% from Feb and positive in all YOY comparisons. However cumulative inflation has hit them hard. Real $ are down vs Mar 24, Mar 21 & Ytd 21. Plus, only 10% of 19>25 growth is real. Their 1.0% YOY lift is -71% below avg. Growth: 2.2%; Avg 19>25: +4.9%, Real: +0.5%.
• Health/Drug Stores – Many stores are essential, but consumers visit less frequently than Grocery stores. $ are +8.9% from Feb and they are positive in all comparisons. Inflation has been relatively low so 63% of their 31.4% 19>25 growth is real. Their +6.4% YOY lift vs Mar 24 is 25% above avg. Growth: 4.3%; Avg 19>25: +4.7%, Real: +3.1%
• Clothing and Accessories – Clothes mattered less when you stayed home. That changed in March 2021 with strong growth through 2022. Actual Sales are +18.6% from Feb, and they are only really down vs Mar 21. 67% of their 19>25 growth is real. $ are +1.8% vs Mar 24, -67% below avg. Growth: 1.3%; Avg 19>25: +3.1%, Real:+2.1%
• Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Prices are still deflating but they were high in 22. $ are +9.8% from Feb and only actually down vs Mar 21. They are really down monthly & Ytd vs 21. Only 27% of their 19>25 growth is real. YOY Mar lift: +6.0%, 62% above avg. Growth: 4.9%; Avg 19>25: +3.1%, Real: +0.9%
• Electronic & Appliances – This channel has had many issues. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 21. $ are +8.3% from Feb and they are only actually down vs Mar 21 & Ytd vs 24. Their strong deflation shows in high real numbers. Sales are +1.5% vs Mar 24, -41% below avg. Growth: -1.9%; Avg 19>25: 0.15%, Real: +3.4%.
• Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Prices are deflating again, and sales are +26.8% from Feb. Actual $ are only up vs Mar 24 and Ytd 21 & 19. Real sales are only up vs Mar 24 and Ytd vs 24 & 19. Just 23% of their 19>25 sales growth is real. YOY sales vs Mar 24 were +4.2%, -7% below avg. Growth: -0.04%; Avg 19>25: +4.5%, Real: +1.1%.
• Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. They have been on a sales rollercoaster since June and $ are+23.6% from Feb. Actual & real sales are only up vs Mar 24 & 19. Real Ytd sales vs 24 are also up. 84% of their 19>25 growth is real. YOY Sales vs Mar 24 are +0.1%, -98% below avg. Growth: -2.5%; Avg 19>25: +4.0%, Real: +3.4%.
• All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are +14.7% vs Feb and positive in all comparisons. They are 2^nd in the % increases vs 19 & vs 21 and 73.9% of their 55.1% 19>25 growth is real. Plus, their 6.7% YOY Mar lift is 40% more than their 92>24 avg of +4.8%. Growth: +6.2%; Avg 19>25: +7.6%, Real: 5.9%.
• NonStore Retailers – 90% of their $ales comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1^st time and they broke the $1 Trillion barrier. $ are +8.5% from Feb but their YOY lift of 6.1% is -38% below their 9.8% avg. However, they are positive in all comparisons and 82% of their 112.7% 19>25 growth is real. Growth: 4.2%; Avg 19>25: +13.4%, Real: +11.6%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, inflation has slowed considerably from its June 22 peak and 7 channels are currently deflating (up from 5 in Feb). Any deflation can help the Retail Situation. As expected, $ rose from February for all 11 channels but the +12.1% lift for Relevant Retail was slightly below avg (-0.6%) and their +3.4% lift vs March 24 was -29% below avg. 10 of 11 smaller channels had a $ increase vs 24 but only 3 of those lifts were above avg. Also in February, no big groups and only 3 channels were both actually and really “all positive”. In March the situation was a little better. 2 big groups and 4 channels were all positive. Relevant Retail has now been all positive in 8 of the last 10 months. The biggest concern is still YOY drops and smaller lifts. This has become widespread. As expected,  $ales in March were up from February, but the monthly performance, especially YOY was still below par. The Retail Market recovery has restarted but progress is slow.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups5 and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes vs 2021 to show cumulative inflation.

Monthly YOY CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

Here are some answers to some obvious questions. Note: Overall Inflation slowed but grocery prices had a significant lift.

1. Why is the group for Non-store different from the Internet?
   • Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
2. Why is there no Food at home included in Non-store or Internet?
   • Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
3. 6 Channels have the same CPI aggregate but represent a variety of business types.
   • They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
   • According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
5. What about Drug/Health Stores only being tied to Medical Commodities.
   • An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
   • While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.