Retail Channel $ Update – January Monthly & February Advance

In February, YOY Commodities’ inflation slowed to 0.6% from 0.8%. Even with a low inflation rate, high cumulative inflation vs 21 can still impact consumer spending and slow $ales growth.  We saw more evidence of this in February. Total Retail $ were -0.9% vs 24, radically below the average 92>24 change of +4.9%. Relevant Retail was -0.2%, also far below the February average of +4.7%. The situation is complex, but the recovery has paused. 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 January Monthly Report and then go to the February 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:     (Note: January Monthly data = Ytd)

• 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 January Monthly. All were down from December but there were no actual YOY sales drops. We should note: Gas Stations are selling less product than in 2021 & 2019. They are the only group not “all positive”. Relevant Retail has been all positive in 11 of the last 14 months and now in 7 of the last 8. ($ are Not Seasonally Adjusted)

The January Monthly is $2.4B less than the Advance report. Restaurants: -$1.3B; Auto: -$0.9B; Gas Stations: +$0.3B Relevant Retail: -$0.5B. Relevant Retail was the driver in the $ales decrease vs December, but all big groups were down. A Dec>Jan decrease in Total Retail  has happened every year since 1992. However, the -16.8% drop was 21% less than average. There were no YOY drops in actual sales for the first time since January 2023. There were 2 “real” sales drops, the same as November, but all but Gas Stations were “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 55% of their growth is real.

Now, let’s see how some Key Pet Relevant channels did in January (82% of Jan Rel Retl $)

Overall– All 11 were down from December. Vs Jan 24, 10 were actually and “really” up. Vs Jan 21, 10 were up but only 6 were real increases. Vs 2019, Only Off/Gift/Souv were actually & really down, but HomeCtr/Hdwe were also 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 19.6% from 21 and 22.1% from 2019 which is having an impact. Sales vs December were -10.8% for HomeCtr/Hdwe and -14.1% for Farm Stores. Vs other years, all actual $ are up for both. HomeCtr/Hdwe are really down vs 21 & 19, but Farm stores are only really down vs 21. However, only 6% of the Building Materials group’s 19>25 lift was real. Avg 19>25 Growth: HomeCtr/Hdwe: 3.4%, Real: -0.01%; Farm: 5.0%, Real: 1.6%
• 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 64% of their 2019>25 growth is real. Supermarkets’ actual $ are up in all measurements and they are only “really” down vs 2021. However, only 10.5% of their 19>25 increase is real growth. Avg 19>25 Growth: Supermarkets: +4.9%, Real: +0.6%; Drug Stores: +4.8%, Real: +3.2%.
• Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are down -45% from December, and their only positives are vs 2019. Prices are still deflating, -3.8% 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 73.5% of their 41.2% lift since 2019 is real. Avg 19>25 Growth Rate is: +5.9%;Real: +4.5%.
• Gen Mdse Stores – All actual & real sales were up for Club/SupCtrs & $ stores. Plus, even with an -34.7% decrease from December, Discount Dept Stores were only really down vs 2021. Now, 34% of their growth since 2019 is real. The other channels do better with an average of 53% in real growth. Avg 19>25 Growth: SupCtr/Club: 5.8%, Real: 3.2%; $/Value Strs: +5.6%, Real: +2.9%; Disc. Dept. Strs: +2.4%, Real: 0.8%.
• Office, Gift & Souvenir Stores – After a +38.2% lift in December, Sales fell -32.4% in January. However, now they are only actually & really down vs 2019. All other comparisons are positive. Their recovery started late, but their progress may be slowly restarting again. Avg Growth Rate: -0.04%, Real: -1.5%
• Internet/Mail Order – Sales are -26.8% from December but set a new January record of $108.4B. All measurements are positive, but their YOY growth, +2.8%, is only 19% of their average since 2019. However, 84.5% of their 126.8% growth since 2019 is real. Avg Growth: +14.6%, 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 in Oct, fell in Nov, rose in Dec, fell in Jan. All measurements are again positive and they are in 2^nd place, behind the Internet, in the % increase vs 19 and vs 21. Also, 80% of their 75.2% growth since 2019 is real. Average 19>25 Growth: +9.8%, Real: +8.1%

Jan had its usual drop vs Dec, but the Relevant Retail drop was 25% less than avg. All big & small channels were down. The YOY lift was 7% below avg for Total and 18% below for Relevant, but 10 smaller channels and all big groups were up. Prices are still deflating in 7 channels, but cumulative inflation is impacting $ as only 6 channels were really up vs Jan 21. The Retail Recovery is still slow. The Jan commodities CPI was 0.8% but slowed to 0.6% in Feb. Let’s see if it impacts Retail.

Jan>Feb sales were down for all but Auto. A Jan>Feb Total Retail decrease has happened in 64% of the years since 1992 but the -4.0% drop is 8 times the -0.5% avg. There were 6 YOY $ drops. There were none in January. $ for all Big Groups were down vs Feb 24. The Total Retail drop of -0.9% vs Feb 24 was very different from their +4.9% 92>24 avg change. The Relevant Retail drop of -0.2% vs 24, was also much worse than their +4.7% avg. Inflation is still a factor. The CPI for all commodities slowed to 0.6% but it is 18.1% vs 21. The inflation surge was just beginning back then. There is some other “real” bad news. 8 measurements were “really” down. In January, there were only 2 – both from Gas Stations. Also in January, all but Gas Stations were YOY all positive. In February, there were no “all positives”. However, Relevant Retail has still been all positive in 7 of the last 9 months.

Overall – Inflation Reality– For Total Retail, inflation fell to +0.6% from 0.8% but sales were -0.9% vs 24. For Restaurants, inflation grew to +3.7% and their sales fell -2.3% vs 24. Gas prices fell, but $ales were -4.4%. That group is still in turmoil. Auto inflation slowed to 0.1% but it is still +19.8% vs 21. Their sales fell -0.9% vs 24. Inflation rose slightly to 0.6% from 0.5% for Relevant Retail. Their sales fell -0.2% and they are no longer all positive. Their slow recovery has paused.

Total Retail – Since Jun 20, every month but Apr 23, Jun 24 & now 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. Prices are +0.6% but YOY sales are -0.9%, far below the 92>24 avg change of +4.9%. However, 41.6% of the 19>25 growth is real, up from 39%. Inflation is low but cumulative inflation is still having an impact. Growth: 24>25: 1.8%; Avg 19>25: +6.6%, Real: +3.6%.

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. February $ are down vs 24 but they have the biggest lifts vs 21 & 19. Inflation rose to 3.7% in February and is now +25.0% vs 21 and +30.0% vs 19. Their -2.3% YOY drop is far below their +5.9% 92>24 avg. Plus, just 35.9% of their 56.5% growth since 2019 is real and they remain 3^rd in performance behind Relevant & Total Retail. Recovery started late but inflation started early. Growth: 1.5%; Avg 19>25:+7.7%, Real: +3.1%. They just account for 13.6% 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, then grew in Feb. Feb $ were up vs Jan but -0.7% vs 24. (Avg Feb Chge: +4.9%). All other comparisons are positive, but only 31.8% of 19>25 growth is real. Growth: 2.6%; Avg 19>25: +5.9%, Real: +2.1%

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 they grew, fell June, rose July, fell Aug>Dec, rose Jan, fell Feb. In Feb, actual $ are -4.4% vs 24 but up vs 21 & 19. Real sales are down vs Feb 24 & Ytd vs 21 & 19. (avg Feb chge: +5.5%). Growth: -0.8%; Avg 19>25: +4.3%, Real: -0.8%. 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, then fell in Feb. The Feb -0.2% YOY drop is a big change from their 92>24 avg of +4.7%. However, 55% of their 46.9 % 19>25 growth is real – #1 in performance. Growth: 1.9%; 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 February. Inflation is low but its cumulative impact continues to slow growth and even cause drops. We saw this in February. We’ll see what happens in the upcoming months.

In 24>25 inflation has slowed, but its cumulative effect still has a negative impact. In Jan, all actual YOY $ comparisons for all big groups were positive. In Feb, 6 were down. In Jan, there were only 2 real drops. In Feb, there were 8. In Jan YOY lifts vs 24, Total Retails was +4.4% and all groups were over +2.9%. In Feb, all were down vs 24, a big contrast to an avg lift over 4.7% for all. Finally, in January, 4 big groups were all positive in YOY comparisons. In Februar, none were all positive, even Relevant Retail (All positive in 7 of the last 9 months). February was very bad. The slow retail recovery has paused.

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

• Relevant Retail: Growth: +1.9%; Avg: +6.6%, Real: +3.8%. 10 were down from Jan. Vs Feb 24: 6 were up, Real: 5, Vs Feb 21: 10 were up, Real: 9. Vs 19: Dept Stores were actually & really down. Plus, Electronics/Appl were actually down.
• All Department Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Sales are -2.4% from January and only their actual & real numbers vs 21 are positive. Their -7.5% Feb YOY drop is 19 times bigger than their -0.4% avg decrease. Growth: -3.2%; Avg 19>25: -0.003%, Real: -1.6%.
• Club/SuprCtr/$- They fueled a big part of the recovery because they focus on value which has broad consumer appeal. $ales are -3.9% from Jan, but they are positive in all measurements. However, only 49.5% of their 40.6% 19>25 lift is real. Their 1.2% YOY lift is -85% below their 92>24 avg of +8.3%. Growth: 3.7%; Avg 19>25: +5.8%, Real: +3.1%.
• Grocery- They depend on frequent purchases, so their changes are usually less radical. Actual $ are -8.7% from Jan but positive in all YOY comparisons. However cumulative inflation has hit them hard. Real $ are down vs 21 & Feb 24. Plus, only 12% of 19>25 growth is real. Their 0.5% YOY lift is -84% below avg. Growth: 2.8%; Avg 19>25: +5.0%, Real: +0.7%.
• Health/Drug Stores – Many stores are essential, but consumers visit less frequently than Grocery stores. $ are -6.5% from Jan but they are positive in all comparisons. Inflation has been relatively low so 61% of their 31.1% 19>25 growth is real. Their +2.5% YOY lift vs Feb 24 is -51% below avg. Growth: 3.4%; Avg 19>25: +4.6%, Real: +2.9%
• Clothing and Accessories – Clothes mattered less when you stayed home. That changed in March 2021 with strong growth through 2022. Actual Sales are +5.9% from Jan and only down vs Feb 24, -3.2%. Their avg Feb YOY change is +3.5%. Real sales are down vs 24 but 72% of their 19>25 growth is real. Growth: 0.5%; Avg 19>25: +3.3%, Real:+2.5%
• Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority.5. Prices are still deflating but they were high in 22. Sales are -1.3% from Jan but only “really” negative vs 21. However, only 31% of their 19>25 growth is real. YOY Feb lift: +1.5%, -54% below avg. Growth: 3.8%; Avg 19>25: +3.2%, Real: +1.0%
• 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 -8.0% from Jan and they are only positive vs 21 & “really” vs 19. They have had strong deflation and it shows. Sales are -9.2% vs Feb 24. The avg Feb change is +2.6%. Growth: -4.7%; Avg 19>25: -0.05%, Real: +3.2%.
• 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 stopped deflating and sales are -3.7% from Jan. Actual sales are only up vs 21 & 19 and Real sales are only up vs 19. Just 17% of their 19>25 sales growth is real. YOY sales vs Feb 24 were down -5.8%. The avg Feb change is +4.5%. Growth: -2.5%; Avg 19>25: +4.2%, Real: +0.8%.
• 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 -6.7% from Jan but actual and real sales vs 21 & 19 are now positive. Plus, 82% of their 19>25 growth is real. YOY Sales vs Feb 24 are -5.8%. Their 92>24 avg Feb change is +3.0%. Growth: -3.8%; Avg 19>25: +3.9%, Real: +3.2%.
• 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 -4.5% vs Jan but positive in all comparisons. They are 2^nd in the % increases vs 19 & vs 21. 73.3% of their 51.7% 19>25 growth is real. However, their 0.6% YOY Feb lift is -84% below their 92>24 avg of +4.2%. Growth: +4.4%; Avg 19>25: +7.2&%, Real: 5.5%.
• NonStore Retailers – 90% of their $ 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 -7.0% from Jan and their YOY lift of 1.7% is -83% below their 9.7% avg. However, they are positive in all comparisons and 82% of their 109.3% 19>25 growth is real. Growth: 2.2%; Avg 19>25: +13.1%, Real: +11.3%.

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 6 channels are currently deflating (down from 7 in Jan). Any deflation can help the Retail Situation. As expected, $ fell from January for 10 of 11 channels but the -5.5% drop for Relevant Retail was 2.75 times more than avg. Their -0.2% drop vs Feb 24 was a big change from their +4.7% avg. 6 of 11 smaller channels had a $ increase vs 24 but none of those lifts was above avg. Also in January, 4 big groups and 6 channels were both actually and really “all positive”. In February, there were only 3 – NonStore, Miscellaneous & Club/SupCtr/$. Even with this change, Relevant Retail has been all positive in 7 of the last 9 months. The biggest concern are YOY drops and smaller lifts. This has become widespread. As expected, February $ were less than January, but its performance, especially YOY was markedly worse. It looks like the Retail Market has paused in its slow recovery.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups 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 and there is more pricing stability.

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.