Market Insights

Walmart Shuts Down 63 Sam’s Clubs as Holiday Retail Sales See Biggest Rise Since Recession. Now What?

 

It’s only January and already the retail segment is being buffeted by ups and downs.

On the down side, Walmart made headlines last week for shutting down 63 Sam’s Clubs stores, including those at 2425 E. Florence Blvd. in Casa Grande, Arizona; 3360 El Camino Ave. in Sacramento, California; and 5135 S. Dale Mabry Hwy. in Tampa, Florida. The news came the same day Walmart announced it would increase its hourly minimum wage and hand out employee bonuses.

Some of the Sam’s Clubs stores will be converted to e-commerce distribution centers, reports said.

Meanwhile, U.S. retail sales this holiday season increased 5.5% over the same period in 2016, the National Retail Federation announced Friday the biggest year-over-year increase since the Great Recession.

Holiday shoppers in the U.S. spent $692 billion in November and December, according to the trade association. The figures, based on numbers released last week by the Commerce Department, exclude spending on restaurants, cars and gas stations.

The most recent time holiday sales increased nearly this much year-over-year was in 2010, as the recession was ending. The year-over-year rise last surpassed the 2017 holiday figures in 2005, when it reached 6.2%.

“We knew going in that retailers were going to have a good holiday season, but the results are even better than anything we could have hoped for,” said Matthew Shay, president and CEO of the National Retail Federation.

Throw in low unemployment, increased consumer confidence and steady income growth, and just maybe there could be reason for retailers to add a skip to their step.

Certainly, it was an optimistic end to a brutal year for the sector, which saw thousands of store closings and more than a dozen retailers file for bankruptcy, including old-timers such as Toys “R” Us, The Limited and RadioShack. And, with many hoping a rising stock market and the Trump administration’s planned tax cuts will provide a further boost to the embattled sector, the numbers are definitely encouraging.

Still, retailers may want to hold off before popping any champagne corks.

For one, while certain types of retailers did well, others didn’t. Building materials and supplies store owners were presumably happy to see unadjusted sales rise 8.1% year-over-year in the holiday period, while furniture and home-furnishings store owners saw sales going up 7.5%.

Sporting-goods stores, on the other hand, were down 0.5%.

Perhaps this consumer trend is one reason Home Depot’s stock has been rising steadily for the past several years while Sports Authority filed bankruptcy in 2016.

Another factor is, of course, the role of e-commerce. This past holiday season, retail sales included $138 billion in online and other non-store sales, which rose 11.5% from the previous year, the National Retail Federation said – over double the growth rate of overall sales.

And that’s part of the problem. The traditional form of consumerism – the one that requires a physical edifice at which customer, salesperson and product all cross paths at the same geographical location – seems increasingly endangered. For brick-and-mortar retailers, the divergence in online vs. traditional retail numbers may turn the good news of sales growth bittersweet.

Even as brick-and-mortar retailers continue to step up their online presence, with a portion of the online sales credited to those efforts, Amazon continues to claim an oversized piece of the e-commerce pie. Indeed, the e-tailing giant said it just had its biggest holiday season with more than 1 billion products ordered worldwide.

So will this be a good news year for retail or a bad news year? If the first month of 2018 is any indication, the answer is a little bit of both.

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