Spending at department stores appears to have stabilised after a rough start to the year.
In a recent note to clients, a Bank of America Merrill Lynch team led by Ethan S. Harris, global economist at the bank, analysed credit card spending at department stores.
They found that July saw a 1.8% month-over-month uptick in department store spending, marking the fifth consecutive month of positive or flat growth.
Growth in year-over-year terms, however, remains at -4.1%, according to the team’s calculations.
“This marks a notable turnaround from the sharp decline in spending at the start of the year, particularly February’s outsized drop,” the team wrote. “As we flagged then, it seemed that part of the considerable weakness at that point owed to store closing.” (Emphasis ours.)
After years of declining sales and customer traffic, retailers are starting to close thousands of stores. As of August 1, Business Insider tallied up that 6,375 closures have been announced in 2017 so far.
Retail has seen quite the shake-up amid the rise of Amazon and other online distributors. But while this shift has changed employment patterns and how people actually obtain the things they consume, it hasn’t changed the magnitude of what we buy across all platforms.
In other words, we’re still buying lots of stuff — but now we’re doing less and less shopping at physical malls. So although there was a huge drop-off in spending at department stores in February, that drop has likely been offset by an uptick in spending online.
Berenberg economists Mickey D. Levy and Roiana Reid illustrated this trend via a chart included in a recent report to clients. The blue line shows the change in retail employment excluding gas and nonstore retailers (the latter mostly means Amazon and other online retailers), which has turned negative in 2017. But at the same time, the orange line, or the growth in retail sales excluding gas stations, has not seen a corresponding dip into the red.