The Commerce Department Report on May Retail Sales
This morning's Commerce Department report on May retail sales looks promising on the surface, but when you drill down inside the numbers it's pretty clear that we're still in a bottoming phase.
On the one hand, retail sales were reported up by 0.5%, after declines in both March and April. Excluding gasoline and building materials, sales were flat. The gains in gasoline and building materials appear to have been the result of increases in commodity prices, especially oil.
What's left is an up and down picture. Apparel was up slightly, general merchandise down slightly. Furniture, sporting goods and electronics continue to be weak. Retail sales are still down 10.8% from May of last year.
That said, the report still represents an improvement from the last couple of months, and reinforces the thought that we're working our way toward a turnaround. My own guess is that we will see the numbers turn in September or October.
For small and independent specialty retailers, it's still very important to plan sales conservatively, keep inventories in line with sales, commit only for near-term deliveries and maintain liquidity. Most importantly, don't anticipate a turnaround by building inventory, keep things close to the vest until sales actually turn around, and chase goods only when that happens.