Retail Sales Weaker in March

Highlights include The Kroger Co. (KR - Analyst Report), Safeway, Inc. (SWY - Analyst Report), Wal-Mart Stores, Inc. (WMT - Snapshot Report) and Costco Wholesale Corp. (COST - Snapshot Report).

March retail sales were weaker than expected. The Commerce Department reported this morning that March 2009 retail sales declined 1.1% from February 2009 and 10.7% from March 2008. Economists were expecting an increase of 0.3% from February to March.

For the first quarter, retail sales were down 11.5% year-over-year. Digging into the report, electronics/appliance stores were down 5.9% (-9.5% y-o-y), grocery stores were up 0.4% (1.1% y-o-y), clothing stores were down 1.5% (5.1% y-o-y) and general merchandise were essentially flat at -0.2% (+1.3% y-o-y).

Two areas of retail that are holding up better than others are grocery and general merchandise. This shouldn't be too surprising. Grocers like Kroger (KR - Analyst Report) and Safeway (SWY - Analyst Report) sell non-discretionary items that consumers need to purchase on a regular basis.

General merchandise stores include Wal-Mart (WMT - Snapshot Report) and Costco (COST - Snapshot Report). Those stores also sell non-discretionary items and other merchandise at low prices.

From August 2008 through December 2008, retail sales fell off a cliff. It appears that retail sales have stabilized in the last three months. Unfortunately, stabilization does not equal an uptrend. For retail sales to rebound, we will need to see gains in wages and employment, which will lead to higher personal income and consumption.

With unemployment is still rising, we are not likely to see gains in wages and employment for some time. Moreover, consumers are saving more and looking for ways to spend fewer dollars when they do go shopping. That doesn't point to an uptick in retail sales anytime soon.