skip navigation

Stay up to date on timely topics and market events. Subscribe to our Blog now.

August 14, 2020

Americans Getting Back to the Malls, Also Contrary to Popular Perceptions

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Headline retail sales rose 1.2% in July, with the estimate for June revised up by 1.0%. So-called “control” sales—excluding car dealers, service stations, building material stores and restaurants—rose 1.4%, also with a 1% upward revision to June.

Our title above echoes the title used a week ago with respect to the payroll jobs data. Various media comments had cited a supposed summer stumble in the economy’s rebound from the COVID shutdown. Last week’s payroll data offered no hint of that, and neither do today’s data.

Judging by the accompanying chart, you might think that Americans are already fully back to the mall, rather than just “getting back.” That would not quite be right. While July sales levels outside of restaurants are well above pre-COVID levels, a good bit of this overage is due to a surge in online sales. So, some traditional brick-and-mortar stores have yet to see sales return to February levels.

Sales of building material and at vehicle dealers, book/sporting goods/hobby, and drug stores have all rebounded to well above February levels, after having plunged in March and April. For these store types, consumers are satisfying pent-up demand, purchasing merchandise that they were unable to buy when stores were closed during the shutdown.

For clothing, furniture and appliance stores, sales have rebounded nicely from their March/April swoon, but are still a bit short of February levels. These are stores that have given up sales to online vendors.

Meanwhile, among grocery and general merchandise (warehouse) stores, as well as online vendors, the opposite pattern has emerged. Sales there surged in March and April, thanks to hoarding and shutdowns elsewhere. They have pulled back a bit recently, but remain elevated well above February levels.

Finally, there are restaurants. With partial shutdowns, social distancing and ongoing fears continuing to restrain food services (as well as various other service sectors that are not considered retailing), restaurant sales have done well to see a 74.7% increase over the last three months, following a 54.1% sales decline in March and April. However, thanks to the realities of compounding, these swings leave restaurant sales still 19.7% below February levels.

Obviously, the retailing sector has seen a variety of experience in these “novel” times. Generally, the rebound has been as robust as one could have expected. Until shutdown and distancing regulations are lifted, it is unlikely that restaurant sales will fully recover, but the near-term outlook is better for other store types…with one proviso.

Just as sales at grocery and warehouse stores have pulled back in recent months as hoarding proclivities have waned, so too sales of vehicles, books/sporting goods (firearms?), and other currently elevated categories are likely to see a sales pullback when pent-up demand is sated. In this charged media environment, many will be quick to pounce on such news as evidence of impending doom. Instead, it will more likely be merely a return to normal. (Wouldn’t we all love some normalcy?) The more informative perspective will be continued sales growth in other sectors that are not currently enjoying sales above February levels.

Exhibit 1: Retail Sales Trends
Retail Sales Trends
Source: Census Bureau. As of 31 Jul 20.
© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.