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Retail Sales Steady Despite Storms, Higher Gasoline Prices

Retail spending appears to have held its own in February despite headwinds from foul weather and rising gasoline prices, according to a new report released Wednesday.

Woman selecting clothes from rail in shop
Lucas Lenci Photo | Riser | Getty Images
Woman selecting clothes from rail in shop

Mastercard Advisors’ SpendingPulse, in a report that measures total retail sales across all payment forms, showed that the recent momentum in U.S. retail sales has been sustained, but it is no longer building as it had in the final months of last year.

“We had some pretty decent results in February,” said Mike Berry, director of industry research for the group.

Although winter storms that struck during the first half of February limited the ability for consumers to get to the stores and restaurants, shoppers made up for the lost shopping time online or later in the month, when some parts of the country actually experienced unseasonably warm weather.

Many consumers either postponed purchases until things thawed out a bit later in the month, or they shopped online to get the items that they needed, Berry said. E-commerce sales were particularly strong last month, rising 13.2 percent from the same period a year ago.

Demand also hasn’t yet been harmed by the sharp rise in gasoline prices brought on by the turmoil in the Middle East, according to Berry. Still, he warns the trend bears watching as he expects that spending levels are only just starting to see the impact of higher gasoline prices.

“We haven’t reached that point yet, but it is something to keep an eye on, especially as we hit the spring-break travel season,” he said.

The impact of higher commodity prices may also be showing up in recent apparel sales.

During the month of February, sales of apparel continued to post gains, although the pace of growth slowed. Overall, retail sales in the sector rose 6 percent from February 2010, Berry said.

Sales were higher in all apparel categories. Women’s apparel sales rose 5.4 percent; men’s rose 7.4 percent; family apparel — which includes clothes for teens — climbed 8.1 percent; and children’s apparel sales jumped 10.7 percent, he said. Footwear sales only inched up 0.8 percent.

February is typically a “clearance month” when retailers try to rid the shelves of winter clothing. The impact of discounting was seen on the pricing levels in the men’s and children’s categories, with somewhat weaker prices seen, according to Berry. However, prices rose for women’s apparel, footwear, and in the family category, possibly indicating that retailers are starting to raise prices to offset higher costs for cotton and other commodities, Berry said.

President’s Day weekend also is a big promotional period for furniture, and it appears that this sector, which was hard-hit by the housing downturn, finally saw some increased demand. Sales of furniture, excluding home furnishing items, rose 4.0 percent, Berry said.

Despite the increase, sales still remained far below where they were in 2008, he said.

“Seeing a nice number like this was welcome news,” Berry said.

Jewelry sales also saw strong gains, both online and at retail stores. Online jewelry sales rose 7.2 percent, while sales at retail stores, which is significantly larger, rose 14 percent.

With Valentine’s Day falling during the month, February is a key sales period for jewelry stores, and much of the strength in sales came from higher-end jewelry.

“When you look at the consumer confidence numbers by income band, you’ll see that it kind of makes sense,” Berry said, referring to a recent read on consumer confidence, which showed those at higher income levels were considerably more confident about the economy.

But the news wasn’t good for all sectors. Sales of electronics and appliances fell 4.1 percent from last year, with most of the decline coming from lower prices on electronics.

Department store sales also suffered, falling 3.5 percent in February.

According to Berry, lower-end department stores are seeing weaker sales due to still-high levels of unemployment. However, high-end department stores are faring better as their customer is feeling more confident in the wake of higher stock prices.

A shopper carries Saks Fifth Avenue bags up Fifth Avenue in New York City.
Getty Images
A shopper carries Saks Fifth Avenue bags up Fifth Avenue in New York City.

A cheerier and more affluent consumer also is pushing up sales of luxury items, which rose 1.7 percent in February from the same period last year.

Berry also noted that sales from consumers staying at hotels fell 2.6 percent, marking the first decline in this sector in more than a year.

“This was a little bit of a surprise,” he said, and it will be another area to watch in the weeks ahead.

Coming into March, the pressure gets ratcheted higher for retailers because last year sales were generally strong. Also, this year, Easter, which helps to spur some purchases, falls later in the year.

“It’s going to be interesting to see how the March numbers hold up going up against difficult comparisons. It’s going to be fairly challenging,” Berry said.

Add what is sure to be rising gasoline prices to the mix, and it should be even tougher.

Berry expects consumer demand will be able to withstand some of the increases in gasoline prices. He’s watching out for when the national average gasoline price rises above $3.50 a gallon. That was the level at which consumer demand began to drop off in 2008, he said.

According to Berry certain sectors are hurt more than others by an increase in gasoline prices. Fast-food restaurants are among the first to take a hit as consumers spend less time travelling around. Then, there starts to be declines in things such as auto repairs and tire purchases because reduced travel means the intervals for such purchases are pushed out.

However, there are some sectors that benefit from higher gasoline prices, including online shopping and groceries items, as consumers look to save money by reducing the time in the car and eating more meals at home.

Questions? Comments? Email us at consumernation@cnbc.com

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