January's lousy retail sales are 'Poppycock': former Hudson's Bay CEO

Key Points
  • Retail sales declined in January, but former Hudson's Bay CEO Jerry Storch says this is to be expected.
  • A better metric, he says, is comparing year-over-year retail sales, which are up 3.6 percent.
  • Meanwhile, retailers will benefit from modest inflation, he says, with price hikes that can quickly be passed on to consumers.
Former Hudson's Bay CEO isn't worried about inflation. Here's why

January's disappointing retail sales shouldn't worry retailers, said Jerry Storch, former chief executive officer and board member of Canadian retail company Hudson's Bay.

"January just doesn't matter," Storch told CNBC on "Power Lunch" Thursday. Storch, who has also served as chairman and CEO of Toys "R" Us and vice chairman of Target, said retail sales almost always decline after the holiday rush. "Of course December has higher sales. It has Christmas in it." He pointed out that, "we came out of one of the strongest holiday seasons in many, many years."

But Wednesday's retail report by the U.S. Commerce Department left some retailers concerned. Retail sales dipped 0.3 percent in January — the worst decline in 11 months — as consumers cut back on motor vehicles and building materials. Analysts had expected an increase of 0.2 percent.

Meanwhile, inflation looms on the horizon with a strong economy, low unemployment, tax breaks from the new tax law and increased infrastructure spending, further heightening fears of decreased consumer spending.

"That's just a bunch of poppycock," said Storch, chief executive officer of Storch Advisors, a consulting firm. While retail sales are usually adjusted seasonally in December and January, a better measurement is comparing year-over-year changes, he said.

"If you compare this January to last January, you see that the numbers are up," Storch said, referring to the 3.6 percent year over year increase this January. "There's no tricky math with seasonally adjusted numbers."

Modest inflation, such as 2 to 3 percent, Storch said, won't scare consumers in a good economy and actually benefits most retailers with price hikes that can quickly be passed along to consumers. Operating costs, such as wage rates and rent, tend to adjust in five to 10 year increments, he said.

"So it takes a long time to come back to you," Storch said. "In a period of moderate inflation the retailers actually do better."