February was a disappointing month for retailers, and it might not be thelast one.
The Census Bureau on Thursday reported that retail sales declined 1.7% in February compared with January, marking the largest month-to-monthdecline since November 2001. And the slump would have been even worse if notfor gasoline station sales, which grew 2.7% over January.
The numbers reflected the poor February sales figures
reported by many retailers last week. But while retailers largely blamed their problems on February winter storms, retail analysts point toother, longer-lasting problems, such as increasing energy costs, risingunemployment and growing health-care costs.
"It's hard to take any optimism away from the numbers, from myperspective," said Jay McIntosh, leader of Ernst & Young's retail industryteam.
Retailers have been struggling for months with declining ordisappointing sales. Although department and grocery store chains have beenamong the hardest hit, even industry stars such as
haveposted sales figures below or at the low end of expectations.
February was a particularly difficult month for many of them. Thesnowstorms that blanketed much of the country forced retailers to closetheir stores, sometime for days. The weather particularly affectedPresident's Day weekend, usually a time when retailers draw in consumersthrough big sales.
The sales figures by the government reflect a fairly widespreaddownturn in consumer spending. Among the losers: furniture stores, whosesales declined 1.6% from January and 1.5% from February 2002; clothingretailers, whose sales declined 3.6% from January and 1.5% from the year-agoperiod; and building material and garden supply stores, whose sales droppeda steep 7.5% from January and 1.9% from the year before.
Leaving aside gasoline stations, whose sales benefited from the big jumpin oil and gasoline prices in recent months, February's sales would havedeclined more than 2% from January. And without the nearly 24% increase inspending at gasoline stations compared with February 2002, retail growth ona year-over-year basis would have been less than 1% instead of morethan 2.5%.
The gasoline bills are clearly adding up, analysts say. For every $1increase in the price of a barrel of oil, consumers' nonenergy spendingdecreases about $7 billion, estimates Kurt Barnard, president of Barnard'sRetail Consulting Group and publisher of Barnard's Retail Trend Report.Meanwhile, oil prices
have risen more than $10 from their five-year average.
"I think it's a question of budgeting," said Ernst & Young's McIntosh."Many people don't have the flexibility as to how much gas they have to buy.Spending a significant amount more for gasoline means something has togive."
But other items also are weighing on consumer spending, analysts say.One big factor is unemployment, which
rose from 5.7% in January to 5.8% in February as the economy lost more than 300,000 jobs.
With people worried about their job prospects, they are less likely tospend, analysts say.
"This is a period of uncertainty, primarily for people that are terriblyworried that the pink slip is on its way to them, if it hasn't alreadyarrived," Barnard said.
But it's not just jobs that are becoming fewer. Wage growth is slowing,the high-wage manufacturing sector continues to shed jobs and workers arehaving to pay more out of pocket for their benefits, notes Richard Hastings,chief retail economist at Bernard Sands. Meanwhile, with interest rates atnear historic lows and the stock market at a depressed level, consumers arefeeling noticeably poorer, he said. All of this will continue to weigh onconsumer spending, he said.
In order to maximize their disposable income, "there really is the riskthat consumers, generally speaking, are going to reduce spending," Hastingssaid.
To be sure, gasoline stations weren't the only retailers that fared wellin February. Other stores that saw gains included health and personal carestores, whose sales increased 0.1% over January and 4.5% over the year agoperiod; general merchandise stores, whose sales jumped 1.2% over theprevious month and 3.7% over the previous year; and catalog, Internet andother nonstore retailers, whose sales jumped 1.3% over January and 9.3%over February 2002.
And February may not have been as bad as it looks at first glance. Thefigures released on Thursday are just preliminary and are subject torevision. After initially reporting that January's sales fell 0.9% fromDecember, the Census Bureau reported Thursday that its revised figuresreveal that January sales increased 0.3% over December.
Barnard attributed the difference to an increase in low-marginpromotions in January that were reflected in retailers' bottom lines. ButMcIntosh disagreed, arguing that the promotions in January were no morepronounced than in January 2001. Instead, sales of gift cards during theholiday season helped drive January sales. Although such cards were largelysold in November or December, retailers typically can't record revenue fromgift card sales until they are redeemed.
But the revisions can swing both ways. In its report Thursday, theCensus Bureau lopped more than a billion dollars off last month's estimateof December sales.
McIntosh warned not to read too much into any one month's report. But hesaid the latest trends are a "definite cause for concern."
"I think we will be waiting pretty anxiously for the March numbers," hesaid.