Death of the Department Stores and the Alleged Retail Recovery

Mish

Department stores have been in a death spiral for years. Covid accelerated the trend.

I went back over the advance retail sales starts for a closer look at what's happening. 

Advance Retail Sales 1992-Present

Advance Retail Sales 2020-08C

The above baseline chart shows sales have recovered above pre-Covid levels for the third month.

For June, July, and August, sales topped $206 billion vs $203 billion in February, seasonally-adjusted in 1982-1984 dollars. 

Misleading Chart

The above chart is misleading because it does not show winners and losers, nor does it show year-to-date comparison.

Year-to-Date Total Sales Not Seasonally or Price Adjusted

  • 2019: $510.6 Billion
  • 2020: $403.9 Billion

Retail sales have not really recovered but there are winners and losers.

Advance Retail Sales in 2020

Advance Retail Sales Select Categories 2020-08 Detail.

The recovery is more than a bit uneven. 

Details

  • Motor vehicles and parts, have recovered.
  • Nonstore retailers (Amazon) never slowed in the first place. 
  • Food and beverage store sales shot up but have given back some gains.
  • I doubt the rebound in food and drinking places is as good as it looks. 
  • General merchandise sales generally flatlined thanks to stores like Wal-Mart that stayed open because they offered food. 
  • The Gas rebound is anemic because people are still working from home.
  • Department stores remain in deep trouble.

Department stores have been dying a slow death for decades. Does anyone care?

For further discussion, please see What Major Stores Went Bankrupt in 2020?

Mish

Comments (62)
No. 1-19
Realist
Realist

Nope. Very few care, unless it affects them personally. It's simply the creative-destruction of capitalism. And it has been going on for hundreds of years.

Greggg
Greggg

Motor vehicles and parts is actually higher now than precovid. I'd attribute that to people's desires to escape the political bullsh*t.

mkestrel
mkestrel

This was a good analysis Mish, thanks.

Sechel
Sechel

Never understood the department store model. If you want shoes they'll never have the merchandise of a dedicated shoe store, If you want a TV same thing. And they're constantly tying up capital in merchandise. the key to selling merchandise is to make sure you're in the moving business and not the storage business, products that sit must be financed. this is the advantage of on-line sales and often the on-line merchant is just a website and the actual product is being shipped from the producer. I learned that when buying a dog crate. Department stores can serve a purpose for the consumer but for its a terrible business model for the merchant. I'm surprised its lasted this long. They only excel in presenting the customer the ability to see touch , feel and try on the product. I've bought clothing , high end mattresses and rugs but for the most part grudgingly and on sale. I doubt the department store made much money on me if any.

Realist
Realist

Hi Mish. Thanks for your post. It got me thinking about many of the things we have been discussing for quite some time on your site. It inspired me to write down a couple of thoughts about:

THE NEW NORMAL

Being a realist means one has to view the world as it is, not as how one wants it to be.

One of the most important things an individual can do, is to realize that the world keeps changing, and it isn’t going to go back to the way it was. Those that can best adapt to change, survive. Those who refuse to even acknowledge change, or spend their time trying to fight change, are doomed to failure.

There is a phrase that captures this concept succinctly: The new normal.

I see many on this site who want to go back to a world that no longer exists. This leads them open to believing politicians who tell them what they want to hear, in order to get their vote.

But I am here to tell you that politicians can not bring back ”the good old days”, whatever that may mean to you.

They cannot bring back high-paid manufacturing jobs in antiquated industries.

They cannot guarantee you any well-paid job.

They cannot stop innovation from happening.

They cannot stop the demise of malls or the rise of online shopping.

They cannot stop the creative-destruction of capitalism.

They cannot stop the world from changing.

And the sooner you realize that politicians (and you) can’t stop the change, the sooner you will realize that YOU must learn how to adapt to the change in order to survive, or even thrive.

There is a new normal out there, whether you like it or not. And the sooner you stop complaining and fighting the change, the better off you will be.

Jobs will continue to change. New jobs will be created. Old one’s will disappear. The old jobs are not coming back.

Technological change will continue. Learn how to use tech or get left behind.

The pandemic and it’s ongoing effects will be with us for years. Even an effective vaccine will not take us back to world we lived in last year. Get used to it.

Global warming (or climate change) is happening and will continue for the rest of your life, as well as the lives of your children and grandchildren. Deal with it.

Sticking your head in the sand, and believing that we can ”go back” is only going to bring you hardship, misery, and depression.

Time to open your eyes. Become a realist. And move on with your life in the new normal.

lol
lol

The Trump govt like the Obama govt has completely deserted main Street in favor of the banks and WS.Obama and Old Yellern pumped over half a quadrillion dollars into banks and WS,Main Street got an EBT card and $25 in extended UE benefits,Trump and JP.... OMG,easily$150 tril in 4 years to drive stocks up,while Main Street got $1200! Shameful!

PecuniaNonOlet
PecuniaNonOlet

The chart is great but why hasnt Amazon clobbered auto parts yet? Not profitable enough? People dont know which break pads or car battery to buy? Seems odd auto parts is an outlier.

Jojo
Jojo

Mapped: The Uneven Recovery of U.S. Small Businesses

Small businesses are the backbone of the U.S. economy, employing nearly half of the private sector workforce.

Unfortunately, lockdown and work-from-home measures brought about by COVID-19 have disproportionately affected small businesses – particularly in the leisure and hospitality sectors.

As metro-level data from Opportunity Insights points out, geography makes a great deal of difference in the proportion of U.S. small businesses that have flipped their open sign. While some cities are mostly back to business as usual, others are in a situation where the majority of small businesses are still shuttered.

Eddie_T
Eddie_T

Hmm. Did I lose another comment to the void? Appears I did.

vanderlyn
vanderlyn

GOOD JOB MISH. nice write up. and great job on coast to coast. keep it up.

deebeee
deebeee

When are you going to mention Mitch McConnell's BLOCKING of AID to businesses. He didn't like the high amount the Dems suggested which, by the way, is NOT unreasonably high. When are you going to stop giving Trump a pass. Heard you on Coast tonight and said "He CANNOT be serious!" re the debate. Biden didn't have a chance in hell to be as stupid as Trump as Trump loudly interrupted 75 or so times. Come on, how can anyone trust your judgment on the markets when you're so unreliable in calling things as THEY ARE. Shame on you.

anoop
anoop

parking lot at local mall here is always full.

Roger_Ramjet
Roger_Ramjet

The non-seasonally adjusted figures are staggering, and far more revealing, in my view.

TimeToTest
TimeToTest

When consumption declines, production declines which further hurts consumption.

Watch the birth rate to predict the future. Infinite growth is not realistic.

IA Hawkeye in SoCal
IA Hawkeye in SoCal

Macy's has survived over 100 years, I doubt that "this generation is different" is actually soooo different that it takes them down. People will continue to shop there.

Eddie_T
Eddie_T

I posted something last night that went poof, so I'll say it again, briefly.

The death of major retailers is perhaps largely due to internet sales, and many other factors like high rents and so forth....figure into the equation...but I would like to mention that an often overlooked part of it is the role played by Wall Street LBO specialists with their unlimited cheap money.

Sears, in particular, could be used as a case study to show how a hedge fund manager took over a company, spun off all the good assets, screwed long term employees, and then left the corpse of a once great company to rot.

When people talk about jobs lost to China.....I always think about the jobs destroyed by people like Eddie Lampert at Sears (net worth $1.2B))...and even Mitt Romney, back when he was with Bain Capital. (Remember KB Toys?).

Many jobs (I have no idea exactly how many, but a lot) went away because of predatory capitalism in the form of LBO's. Most Americans don't even know what a leveraged buy-out is...much less how it affected their lives.

Yes, I do care that the legacy retailers are all dying out. And it pisses me off that nobody much gets this part of it.

Dodge Demon
Dodge Demon

Crime at the malls accelerated this trend.

dr smock
dr smock

These charts show the retail sales in dollars, but I know for damn sure that the inflation rate in the products sold including those at Walmart is up at least 10%, AT LEAST. The private federal reserve is lying in their bogus inflation charts. If you adjust for inflation, the retail units sold takes another beating.