The coronavirus pandemic has dealt a historic blow to retail sales, which posted last month its steepest drop on record due to widespread shutdowns and federal social distancing guidelines.
According to the Commerce Department, total U.S. retail sales — a measure of purchases at stores and online as well as automobiles, gas and dining sales — dropped a seasonally adjusted 8.7% to $483.1 billion in March compared to the previous month. It was the worst monthly decline since the Census Bureau began collecting data in 1992.
Excluding other categories, retail sales fell by 6.2%. Although food and beverage sales surged 28% to defy the sector’s overall performance, sales at clothing and accessories stores plunged 50.5%.
In mid- to late March, the government mandated the closures of many so-called “nonessential” brick-and-mortar stores across the country — a lockdown that has been extended through the end of April. While essential-goods retailers have been seeing an uptick in sales, many companies in the fashion, footwear and accessories space were forced to furlough or lay off workers, leaving millions of Americans without jobs.
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“While employment rates will see a soft bounce when the economy reopens, we will still see high unemployment and the lingering effects of lost wages,” added Kerstin Braun, president of trade financier Stenn Group. “This will depress spending for household durables and discretionary purchases.”
However, today’s figures from the Commerce Department showed that e-commerce continues to make gains. Nonstore retail sales advanced 3.1%, as some retailers direct their resources toward digital and other omnichannel efforts, including contactless services like curbside pickup. Many, however, have already expressed concerns that e-commerce gains will not be able to replace physical store sales.
A recent report from Fitch Ratings suggests that discretionary spending is already “adversely affected,” and the increased likelihood of a downturn could extend well into 2021. The agency projected that discretionary retail sales could decline up to 50% in the first half of 2020, with a slow rate of improvement through the summer if stores begin reopening in mid-May or early June. It also forecasted sales to be down medium to high single digits in the second half of the year, while sales in 2021 could plunge 8% to 10% compared with 2019 levels.
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