What’s Causing Retail Declines And When Will It End?

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Although its been a slow start to the season, market watchers say they still expect back-to-school shopping to boost retail traffic.
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Although the retail sector saw its worst weekly traffic since Easter during the final week of July, analysts say there are practical explanations for the declines and the numbers are already improving.

Citi Research analyst Kate McShane attributed declines to a shift in tax holidays to early August; customers “buying closer to need;” and the move forward of the Labor Day holiday this year.

Retail traffic declined 9.42 percent in July’s fourth week with all four regions of the U.S. seeing negative traffic year-over-year—the South declined the most at 12.7 percent followed by the Northeast, down 8 percent. The Midwest slumped 7.9 percent while the West was down 6.5 percent, according to a report by Cowen and Co.’s team of retail analysts.

While footwear has been a more resilient category throughout the ongoing retail slump, it too saw a deceleration in the week ended Aug. 1, 2015. Total footwear sales for the week increased 1.6 percent, a deceleration from the 5.4 percent increase in the prior week, Sterne Agee CRT analyst Sam Poser wrote in an Aug. 5 note, referencing data from SportscanInfo.

McShane also noted that total U.S. athletic footwear point-of-sales increased 4.1 percent year-on-year in July, a deceleration relative to the 5.7 percent growth last month.

Poser said a marked improvement should appear in the retail numbers next week since the majority of tax-free holidays will take place on Aug. 7, 8 and 9.

Meanwhile a few of footwear’s heavy hitters—namely Skechers USA Inc., Under Armour Inc. and Jordan Brand—continued to show strength amidst declines.

Sales for both Under Armour and Jordan actually accelerated during the lull.

“The acceleration in Under Armour’s footwear was due to the continued strength in the Curry basketball shoes,” Poser wrote. “The strength in Jordan was a result of the launch of the Retro 11 Cobalt last week and the continued strength of the Air Jordan 7 Bordeaux launched on July 18.”

Skechers, which is “highly susceptible” to back-to-school shopping and tax-free holidays, still posted a robust 15.8 percent increase last week, Poser said. The increase was a deceleration from the 35.8 percent gain posted in the prior week but not yet a cause for concern.

“We expect Skechers sales to meaningfully increase when numbers are reported next Wednesday,” said Poser.