How Stimulus Payments Are Boosting Department Stores

Last month, the United States government began distributing the second round of economic payments as part of a broader COVID-19 relief bill signed into law in late December. The unexpected retail beneficiary of those $600 stimulus checks? Department stores.

According to the U.S. Census Bureau, the category shot up 23.5% month over month in January. The jump in consumer spending was a silver lining for department stores, which had already been challenged by digital disruption and the shift toward experiential shopping before the coronavirus health crisis struck the country.

Struggling with mounting debt and prolonged closures, a number of nationwide chains — including boldface names like JCPenney and Neiman Marcus — filed for bankruptcy protection last year in hopes of salvaging their businesses. Over the holiday season, which is often the busiest shopping period of the year, many retailers saw empty parking lots and little to no lines at registers. However, experts have suggested that, armed with stimulus checks and COVID-19 vaccines, shoppers will have more spending power and feel less reluctant to make their way back to stores.

“We expected retail spending to ramp up in January thanks to the latest round of stimulus checks and better COVID trends, and it clearly did,” NRF chief economist Jack Kleinhenz said in a statement. “There was none of the falloff in spending that we often find post-holiday and the increase was even better than expected. There is plenty of purchasing power available for most consumers, and the pickup in shopping has even been reflected in the number of hours worked by retail employees. Confidence is building thanks to the availability of COVID-19 vaccines and states and local governments are beginning to remove restrictions on economic activity. Going forward, I expect consumer spending to build on this momentum.”

Data from the Census Bureau also showed that consumers flocked to sporting goods and hobby stores, which saw a gain of 8% in sales. The category has continued to benefit from pandemic-induced macroeconomic factors like increased outdoor and fitness activities. What’s more, sales at clothing and accessories stores advanced 5%, while miscellaneous store retailers recorded a 1.8% improvement in sales.

Separately, non-store retailers, which includes e-commerce, rose 11% as online channels enjoy big momentum and are largely outpacing their brick-and-mortar counterparts. Today, many stores and shopping centers are being used to fulfill online orders as consumers demand contactless options like curbside pickup amid the outbreak.

Overall, U.S. shoppers boosted spending by 5.3% to $568.2 billion in January, compared with December’s revised monthly retail sales decline of 1% to $539.7 billion. It marked the first monthly increase in four months and was far better than the expectations of economists, who predicted a seasonally adjusted gain of just 1.2% last month.

Beyond footwear and apparel retail, consumers spent on electronics and appliances, with sales in the category jumping 14.7%, as well as at furniture and home furnishing stores, which climbed 12%. They also returned to restaurants and bars, with food services and drinking places logging a 6.9% gain in sales.

“We’re encouraged by the strong January retail sales report — a testament to the incredible resilience and growing optimism among consumers and retailers alike,” added Tom McGee, president and CEO of the International Council of Shopping Centers. “The pivotal role retailers have played in delivering essential services, keeping customers safe in-store and providing innovative purchasing options should not be overlooked. These innovations are already paying dividends, and they’ll continue to be fundamental to retailers’ strategies and the economy more broadly moving forward.”

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