It feels like it's been eternity since the word "increased" made its way into a retail report, but the time has come. Despite the tragic same-store sales figures many independent retailers reported last week, overall sales at retailers in January actually rose 1%. For retail buffs like me, the news initially brought a tingly warm feeling of hope that all is not lost for the sector. So, is retail on the road to recovery?
Let's get real, here. Unemployment is sitting at 7.6%, with major corporations in nearly every industry -- from Macy's (NYSE: M ) to Caterpillar (NYSE: CAT ) to PNC Financial Services (NYSE: PNC ) -- giving employees the boot. Credit lending is still tight as the banks behind MasterCard (NYSE: MA ) and Visa (NYSE: V ) cards are no longer handing out gobs of credit to everyday Joes. And gross margins at retailers from premium-priced Saks (NYSE: SKS ) to cheaper-chic J.C. Penney (NYSE: JCP ) are eroding as frugal consumers are only interested in purchasing items at steep discounts. Suffice it to say that the retail world is far from out of the woods.
Sales may have crept upward sequentially in January, but let's not forget that year over year, sales are still down 9.7% from January 2008. Selling more stuff in comparison to December wasn't a tough task; the weak holiday shopping season was no high hurdle to clear, and the months prior to that had been just as brutal. The increase that has initiated a "glimmer of hope" to news media publications around the Web is not impressive. It's not a bright spot in the market. And it's in no way, shape, or form an indication that retail is starting to turn around.
Our economy is buried in a mounting mess and is far from digging itself out right now. Without going into too much economic detail, I'll simply throw it out there that I think the global economy has several years before it fully recovers, despite the efforts of our nation's leaders to expedite the process. I offer this outlook because I believe this prolonged recession indicates that it will take a very, very long time for retail to embark on another upswing. I predict that retail will be one of the last industries to emerge from this downturn.
Free-flowing credit is how our fellow Americans financed their extravagant lifestyle in past years. Now, consumers are stranded not only without their magical plastic cards, but also without jobs. This combination is lethal to the retail industry in the near term. Until all of the pieces are put back together so that our economy is ticking like normal, much of the retail sector will remain a disaster zone. Thus, my take on this month's sales increase is that it was simply an anomaly.