Retail is on track for another strong year in 2019 — barring, say, a ramped-up trade war or another government shutdown.
The 35-day partial federal government shutdown has kept the industry from getting a complete view of consumer spending at the end of 2018. Still, the National Retail Federation on Tuesday estimated that 2018′s retail sales grew 4.6 percent over 2017, hitting a whopping $3.68 trillion. That figure topped the NRF’s forecast of at least 4.5 percent growth for the year.
There’s reason to expect a repeat in 2019. Wages are increasing, consumer confidence is high, and unemployment is low. The NRF expects this year’s retail sales to increase 3.8 percent to 4.4 percent over last year, to more than $3.8 trillion.
But industry experts are quick to qualify the good news. With so much uncertainty swirling around President Trump’s trade war, a volatile stock market and the government shutdown, it’s possible that sales could start to sag. Matthew Shay, the NRF’s president and chief executive, said Trump and other elected officials should be wary not to alarm shoppers during what could otherwise be a strong year for retail.
“Consumers will spend as long as they’re confident about the future of the economy,” Shay said. “It’s timely in some ways that today is the same day the president will deliver the State of the Union later this evening.”
Retailers have been front and center condemning Trump’s tariffs since early last fall. Big-box retailers like Walmart and Target cautioned that levies on Chinese goods could force them to raise prices. The Retail Industry Leaders Association, an industry lobbying group, argued that any tariffs on consumer goods were nothing more than a hidden tax.
Those concerns aren’t going away. If tariffs on $200 billion in Chinese goods rise from 10 to 25 percent on March 1, customers could see price increases, and businesses could lose profits, said Jack Kleinhenz, the NRF’s chief economist.
Kleinhenz said the precise impact of the shutdown is hard to measure. First-quarter spending could be affected by a backlog in tax returns from the Internal Revenue Service. But January sales can be tricky to splice anyway. Weather issues — like the polar vortex — could affect shopping habits, for example.
The shutdown “doesn’t have, at this point, a large impact that we know of on spending,” Kleinhenz said.
The NRF’s holiday figures fell in line with sales data from just after Christmas. MasterCard SpendingPulse — which tracks retail spending trends — said holiday sales had seen the strongest growth in the past six years, surging 5.1 percent to more than $850 billion. For its part, Amazon touted strong sales on millions of its devices and broad use of the company’s free holiday shipping perks. And Target’s comparable sales grew 5.7 percent in November and December.
(Amazon founder and chief executive Jeffrey P. Bezos owns The Washington Post.)
But come January, not all retailers had reason to cheer. At Macy’s, sales at stores open for at least a year — including online sales — climbed 1.1 percent in November and December. Macy’s chairman and chief executive Jeff Gennette said sales over Black Friday and Cyber Week started off strong. But that momentum fell off before Christmas “and did not return to expected patterns until the week of Christmas,” Gennette said.
Kohl’s also reported that sales at stores and websites open for at least a year, on a shifted basis, rose 1.2 percent in November and December. Over the 2017 holiday season, the company reported nearly 7 percent growth.
As for the rest of 2019, Shay said retailers “have a lot of levers they can pull” to work with their suppliers should the trade war continue. And he expressed confidence that the United States can improve free and fair trade without resorting to tariffs.
“Retailers are in a good place to make decisions that are going to allow them to continue to operate in an uncertain environment,” Shay said, “and address whatever head winds they may face.”
Mark Cohen, director of retail studies at Columbia Business School, said the holiday season exposed “a tale of two cities.” Some retailers, like Amazon, saw booming sales. But J.C. Penney, Macy’s and Nordstrom don’t necessarily have new strategies going into 2019 that can help them dig out of last year’s tumult.
Cohen said he also worries that consumers will soon come up against price increases from Trump’s tariffs and other costs associated with government policy, such as if there are cutbacks to the Affordable Care Act. There’s little room for the retail industry to swallow a 25 percent tariff, Cohen said, without consumers feeling the heat.
“When it all runs its course,” Cohen said, “there is still this cloud that exists and is bringing a darkness across the consumer space.”