The Washington Post

Cold snap continues for retail sales

Pedestrians carrying shopping bags cross the street in the Georgetown. The Commerce Department said January retail sales fell 0.4 percent. (Andrew Harrer/Bloomberg News)

The retail sector’s cold snap continued in January as sales plunged below analysts’ expectations, raising fresh concerns about a sputtering economic recovery.

Sales dropped 0.4 percent as shoppers stayed home last month, according to Commerce Department data released Thursday. Economists were not expecting a strong report, but the decline was a disappointing surprise.

The government also revised December sales data down. Sales declined 0.1 percent from November, instead of an earlier reported rise of 0.2 percent.

The drop is significant because retailers are still licking their wounds from a dismal holiday season. The country’s brutal winter has kept consumers indoors or shopping online. But even non-store sales — which includes online shopping — declined in January, a sign that consumer spending could be weak across the board.

Analysts say the economic picture should become clearer when winter ends, but Thursday’s retail sales report is the latest in a string of worrying economic data. The nation’s last two jobs reports were weak, and updates on manufacturing and factory orders have elicited concerns of a “pause” in the recovery. Weekly jobless claims, also released Thursday, showed a slight uptick in layoffs.

“Extreme temperatures . . . are making it increasingly difficult to assess if the retail sales slowdown is temporary or a telling sign of a longer-lasting weakness,” Jack Kleinhenz, the National Retail Federation’s chief economist, said in a note. “No one can jump to any solid conclusion until we shovel out of the snow.”

Sales were especially low at department stores, clothing stores and furniture shops, where they fell 1.5 percent, 0.9 percent and 0.6 percent, respectively. Automobile sales had the largest drop, falling more than 2 percent, which also dragged down the total figure. Excluding autos, retail sales remained flat.

“This report clearly indicates that weather was a major factor in spending patterns in January,” Chris Christopher, director of consumer economics at IHS Global Insight, said in an analyst note.

Cold weather aside, 2014 has been rough for retailers. This month, the National Retail Federation issued a modest growth forecast for the year. The trade group said annual sales would increase 4.1 percent, compared with last year’s rate of 3.7 percent.

Last year, retailers offered aggressive discounts during the short holiday season but saw their profits squeezed in return. Many retailers focused on drawing in online shoppers, but that was not enough to offset the malaise caused by budget-conscious shoppers still concerned about the economy.

Retailers have become worried that news about massive data breaches at Target, Neiman Marcus and other major stores that resulted in the theft of payment data could scare away some customers. Security experts have said that the attacks are likely the leading edge of a wave of serious cybercrime targeting the nation’s antiquated payment systems.

After consumer advocates complained that not enough was being done to protect consumers’ data, the nation’s major retail associations and financial groups said Thursday that they would form a partnership to focus on improving cybersecurity. Retailers, merchants and banks have been pitted against each other in a debate over upgrading the country’s payment cards and notifying shoppers when their information has been compromised.

“Customers are counting on everyone to keep their data safe and secure,” Richard Hunt, president and chief executive of the Consumer Bankers Association, said in a statement. “It’s critical to recognize that the real enemy here is the hacker.”

Amrita Jayakumar covers national startups, small business issues and entrepreneurship.



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