With prices up for everything from fresh vegetables to desk tables, consumer buying tends to wane as households tighten their budget belts. While some retailers are witnessing that tightening, sales in general remain strong in the latest manifestation of a highly irregular, uneven economy.
Retail sales during the month of July rose over 10% nationwide on a year-over-year basis, according to the most recent figures released by the Census Bureau. Relative to June, sales were mostly unchanged.
Matthew Shay, president and CEO of the National Retail Federation, said the cost of gasoline is down considerably from where it was, which appears to have given families more breathing room and discretionary spending power.
“Retail sales grew in July, supported by declines in prices at the gas pump and moderately lower inflation,” Shay explained in a statement. “Consumers are adapting to higher prices by prioritizing essentials like food and back-to-school items, and retailers are working hard to absorb the impact of higher costs and help customers stretch their hard-earned dollars.”
The inflation-assessing Consumer Price Index has risen with each passing month for well over a year now. In June, it increased by over 9%, its highest annual growth rate since the 1980s. In July, the CPI growth eased slightly to 8.5%, suggesting to some that inflation may have reached its peak.
Lower gas prices have contributed to the pullback. As of Aug. 22, a gallon of unleaded regular sells for an average of $3.88, according to the Energy Information Administration. That’s down from over $5 per gallon earlier this summer and more than $4 from two weeks ago. Compared to the same time last year, though, the cost of gas remains quite high. The average then was $3.15, government data shows.
Sales sluggish for major brands
Despite the dip in gasoline price and overall uptick in retail sales, demand has been sluggish for a number of retailers, resulting in a glut of inventory. Department store Kohl’s said in an earnings call that because customer activity has slowed, the company plans on slashing prices on lots of their merchandise before the year’s out. Kohl’s CEO Michelle Gass noted the move is necessary with 2023 around the corner and the holiday season even closer.
“We’re clearing out the goods,” Gass said. “We’re cutting out receipts, and we are being more promotional.”
She added that while no one can predict the future, she’s confident that marking down prices will incentivize buyers to come to their stores and online checkouts.
Other major big box retailers have encountered similar inventory dilemmas, such as Target and Walmart. In addition to lowering their prices, Walmart is relying on technology to assist with inventory management. The strategies have worked so far, noted John David Rainey, Walmart’s executive vice president and chief financial officer. As CIO Dive reported, Walmart is leveraging augmented reality technology to reduce its inventory and speed up fulfillment processes.