Thanks to mild weather, January looks to have been a very strong month for retail sales based on anecdotal indicators and press reports. Last week's reports from chain stores were unusually upbeat, an improvement especially evident among struggling chains like Pier 1 or Gap North America where sales showed life. January's weather was the warmest on record, a positive contrast to the severe storms that hit the Midwest and Northeast last year.
For the last several years, and especially it seems this year, everybody's been talking up the popularity of gift cards. I personally think they're impersonal, but that apparently is just me. There were plenty exchanged in my family this Christmas. Chain after chain -- apparel, general merchandise, food services, miscellaneous -- reported rising year-on-year purchases of gift cards. Retail chains did in fact post strong results in January and soft results for December, which would be consistent with a rise in gift cards (which are tallied at redemption not purchase).
Yet hard evidence of the gift-card boom isn't easy to find. The gift-card effect should be seen in a falling sales share for December and a rising share for January. Below is a graph of unadjusted retail sales excluding both vehicles, where gift cards until now haven't been used, and gasoline stations, where sales are dominated by price changes.
The graph illustrates the seasonal nature of retail sales, clumped as they are at the end of the year. Rising use of gift cards should be leveling that pattern a bit, but it apparently hasn't. Comparing December and January to each other shows a rise -- not fall -- in December's share to 58.2% in 2004 against 57.6% in 2003 and 57.7% in 2002. January 2005's share of the annual total was 7.4%, about the same as the two prior Januarys. The share for this past December 2005 was 10.2%, also just about unchanged.
Included below is the same graph but adjusted for seasonal and calendar effects, which show January's share at 8.1%, unchanged from 2004 and down from 8.1% in 2003. But December's share was virtually unchanged at 8.8% (you need more than one decimal point to see the difference!), the same as the two preceding years. (Note that 1/12th is 8.3%).
Bottom line
The popularity of gift cards may not be changing the retail calendar year as much as expected, at least it hasn't over the last few years. Nevertheless, gift cards were a suspect in December's poor 0.1% ex-auto, ex-gas gain. January's data, which again look to be dominated by weather effects not gift cards, will be released next Tuesday.
Mark Pender, Contributing Editor
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