Advertisement
U.S. markets close in 1 hour 11 minutes
  • S&P 500

    5,252.82
    +4.33 (+0.08%)
     
  • Dow 30

    39,774.88
    +14.80 (+0.04%)
     
  • Nasdaq

    16,380.95
    -18.57 (-0.11%)
     
  • Russell 2000

    2,123.15
    +8.81 (+0.42%)
     
  • Crude Oil

    83.10
    +1.75 (+2.15%)
     
  • Gold

    2,240.20
    +27.50 (+1.24%)
     
  • Silver

    24.94
    +0.19 (+0.78%)
     
  • EUR/USD

    1.0793
    -0.0036 (-0.33%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2619
    -0.0019 (-0.15%)
     
  • USD/JPY

    151.3830
    +0.1370 (+0.09%)
     
  • Bitcoin USD

    70,557.59
    +1,790.98 (+2.60%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Retail sales will see '3%-5% growth’ in 2021

December retail sales fell 0.7% in December. Moody’s VP & Senior Credit Officer Mickey Chadha joins Yahoo Finance Live to discuss.

Video Transcript

AKIKO FUJITA: Welcome back to "Yahoo Finance Live." US retail sales fell for the third straight month in December, declining 0.7% month-on-month during the peak holiday shopping season. Spending declined in areas like bars and restaurants, online purchases. They increased, however, in home improvements, health, and personal care products, as well as clothing and gas. Let's bring in Mickey Chadha. He is Moody's VP and senior credit officer.

And Mickey, I guess there's a bit of good news and bad news. You month-on-month, it wasn't good, three straight months of declines. But when you look at the numbers out from the National Retail Federation, they actually said holiday sales jumped 8.3% year-on-year. So how do you decipher the numbers?

MICKEY CHADHA: Well, you know, that's absolutely right. When you look at retail sales in December, you did see a decline. And so when you look at it, it does seem like they're a little weak, which they were, because November was lower than October as well. But when you look at a year-over-year retail sales number, and I'm talking about retail sales just without taking food service into account and including more vehicles in there, you're looking at about a 6.3% increase in December.

And if you add November and December together, we're looking at over 6% increase from 2019. Now, when you compare that to 2019 November and December sales, which was the 2019 holiday season, that increase was only about 3.7%. So when you compare that to this year, this year actually outstripped 2019 by pretty good margin. And so what's amazing is that despite what happened during 2020, it's doing better than 2019 on a year-over-year basis.

And 2019, if you remember, the economic outlook at that time during the holiday season was actually pretty good as opposed to 2020. So the weakness that we see in December is definitely related to the increase in coronavirus cases, the increase in more restrictions in certain geographies where the cases are going up, and the softness overall in the economy where we saw jobless claims were higher, the stimulus programs were in flux. We did not know when they were going to be passed through Congress, which they still remain a little bit in flux. So those things impacted that.

ZACK GUZMAN: Yeah, that's one way to look at it. And the other way, too, I mean, if you kind of piece together maybe some of the color that we got from the CEOs at some of these retailers, including Best Buy, was maybe the concerns over a pull forward of a lot of Americans buying some of these-- specifically kind of worth highlighting the technology sector there, when we think about gadgets that have been purchased earlier on in lockdown and maybe how that may have diminished the need to go out and buy presents around the holiday season here.

But when you look forward to 2021 and what's going to happen this year, what's kind of the expectations around that by frication when you look at retail and specifically apparel versus the tech sector and some of those things that were purchased? Are you expecting kind of that shift to continue as well as the strength in the overall e-commerce space to continue once we kind of start to approach a normality once again?

MICKEY CHADHA: Well, you know, that's a good question. What we saw in 2020 was this bifurcation between the discretionary and nondiscretionary retailers, primarily because the discretionary retailers were either shut down or had other issues associated with them. And so when we look into 2021, you know, we're expecting the overall retail sales number to be 3% to 5% growth in 2021.

And what we're expecting is that some of the sectors that really did well in 2020, as things normalize, especially places like food, food at home, grocery stores, et cetera, or home improvement, I mean, these sectors really did well in 2020. As we go into '21, we see some normalization. Those sectors are probably going to still remain strong, but not to the level they were in 2020.

And then when you factor in sectors such as apparel, clothing, department stores, et cetera, which have been weak and were weak in 2020, as things normalize and the spend of the consumer shifts back into certain other categories, we're going to see those sectors actually improve. And so overall, we still see 2021 as a pretty good year from a sales perspective of 3% to 5% and also from a profitability perspective, because 2020 was so depressed, we're looking at about a 20% increase in operating profits across retail.

AKIKO FUJITA: Yeah, Mickey, what kind of impact are we likely to see from these additional direct payments that have gone out, $600 initially. You heard the president-elect yesterday saying 1,400 more if, in fact, his plan is approved by Congress. We saw these payments quite supportive of retailers early on in the pandemic. Are we going to see the same kind of impact?

MICKEY CHADHA: Well, yes, absolutely. So what we saw was this bifurcation between, you know, the middle upper income level and the lower income demographic. And the lower income demographic has been affected a lot more by the pandemic than the middle upper income level.

So when you're looking at that demographic, these payments make a big difference. And so when you're talking about sectors that are discounters, like the dollar stores and other discounters out there that actually consumers rely on these payments on to actually go there and actually purchase items that they need, this is a big impact. And we've heard that from sectors like Dollar General, Dollar Tree, Walmart, all these retailers that say that big impact happens when the stimulus checks come in. And then you see that taper off as you go forward. So it's a big impact. And I think that those stimulus checks will make a big difference on that lower income demographic.

ZACK GUZMAN: All right, we'll see if that plays out. And we'll see exactly how much to be expected, there is debates between Republicans in Congress-- Congress members there with the Biden team continue. But Mickey Chadha, Moody's VP and senior credit officer, appreciate you coming on here to chat that.

Advertisement