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Retail sales surge 1.9% in September, beating forecasts

Yahoo Finance's Emily McCormick joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss September retail sales, in addition to VF Corporation second-quarter earnings report.

Video Transcript

ALEXIS CHRISTOFOROUS: Despite a global pandemic and high unemployment, consumers continue to spend. This morning we found out retail sales rose in September for the fifth consecutive month, up 1.9% as we all spent more on things we need to work and learn from home. Spending on cars, clothing, and also sporting goods were strong last month. Still though, there are signs this economic recovery is losing steam.

Overall consumer spending remains below pre-pandemic levels and monthly job gains we know have slowed. New applications for unemployment benefits are now at their highest level in about eight weeks, and more workers are reporting their layoffs are permanent. And of course we're still waiting for some sort of a stimulus deal to come out of Washington.

Despite that though we have got stock futures higher across the board with Dow Futures up 135 points, NASDAQ Futures up about 85, and S&P Futures up 14 points with less than a half hour to go before a new trading day begins here on this Friday morning. Yahoo Finance's Emily McCormick is joining us now for more. And, Emily, I know you had a little more time to dig into this retail sales report. What were some of the key takeaways for you?

EMILY MCCORMICK: Well, Alexis, taking a look at this retail sales report, that headline index blowing past expectations for September over August, retail sales rising 1.9% in September on a monthly basis. That was much better than the 0.8% gain that had been expected. Now, I want to note that retail sales also came in 5.4% above levels from the same month in 2019, so this has been one of the few areas of the economy that we've seen actually recover back to and exceed pre-pandemic levels, also above those levels that we had from February this year.

Now taking a look by category, we saw sales at clothing stores surge 11% for the largest month-over-month increase we saw for September, although we are still seeing spending levels below from 2019 for clothing stores specifically. Now we also saw spending at department stores, auto dealers, and sporting goods stores contributing to this monthly gain. We saw department store sales up 9.7%, auto dealer sales up 4%, and sporting goods and hobby store sales up 5.7% in September.

Now non-store retailers or e-commerce stores also contributed to the gain, although at a lower level than we've seen in months past. Those were up a half a percentage point month over month, but we're up nearly 24% during the same period last year. So overall, an unexpected and welcome upside surprise from this morning's retail sales report, Alexis and Brian.

ALEXIS CHRISTOFOROUS: All right. Speaking of upside surprise, I want to stick with retail and talk VF Corp. That's the parent company of Vans, of North Face, Timberland. It looks like things are starting to recover after that initial hit from the pandemic.

EMILY MCCORMICK: That's right, Alexis. Taking a look at these fiscal second quarter results, they were better than feared. We still saw second quarter adjusted earnings per share down by nearly half over last year. But they did come in better than expected. Those adjusted earnings per share were $0.67 versus the $0.49 anticipated. And we also saw revenue of $2.6 billion, down 23% over last year, but again, also above that expected amount of $2 and 1/2 billion.

Now each of VF Corp.'s major brands reported sales declines. We saw Van sales down 10%, North Face down 25%, and Timberland sales down 24%. So again, swinging to declines where we saw increases in most of these areas at the same period last year. Now as we've seen with other retailers, digital revenue accelerated during the pandemic for VF Corp. We saw that up 44% versus 15% rise in digital sales in the same period last year. And that's even as about 95% of VF Corp.'s North American locations were open by the end of the second quarter. So still seeing strength there.

Now finally I want to point out what CEO Steve Rendle actually said in this morning's earnings statement. He said, quote, "We are beginning to see signs of stabilization and strength across all aspects of our business, supporting our decision to raise the dividend and provide a financial outlook for the balance of the year. Although uncertainties remain, investments in our digital transformation are resulting in near-term momentum and improved capabilities to emerge in an even stronger position." Now we do see shares of VF Corp. Up about 1.8% in early trading. They are still down more than 20% for the year to date, Alexis.