Retail sales data signals consumer caution during the holidays
US retail sales fell 1.1% month-over-month in December. Meanwhile, wholesale inflation cooled.
US retail sales fell 1.1% month-over-month in December. Meanwhile, wholesale inflation cooled.
U.S. retail sales data from the federal government for the holiday shopping month of December was released on Wednesday morning.
On a seasonally adjusted basis, the US Commerce Department reported that overall sales results were the following:
While retail sales continue to grow, there are signs of a slowdown. Year-over-year growth for December 2022 posted the slowest growth in 22 months, according to GlobalData Managing Director Neil Saunders. The rate of increase has nearly halved since August, when it was 10.2%.
“Some of this is down to moderating inflation, but some is also a consequence of a more pressured and concerned consumer who has become more frugal about spending,” Saunders said. “If this pattern is emerging over the holidays – a time when people tend to throw caution to the wind as they spend to enjoy themselves – it does not bode well for the sober months of January and February which are traditionally more subdued and constrained as consumers assess their finances and pay down holiday debt.”
The latest data offers another warning sign: Things may get harder in retail in 2023. Saunders said that recent months have shown that it is “quite clear that the year ahead will be much tougher” than 2022. But he warned that it is important not to be “overly pessimistic.” Consumer spending has mostly held up over three years of a pandemic, supply chain chaos and inflation. At the same time, the inflation rate is coming down.
“As such, what we are likely to see is a trimming at the edges of retail, as people continue to adjust behaviors and shopping patterns to make ends meet, rather than a full-blown retail recession,” Saunders said.
Inflation remains high in some categories, offering a reminder that this period of high prices is not yet over just because the calendar turned to a new year. The price increase in food for December was 11.8%, according to the Consumer Price Index. That was well ahead of the 6.5% overall inflation rate, and continues to lead consumers to make choices.
“Across the whole holiday period our data show that consumers were working hard to reduce costs by trading down to value retailers, buying more own brand product, and modestly cutting the amount they buy,” Saunders said. “Many households were less wasteful with food over this holiday period, and retailers had to work a lot harder to stimulate sales.”
The month-over-month decline seen this month is also a somehwat ominous sign, but there could be a silver lining, according to a note from Bank of America Global Research. While the bank's economists said holiday spending appears "soft," technical details of the data could provide a lift to start the year.
"Seasonal factors have not fully adjusted for the shift to more front-loaded holiday shopping since the start of the pandemic," BoA wrote. "Therefore, the seasonal adjustment likely exaggerated the weakness in retail sales in December. If this is correct, we should see a big bounce in retail sales, and consumer spending more broadly, in January."
Another sign of easing inflation showed up in the U.S. Commerce Department’s report on wholesale prices.
According to the Producer Price Index:
Prices for goods before they reach retail declined 0.5% in December.
The year-over-year wholesale inflation rate was 6.2%, the lowest of the last 12 months.
This was driven by a sizable decrease in the price of goods at 1.6%. Energy prices also declined 7.9% for the month.
This came after an increase in wholesale prices in October and November.
The Producer Price Index tends to be a forward-looking measure of inflation that tracks prices of goods and services before they reach consumers.
Dealboard has funding and M&A updates from ecommerce aggregators and forecasting software.
This week, the aggregator space is active with M&A, IKEA is ready to roll out newly-purchased warehouse management software and Authentic Brands Group acquired a boot icon. Plus, there’s new investment to report for YouTube influencer Emma Chamberlain’s coffee brand and retail forecasting.
Here’s a look at the latest deals:
Chamberlain Coffee, the consumer brand founded by YouTube influencer Emma Chamberlain, raised $7 million in new funding.
The financing included backing from existing investors including Blazar Capital, Chamberlain and United Talent Agency. New investors include Volition Capital, Electric Feel Ventures, L.A. Libations and Noah Bremen, founder of PLTFRM.
The new funding follows the launch of a Ready-to-Drink (RTD) product and coffee pods. Previously, the brand raised a Series A in August 2022.
"Creating a uniquely inviting coffee brand has been my dream for so long now, and having key investors back us allows us to build Chamberlain Coffee in ways that feel fresh and exciting,” said Chamberlain, in a statement. “There are so many products I am eager to develop and projects I'm excited to get working on. With such an incredible team and group of investors I am more excited than ever to see what the future holds for Chamberlain Coffee."
Impact Analytics, a software company for retail supply chain and merchandise planning, raised new funding from Vistara Growth.
The new investment, the amount of which was not disclosed, comes after Impact raised funding in February 2021 and October 2022 from Argentum.
The funding will help Impact Analytics further develop its Impact Analytics SmartSuite product portfolio, which is designed to help optimize forecasting, merchandising and end-to-end lifecycle pricing. Rather than the traditional forecasting approach of basing decisions on the preceding year, Impact Analytics applies a model that includes 150 variables from internal and external sources, while combining recency and history. Clients include BJ's Wholesale Club, Dick's Sporting Goods, Puma and Tapestry.
Selva Ventures, a venture capital firm focused on consumer brands that promote healthier living, closed its second fund at $34 million, TechCrunch reported.
With the new funding, Selva will invest in brands across categories including health, wellness, beauty and personal care. The fund expects to write checks of $1-2 million in seed and Series A startups, while assisting in areas like finance, operations and retail partnerships.
Backers of the second fund include Unilever Ventures, PagsGroup and Obelysk.
Nautica and Forever 21 owner Authentic Brands Group acquired the intellectual property of Hunter, a 160-year-old British outdoor lifestyle brand known for its Wellington boots.
With the deal, ABG appointed longtime partners Batra Group and Marc Fisher to execute retail and ecommerce operations, as well as continue to expand the brand in the UK and U.S., respectively.
“At the intersection of fashion and outdoor, Hunter introduces another elevated global brand to Authentic’s diverse Lifestyle portfolio,” said Authentic CEO Jamie Salter, in a statement.
Terms of the deal were not disclosed.
DTC cookware brand Great Jones was acquired by Meyer Corporation, a global company that also owns kitchen brands such as Farberware and KitchenAid.
Founded in 2018, Great Jones grew with stylish, colorful cookware that stood out on Instagram feeds. CEO Sierra Tishgart will remain in the lead role, and take on an expanded role as the creative director of Meyer. Previously, Meyer was both a supplier and minority investor in Great Jones through fundraising. Now, Meyer will support product expansion and international retail development.
"I have long admired Meyer's expertise in our category, and I've had the personal pleasure of getting to know the Meyer family and team over several years," said Tishgart, in a statement. "I am ecstatic about the opportunities their support will unlock for Great Jones. We've operated as a small team of less than 10 throughout the company's four-year history, and this collaboration will strengthen our technical capabilities and secure our reach for many, many years to come."
The investment arm of IKEA parent Ingka Group acquired the warehouse management software platform Made4Net.
As a result of the deal, Made4Net’s software will be deployed across IKEA’s 482 stores and fulfillment centers. Made4Net will continue to operate as an independent subsidiary of Ingka, with a headquarters in New Jersey. CEO Duff Davidson will remain at the helm of the company.
“Our business currently requires a better fulfillment operations system with more accurate data that better supports handling for our customers,” said Tolga Öncu, head of retail at Ingka Group, in a statement. “Our goal is to become leaders of life at home, serving more people in an omnichannel reality, whenever and however customers choose to meet us.”
European ecommerce aggregator SellerX acquired Elevate Brands, a U.S.-based aggregator.
The combined companies will be known as SellerX Group. It will comprise a portfolio that includes 80 Amazon-native private label consumer brands in categories including sports and outdoors, home, mobile accessories, pets and consumables. The portfolio will span over 40,000 products.
With the deal, SellerX Co-CEOs Philipp Triebel and Malte Horeyseck will lead SellerX Group, while Elevate Brands cofounders Ryan Gnesin, Jeremy Bell and Robert Bell will remain in key leadership positions.
“This acquisition combines our know-how and diversified portfolios of strong brands with a market-leading technology platform and strong operational infrastructure,” said Triebel, in a statement. “By leveraging our combined strengths, I am convinced we are well-positioned to drive further consolidation in the industry.”
Ecommerce aggregator Society Brands acquired Wolf Tactical, a tactical gear company.
Founded in 2017 by Tim Wu, Wolf Tactical makes products including DC belts, range belts to weighted vest and tactical backpacks.
"I started Wolf Tactical by myself as a side hustle with very limited knowledge of business and entrepreneurship. A combination of hard work and relentless learning allowed me to build it into a multi-million-dollar business," said Wu who will remain as brand president, in a statement. "With the help of Society Brands, I have access to untapped potential that I would not be able to achieve by myself.”