U.S. retail sales smashed expectations in March, with total sales (mkt +0.3% m/m) up 0.7%, ex-autos (mkt +0.4% m/m) up 1.1%, and the control group (mkt +0.4% m/m) up 1.1% as well. This means that Q1 GDP is likely to receive a boost from strong consumer spending. Revisions to February U.S. sales were up, and also came in strong, taking all three measures up 0.3pp to +0.9%, +0.6%, and +0.3% respectively.
Non-store retailers and bars and restaurants saw the biggest year/year increase of 11.3% and 6.5%, respectively. This is inline with our LSEG earnings data suggesting that consumers’ preferences are still gravitating towards services and eating out vs. shopping at malls.
The latest retail sales data reflects strong consumer buying, despite feeling the pinch from higher inflation.
Exhibit 1: U.S. March Retail Sales 2024
Source: LSEG IFR
For Q1 2024, the LSEG Retail/Restaurant Index is looking at a 12.7% blended estimated earnings growth rate and a 3.8% blended estimated revenue growth rate.
Five out of the 10 consumer-related industries have turned positive. The Hotels, Restaurant and Leisure sector continues to be on track to record one of the highest estimated earnings growth rates in Q4, a 22.2% surge over last year’s level (Exhibit 2). This is in line with the latest U.S. retail sales data showing that eating out and going to bars is much stronger than a year ago. This is remarkable, considering how difficult the comparisons are from a year ago.
The forecasts for Q1 2024 show that consumers continue to gravitate towards experiences rather than mall visits. Similarly, the forecasts for 2024 show that this trend is expected to continue for the remainder of the year.
Exhibit 2: Q1 2024 Earnings Growth Rates: LSEG Retail and Restaurant Index
Source: LSEG I/B/E/S
Discount levels – U.S. online retailers
The discount penetration (how much of the assortment is on sale) has remained stable the past three months this year. LSEG discovered this in a collaboration with Centric Market Intelligence, formerly StyleSage, which analyzes retailers, brands, online trends and products across the globe.
Retailers tend to be conservative when they introduce their new full-priced spring merchandise ahead of the Easter holiday. For April, the discount penetration is 35%, in line with March’s average, and below February’s average of 37%.
Similary, the average percent discount in April is 34.0%, below last year’s average of 37.7%.
Exhibit 3: Discount Penetration and Average Discount: U.S. Online Retailers
Source: Centric Market Intelligence formerly StyleSage Co.
