Retail Sector Mid-Year Check-In

July 20, 2023

Source: Bloomberg; Johnson Redbook Source: Bloomberg; Johnson Redbook

Today’s Chart of the Week highlights the importance of last week's negative change in the Johnson Redbook Index. This index tracks the year-over-year same-store sales growth in a sample of approximately 9,000 stores of large U.S. general merchandise retailers. As such, it provides an advance reading of trends in retail sales ahead of official releases and company reports. Last week's reading showed that the Johnson Redbook Index decreased by 0.40% for the week ending July 8, 2023 compared to the same week last year.1 As shown in the chart, the index has been decelerating, and this is the first time the index has gone negative since March 2020. It's nearly impossible to forget the previous environment of negative readings when COVID-19 lockdowns were in full swing and the economy spiraled into a quick recession. Understandably, this was a very difficult time period for retailers and the fact that the Johnson Redbook Index has fallen negative again is telling.

This could be a troubling sign as we head into second quarter earnings reporting for retail companies. So far we have seen a few cracks in retail earnings. For example, Levi Strauss & Co. lowered revenue and earnings per share guidance earlier in July.2 Their Chief Executive Officer Chip Bergh said, “The macro effects of higher inflation and a slowing U.S. economy has put increased pressure on the price-sensitive consumer."3 The company noted that low- and middle-income shoppers were feeling the most pressured. On the other hand, an example of slowing sales from a luxury company is Richemont, the owner of Cartier and Van Cleef & Arpels jewelry. They reported a surprise lower-than-expected revenue increase on July 17 from the Americas for the quarter ending June 30, 2023.4

Key Takeaway    

The Johnson Redbook Index is one of the weaker data points I have seen amongst other retail sales numbers in the U.S. that have signaled consumer spending remains resilient despite higher inflation and interest rates. As is always the case, this earnings season will be very important to see if some retailers have run out of steam and post weaker earnings.



1Trading Economics – United States Redbook Index; 7/9/2023

2Levi Strauss & Co – Levi Strauss & Co. Reports Second-Quarter 2023 Financial Results; 7/6/2023

3Yahoo! Finance – Levi Strauss cuts outlook, warns of 'price-sensitive consumer'; 7/7/2023

4Reuters – Luxury group Richemont boosted by Asia recovery but Americas weigh; 7/17/2023

Tags: Retail sales | Consumer spending | Inflation | Earnings | earnings recession

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