Big Week Ahead For Retail Data

Prepare for a big week of retail data, all of it unprecedented in light of the COVID-19 pandemic. Starting with the Commerce Department retail sales data on Wednesday, retailers will get a sense of how much consumers are spending and the retailers they are spending with.

Expect a steep drop in March spend due to the COVID-19 crisis. Most analysts expect an 8 percent plunge during the month, after a 0.5 percent decline in February.

“Activity during the month likely fluctuated notably and the impact is unlikely to be uniform across all industries,” Nomura Holdings said in a note to clients April 9. “While the March report will reflect average activity, sales were likely notably weaker at the end of the month, when almost all states enforced some type of stay-at-home order, relative to the first week of March. This suggests April’s numbers will likely be even worse.”

Credit Suisse economist James Sweeney agreed. “March should mark only the beginning of a recessionary decline in consumption and the decline is likely to intensify in April. Overall we expect consumption to fall by 17.5% QoQ annualized in Q2, the worst quarter since WWII,” Sweeney wrote in a note April 9.

While numbers in the commerce report will be down, the more pressing issue is how relevant the March decline will be. Many analysts have called the data expected this week “hypernegative.” That could mean that the street will be kind to retailers as they release March retail sales numbers. But it also means that retailers have a deep ditch to dig out of. For retailers, there are no surprises from March. They’re focused on reopening.

“People are more interested in news about the spread of the virus than they are about the economic data,” said Art Hogan, chief market strategist at National Securities, said per a CNBC report. “We got another massive increase in jobless claims. That’s ignored because we’re listening to who is plateauing … Is New York actually getting better and we see a peak? I get the feeling people are going to look at the first quarter earnings and say, ‘we know this and you should pull your guidance.’”

Although they don’t have to report anything by SEC regulations, GameStop will be interesting to watch this week. Its public behavior has been erratic, trying to claim that it was an “essential” retail function in mid-March. It is also in the thick of a nasty board fight from an activist investor. Hestia Capital and Permit Capital have nominated two candidates for election to GameStop’s Board, and have expressed frustration with the company’s performance both before the coronavirus crisis and during the crisis. The voting deadline for the new board of directors is next Monday April 20.

“Over the next 12 months, the Board will be faced with many difficult challenges, including the uncertainties posed by COVID-19, the Company’s excessive cash consumption, the need to sell non-core assets in a difficult financial market, a significant debt refinancing, the exploration of real estate sale-leaseback transactions, and the implementation of new strategic initiatives and investments for the future, among other things,” said a statement from Hestia Capital. “Given the current environment, we cannot afford a Board that hesitates in its decision making. Our candidates will bring a stockholder mindset and commitment to ensuring that the Board will act with urgency and focus on the key strategic initiatives needed to protect GameStop’s brand and build a new level of customer, employee and investor confidence in the Company’s future.”