Dividends and US retail sales, factory output sink as economy reels from pandemic

In a normal year, the most important shopping day is what is called Back Friday or the day after Thanksgiving. What happens is people stop, get together with family and have little to do so the next day they go shopping. One can wonder what people are doing now – yes there is internet shopping with Amazon and Shopify but it is not the same.

In an article by Lucia Mutikani of Reuters US retail sales suffered a record drop in March and output at factories declined by the most since 1946. The good reason for the declines is the social distancing to fight the virus. One has to remember, in a service economy and having some of the biggest malls in the world, shopping is a normal thing for most Americans.

The dollar drop of 8% drop in retail sales is $46.2 billion. Auto sales were down 25.6%, gasoline prices while dropping to lowest levels in years sales were down 17.2%. If we are all at home, few people are driving.

Sales at clothing stores were down 50.5%, furniture stores down at 26.8% and spending at sporting goods, hobby, musical instruments and book stores down 23.3%. Sales at electronics and appliance stores decreased 15.1%.

Sales at restaurants and bars dropped 26.5%.

What was up – grocery stores went up 26.9% as more people made their own meals; health care is up 4.3%, building material stores were up 1.3%.

Linking to dividend paying stocks, when the pandemic eases what will you spend money on, besides bills? what about your friends and family? If you said clothes then one would expect others to do the same and maybe retail has an opportunity. However, we went in the shutdown with stores having inventory of winter stuff and starting to bring out the spring collection. The summer collection is shorts and less clothes. Do you believe the stores make a great deal of markup on the summer collection? When the economy does open up , what will be the v shape in sales and what will be lagging indicators?

There are more questions than answers, till the next time – to raising questions.

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