FactSet's Sara Potter, Vice President, Market Analysis, explains where this holiday season's retail sales were strong, and which numbers can be interpreted as key indicators of our economic health.
Today’s December retail sales report from the U.S Census Bureau came in slightly lower than expected, but still confirmed that the 2010 holiday shopping season was the strongest we’ve seen in years. December sales were up 0.6% from November, and 7.9% on a year-over-year basis. The biggest monthly gains were realized by non-store retailers, building supply stores, health care retailers, gas stations, and motor vehicles. Analysts have been closely tracking retailers’ weekly and month-end reports, so there weren’t many surprises today, but there are some interesting trends that can be gleaned from all of the available data.
Back on the Road
Motor vehicle and parts dealers make up the largest subcomponent of overall retail sales. Up 1.1% from November to December and 14.2% year-over-year, this sector has been an area of particular strength over the last few months. According to data from the Bureau of Economic Analysis, December light vehicle sales on a SAAR basis rose to 12.5 million units – the highest number since the Cash for Clunkers surge in the summer of 2009. This increase is a positive sign that the U.S. consumer is making a comeback. The even stronger growth in light truck sales is good news about the state of American small businesses. Light trucks include pickups and vans, which are the workhorses for small companies, and strength in this sector shows rising confidence among small business owners and in the overall economy.
Spending Online
Online sales were strong this holiday season, as evidenced by the strength of non-store retailers in today’s report. Month-over-month sales at non-store retailers grew a whopping 2.6%, translating into a jump of 15% versus December 2009. The dominance of online sales is strongly tied to growth in the electronics sector; a great example is the success of Amazon.com Inc. (AMZN) in recent years. 2009 data show that their electronics segment has grown to 45% of total sales from just 24% five years earlier. Electronics are likely to represent the majority of Amazon’s sales in 2010, given the popularity of new gadgets, like smartphones and e-readers. Likewise, Apple Inc. (AAPL), whose iPad and iPhone devices were big hits this holiday season, has benefited from the availability of their products from both online merchants and brick-and-mortar retailers, as well as in their own Apple stores.
Quick tip: 
Examine Amazon’s success in greater depth by accessing the Segments Report in FactSet.
Just go to Company > Financials > Segments, and type in AMZN as your ticker.
Retail sales ended 2010 on a strong note, with annual growth for 2010 coming in at 6.6%, the first positive increase since 2007, and the biggest since 2005. The solid retail sales numbers bode well for the consumption component of GDP in the fourth quarter of 2010, which will be announced on January 28.
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