Retailers bank on rebound

Retail sales across the country jumped 5 percent in May compared to the same month in 2012, and local retailers say increased confidence in the economy is helping to drive the trend.

The national sales data comes on the heels of positive movement in Missouri’s gross domestic product. The state’s GDP grew by 3.7 percent to $258.8 billion in 2012, according to advanced data estimates from the U.S. Bureau of Economic Analysis.

According to the National Retail Federation, building material and garden equipment sales – up 9.3 percent compared to May 2012 – are a bright spot in the U.S. May retail sales report.

Other trends noted in the report were sales of clothing and clothing accessories’ increasing by 4.8 percent and general merchandise stores fairing less favorably, up 2.3 percent year over year.

Tale of two segments
Westlake Ace Hardware General Manager Stuart Presley said sales of its core items, which include building equipment, are up nearly 5 percent in the first half of the year. He said garden-equipment sales, which were impacted by spring rains, are roughly flat compared to the first six months of 2012.

“Home improvement, hardware, electrical, plumbing – that core business – we have seen an uptick in that,” Presley said, noting he’s projecting storewide sales of nearly $3.7 million, only a slight bump compared to 2012 at the 2350 S. Campbell Ave. store.

Going back to 2008, Presley said Westlake Ace’s sales have consistently ranged between $3.5 million and $3.7 million.

“Our business is pretty steady, overall, because there is always something to fix around the house,” Presley said, adding hardware stores are often insulated from economic downturns. “I think what you are seeing in the last quarter is that people have more disposable income to take care of these repairs and things around the house that maybe they put off for the last three or four years.”

Hank Browne, founder of Sherwood, Ark.-based Hank’s Fine Furniture, said sales across the 16-store chain are up roughly 6 percent in the first half of 2013, bucking the national trend. The NRF reported furniture store sales were flat in May.

With stores in five states, including one at 1645 E. Independence Road in southeast Springfield, Browne said sales volumes have grown in the midrange products such as sofas instead of higher-priced room sets.

“It has gotten better, but unemployment is still too high,” he said, noting Hank’s 2012 revenues were roughly 9 percent below the pre-recession year of 2007. “People still don’t have as much discretionary income as they’ve had in the past.”

To spur on sales, Browne said Hank’s put pressure on its suppliers in the last year to drop prices, among other things.

“We have given longer terms, interest-free financing, which we are still doing. And a lot of it is that we have gone to our manufacturers and said, ‘We have got to have this product at this price because that’s what it takes to create excitement in the marketplace now.’ The manufacturers, they need business to, so they have participated,” Browne said. “The end result is that a sofa that would have normally sold for $600 we can now sell for $499. The consumer gets a good deal and we get more business.”

Market comparisons
The increase in the state’s GDP is the largest since 2007, when the Missouri economy grew by 4.1 percent compared to the year before. After growth of 3.6 percent in 2008, GDP fell 1.5 percent in 2009, then rebounding in the 2 percent range in 2010 and 2011.

The 2012 GDP movement in Missouri nearly kept pace with U.S. GDP, which rose 4 percent compared to 2011.

Approaching $260 billion, Missouri ranked No. 22 last year in GDP among states, and compared to its bordering neighbors, only Illinois and Tennessee have larger economies, ranking No. 5 and No. 18, respectively. California has the largest GDP, valued at just more than $2 trillion last year.

Looking forward, Presley said there is a good chance his business may be on the verge of higher sales with the local housing market improving. “With people purchasing new homes, with people finally selling with the lower interest rates that we’ve had in the last six months or so, that definitely affects our business,” Presley said. “While we are not in the building [business] – we are in the replacement business and hardware business – people are fixing things more. The interest rates are lower, so people have more money to spend if they are refinancing or going into a new home.”