The coronavirus pandemic hammered retailers and drove many well-known names into bankruptcy. But even those that didn't go to that extreme still suffered revenue losses when the outbreak was at its worst and consumers were largely staying out of stores.
A sluggish economy didn't help retailers, either. In April 2020, the U.S. jobless rate reached a record high and stayed elevated for the remainder of the year.
Things have improved more recently, though. Stimulus checks and new jobs have made the economic situation less dire. Coronavirus vaccines have made shoppers less skittish about entering stores. And the fact that the country has largely opened up has prompted more consumers to go out and spend.
The result? Retail sales rose 14.3% in June on a year-over-year basis. They were also up 26.8% from June 2019, according to data from the U.S. Department of Commerce.
Not surprisingly, some of that boost came from online sales, which have also boomed in the course of the pandemic. E-commerce grew 6% year over year in June and was up 44% from June 2019.
A surprising turn of events
For some analysts, June's numbers were unexpected. Many anticipated that consumers would divert more of their funds to travel and experiences and spend less on retail purchases. But still, consumers loaded up on apparel, perhaps in anticipation of more social plans or an eventual return to working in person.
Now to be fair, part of the reason why retail sales growth was so strong in June was due to inflation. But still, the news is positive for retailers. In fact, department store sales, which were getting sluggish even before the pandemic, rose 28.9% year over year in June and were up 6.5% compared to 2019.
The real estate investor takeaway
Sluggish sales throughout 2020 forced many retailers to rethink their plans and permanently close stores. And that dealt a harsh blow to shopping centers and malls.
Malls in particular were struggling with closures before the pandemic, so the events of 2020 only fueled an already troublesome trend. But now that retail sales are up, it could curb that uptick in store closures and in fact inspire retailers to open up more locations. That, in turn, could drive much-needed revenue into shopping center and mall REITs (real estate investment trusts) and help compensate for vacancies.
Of course, it'll be interesting to see how shopping habits evolve during the latter half of 2021. Online purchases grew more popular during the pandemic as fears kept consumers away from malls in particular. If digital sales continue to soar, retailers may, in turn, opt to shift their focus to e-commerce and put plans for new stores on hold.
But either way, an uptick in retail sales for the month of June is something real estate investors should be happy about. And if that trend continues, shopping center and mall REIT holders could be in for a much better year.