The retail sector is on watch after the December Retail Sales report came in below expectations, including flat growth for December vs. the expectation for a 0.4% month-over-month gain. Of course, December is a key month for the retail sector due to the holiday shopping phenomenon.
Retail sales were up 2.4% on a year-over-year basis. Categories that dragged during the month included the furniture and home furnishings category, with a 5.6% decline from a year ago. Department stores saw a 0.3% decline from a year ago in a read that does not bode well for Macy’s (M), Kohl’s (KSS), and Dillard’s (DDS). The pace for nonstore retailers was just 0.1% month-over-month and 5.3% year-over-year, which marks a slowdown for the category that includes Amazon (AMZN), Etsy (ETSY), Wayfair (W), and eBay (EBAY).
Navy Federal Credit Union Chief Economist Heather Long weighed in on the December Retail Sales report. “This is a K-shaped economy with strong spending from the top and much more cautious spending from middle- and lower-income consumers. Retail sales were flat in December, driven by soft spending on autos, home furnishings, appliances, and clothing. These items were hard hit by tariffs in 2025, and consumers shifted their spending elsewhere,” highlighted Long. The general view is that the holiday shopping season was solid but not spectacular.