Checking in on Retail Trends and the “Fifth Avenue Flight”
Stimulus Checks Spur January Spending Spike
In January, millions of Americans received $600 stimulus checks. Data released yesterday shows that, as people spent this stimulus money, retail sales climbed by 5.3% in January. Economists only predicted gains of 1.2%.
Spending rose in every major category last month. Electronics and appliances led the way, increasing by 14.7%. Spending on home furnishings was up 12%. Even restaurants and bars, which have faced severe hardships during the pandemic, saw gains of 6.9%.
Retailers Follow Consumers to Florida
Region-specific data shows that, as Americans are moving to new locations in droves, retailers are following. For example many people have relocated to Palm Beach, Florida over the past year, either temporarily or permanently. A large portion of these people have come from New York, but others hail from Chicago, New England, and California.
Retailers like West Elm (WSM), Urban Outfitters (URBN), and Lululemon (LULU) are rushing to open new locations in the area. In addition to retailers, some financial institutions are also making the move. Elliott Management has shifted its headquarters from midtown Manhattan to West Palm Beach and Goldman Sachs (GS) is considering opening offices in Palm Beach.
As retail patterns change, analysts are eying inflation trends. As more money has been pumped into the economy, the producer price index, a metric tracking price movements from the point of view of sellers, climbed 1.3% last month. This was the most significant monthly gain since the measure started in December 2009. Some inflation can help spur economic activity, but too much can cause problems.
Looking ahead, analysts are unsure exactly how consumers will respond as vaccine rollout efforts continue. Additional stimulus from the federal government will also impact trends. Retail patterns have been difficult to predict this year, and there could be more surprises in the upcoming months.
Earn a Bonus Between $25 and $2,500 When You Transfer Your Investments to SoFi Invest*
Trade stocks and ETFs, buy crypto, or start automated investing all in one place. It's easy to transfer your cash & holdings from other firms. Get started in the SoFi app.
Ford’s $1 Billion Investment in Electric Vehicles
EV Manufacturing in Cologne, Germany
Ford (F) is investing $1 billion in an electric vehicle manufacturing plant in Cologne, Germany. Cologne is Ford’s European headquarters and it has been building cars there since before World War II.
The automaker announced the plan yesterday, adding that it aims to make all its European passenger vehicle offerings electric by 2030. Ford plans to have its first European-built EV ready to sell by 2023. “Our announcement today to transform our Cologne facility is one of the most significant Ford has made in over a generation. It underlines our commitment to Europe and a modern future with electric vehicles at the heart of our strategy for growth,” said Stuart Rowley, President of European Business at Ford.
Other Legacy Carmakers Ramp Up EV Offerings
Ford is not alone in working to grow its EV offerings. An increasing number of governments around the world are making commitments to phase out diesel and gasoline vehicles. Legacy carmakers are rushing to stay relevant and compete with newer companies like Tesla (TSLA) as these changes take place.
General Motors (GM) last month announced that it plans to make the shift away from gas-powered vehicles by 2035. Jaguar Land Rover (TTM) said earlier this week it will make its Jaguar luxury brand fully electric by 2025, and that by 2030, it plans to roll out electric versions of all its models.
Ford’s Plans Beyond Europe
Ford’s investment in the Cologne plant is part of a larger initiative that stretches beyond Europe. Ford plans to invest $22 billion in its electric vehicle business around the world by 2025.
EV sales climbed in Europe and China last year, but in the US they fell by about 10%. Some analysts believe EV sales will pick up in the US as more models become available and as more infrastructure to support EVs is built. The Biden administration has promised to install half a million public EV chargers by 2030, which could help Americans feel more ready to buy EVs. Investors will be eager to see which of the many companies working to gain market share in this industry will come out ahead.
Shopify Shares Q4 Earnings
Shopify Beats Expectations as Ecommerce Continues to Boom
Shopify (SHOP) shared fourth quarter earnings and sales which handily beat expectations yesterday. The Ottawa-based ecommerce company’s adjusted earnings were $1.98 million. Its revenue was $977.7 million for the quarter—up 94% from the same period a year ago.
Demand for Shopify’s services has surged during the pandemic. Last quarter in particular, businesses turned to the platform during the holiday shopping season.
Threats to Shopify
Shopify’s business model is not without its risks. The company has over one million customers and most of them are first-time entrepreneurs. As unemployment surged during the pandemic, many started their own businesses and turned to Shopify for help. But if the labor market regains strength, some of these people might return to working for larger companies rather than continuing to operate their small businesses.
Shopify might also face more intense competition in the coming months. For example, Amazon (AMZN) recently acquired Selz, an Australian company providing ecommerce services. Amazon plans to grow the company and help it compete with Shopify.
“Normalized Pace of Growth” Expected in 2021
Many analysts expect that online shopping habits formed during the pandemic will be here to stay. As the economy regains strength and consumers have more disposable income, they might spend even more money on ecommerce.
While Shopify expects its business to stay strong even as more people are vaccinated and can return to brick-and-mortar stores, its leadership anticipates a more "normalized pace of growth" in 2021.