Retail pro overlooks Friday’s ‘really bad’ sales report and predict a rebound in May

April U.S. retail sales were down a record 16.4% but one notable retail expert is hopeful May’s upcoming report will signal a rebound in spending activity.

‘Really bad’ but will rebound

Expectations heading into Friday’s retail report were for a “bad” sales reading but the final numbers were “really bad,” J Rogers Kniffen CEO Jan Kniffen said on CNBC’s “Squawk Box.” There is a simple explanation for the sales data in that the government dictated many stores to close their doors to slow the spread of the COVID-19 pandemic. However, consumers “didn’t really want to go to them anyway.” 

Similar reports of poor retail sales were released worldwide throughout May.

April’s U.S. data is likely to mark the lowest point in terms of retail sales and May’s data will show a rebound in spending, he said. Across many parts of the U.S., stores are starting to reopen their doors and are operating at around 55% of last year’s levels.

Beyond May, stores will continue lifting their maximum capacities and retail sales will continue to rise. Retailers are likely to hit 65% to 70% of last year’s levels leading up to the end of the year holiday season. By the time December hits and shoppers are ready to buy presents, the sector would be close to fully rebounding at 90% of 2019 levels.

‘Nothing new’

Kniffen predicted back in 2014 that half of all non-food retail sales will be conducted online by 2030. On Friday he updated his prediction and said this is likely to happen by 2025. He also revised his prediction of 10,000 retail stores closing each year for 10 years to 50,000 stores closing this year alone.

“We are going to go online, we already knew that,” Kniffen said. “We are going to go digital, we already knew that. We are going to go to cashless payments, we already knew that. It’s just going to come a lot faster.”

What’s next for stores

The acceleration in store closures is clearly attributed to the COVID-19 pandemic as the retailers who were struggling prior to the pandemic are struggling even more in the current environment, he said. 

The most impacted retailers are those whose cash flow has fallen all the way to zero. Put in comparison, a 10% decline during a recession is a “big deal.” Even when retailers come back online, their cash flow won’t be anywhere close to prior levels so many stores will merely be opening their doors just to close them in a few months.

On the other side of the transaction, consumers will demand convenience and safety which is both hard and expensive for retailers to deliver.