These are the bright spots in the retail sector, according to foot-traffic data

By James Rogers

Discount and dollar stores are among the retail winners, according to Placer.ai.

Although second-quarter retail visits were down slightly year-over-year, there are plenty of bright spots across the sector, according to foot traffic data from analytics company Placer.ai.

Overall retail visits were down 1.8% year-over-year in the second quarter, Placer.ai said, as a strong January was followed by a slowdown that continued in April and May. "But visit trends began showing improvement towards the end of Q2 2023, indicating that the consumer spending slump may be drawing to a close," Placer.ai said, in its Quarterly Index. "And with a variety of promotional events coming up -- from owned retail holidays in July to Back to School and Labor Day sales in August and September -- the coming months may well bring a significant retail turnaround."

Within retail, the discount and dollar stores subcategory enjoyed a strong quarter, with visits to Five Below Inc. (FIVE) growing 14.5% year-over-year and visits to Dollar Tree Inc. (DLTR) rising 10.5% over the same period. Foot traffic to Ollie's Bargain Outlet Inc. (OLLI) climbed 8.4%, while visits to the Dollar Tree-owned Family Dollar rose 5.1%, according to Placer.ai. "Discount & Dollar Stores continued their upward trajectory in Q2 2023, as budget-conscious shoppers continued to hunt for bargains and category leaders continued expanding their product offerings," the analytics company said.

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Dollar Tree and Dollar General were the foot traffic leaders in the subcategory with a 39.4% and 32.9% visit share, respectively, during the second quarter. "The chains are likely to hold on to their lead as they continue expanding throughout the country," Placer.ai wrote.

The analytics company also noted an upturn in the grocery sector, led by Trader Joe's, where visits rose 9.7% year over year, as well as a recovery in dining. "Several newer chains are showing promising growth numbers, and established visit leaders are also attracting diners to their venues," the analytics company wrote. "These visit trends also suggest that consumers are finally ready to engage in discretionary spending once again, following several months of budgeting and saving -- just in time for the busy summer season."

Foot traffic to McDonald's Corp. (MCD) restaurants rose 8.4% year over year, while Popeyes rose 7.5% and KFC's second quarter visits were up 6.8% compared with the same period last year. Starbucks Corp. (SBUX), Tim Hortons, and Dunkin' Donuts visits increased 6.9%, 6.5%, and 3.6%, respectively.

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Elsewhere, the fitness subsector significantly outperformed during the second quarter of 2022, and car wash chains also enjoyed year-over-year visit growth. Malls also made a comeback in the second half of the quarter, according to Placer.ai.

However, the superstore subcategory experienced a 2.4% year-over-year decline in foot traffic in the second quarter, according to Placer.ai. Visits to Walmart and Target Corp. TGT were both down 2.8% compared with the second quarter of 2022, while visits to BJ's Wholesale Club Holdings Inc. BJ were down 4.2% year-over-year. There were some exceptions: Costco Wholesale Corp. (COST) saw visit gains, possibly as a result of the company's expansion efforts, and Walmart Inc. (WMT)-owned Sam's Club also outperformed the category average, with visits relatively close to 2022 levels.

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U.S. retail sales rose 0.2% in June, the Commerce Department reported Tuesday, below the 0.5% forecast by a Wall Street Journal poll of economists, although overall consumer spending is fairly strong.

Additional reporting by Jeffry Bartash.

-James Rogers

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07-18-23 1313ET

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