Spending in May a Relief to Some Retailers
By THE ASSOCIATED PRESS
Published: June 8, 2007
Americans shopped hesitantly in May, giving retailers some relief from a dismal showing in April but still raising questions about how strong consumer spending would be in the months ahead.
As the nation’s merchants reported results yesterday, the disappointments included Wal-Mart Stores, Macy’s and Abercrombie & Fitch. Costco Wholesale, Kohl’s and luxury retailers like Saks beat expectations.
“It wasn’t a blowout, but the gains were a solid snap back,” said Ken Perkins, president of RetailMetrics, a research company in Swampscott, Mass. Still, Mr. Perkins and other analysts said that the performance reflected a slowing consumer spending trend.
“It’s a slowing trend that we have been seeing since February,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers, a trade group. From February through May, the index averaged a 2.2 percent same-store sales gain, compared with the 4.1 percent average in the comparable period a year ago.
Analysts are closely monitoring sales in June, the second most important month on the retail calendar behind December. But most analysts believe the modest spending pace will continue.
The mixed performance in May followed one of the worst sales slumps ever for the retail industry. While one-time factors like an early Easter and rainy weather hurt sales in April, business was so bad it fed worries that higher gasoline prices and a weaker housing market were eating away at consumer spending.
In May, same-store sales rose 2.5 percent, down from 4.5 percent a year earlier but a sharp improvement from the 1.9 percent drop in April. The sales in May benefited from warmer weather and the Memorial Day shopping weekend, which was not included in the results a year earlier.
Wal-Mart had a 1.1 percent same-store sales gain, below the 1.4 percent predicted by analysts surveyed by Thomson Financial. The figure excluded fuel sales; including fuel, same-store sales rose 1.3 percent.
Wal-Mart, which reported a 3.5 percent drop in same-store sales in April, its worst performance on record, continues to struggle with its apparel and home businesses. Store executives said yesterday that those categories should see big improvements in the fourth quarter.
The company said it expects same-store sales in June to range from unchanged to up 2 percent.
Its rival, Target, whose cheap but stylish merchandise appeals to a broader shopper base beyond the lower-income customer, had a 5.8 percent gain in same-store sales, just below the 5.9 percent estimate.
Costco had a 7 percent increase in May same-store sales. Analysts expected 5.6 percent.
Among moderate-price department stores, J. C. Penney posted a 2 percent decline in same-store sales in its department store business, worse than the 0.3 percent gain analysts had expected.
Macy’s continued to struggle with the transition of former branches of May Department Stores to the Macy’s brand. The company said same-store sales fell 3.3 percent, missing its own expectations and the 1 percent forecast by analysts.
“While we were disappointed with sales in the month of May, the increased promotional marketing support currently being implemented for the Macy’s brand is expected to improve sales trends in June and July,” Terry J. Lundgren, the chief executive of Federated Department Stores, the parent company of Macy’s, said in a statement.
Kohl’s reported a 10.5 percent gain in same-store sales, beating the 6.2 percent estimate.
Upscale stores shined. Saks, which operates Saks Fifth Avenue, reported a 37.5 percent gain in same-store sales, better than the 13.9 percent estimated by analysts. Saks said May’s results benefited from a shift in the promotional calendar, a move that will hurt June results.
Nordstrom had a 6.3 percent same-store gain, better than the 2.6 percent estimate.
Gap Inc. continued to languish, posting a 3 percent decline in same-store sales, although results were better than the 4.4 percent drop Wall Street had expected.
Limited had a 2 percent same-store gain, much better than the 1.6 percent decline forecast by analysts.
Among retailers focused on younger shoppers, Abercrombie & Fitch posted a 5 percent drop in same-store sales, worse than the 1.2 percent forecast.
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