U.S. Retailers Struggle Through Spring
Wednesday May 4, 5:04 pm ET
By Anne D'Innocenzio, AP Business Writer
U.S. Retailers Struggle Through Spring, on Heels of Consumers' Early-Year Spending Spree
NEW YORK (AP) -- The spring fling that the nation's retailers hoped for appears to be fizzling.
A combination of factors -- unseasonably cool weather, a spike in gasoline prices, higher interest rates and confusing fashions -- have made consumers pull back on spending in March and April, after going on a spending spree earlier in the year. And there's growing concern among analysts that this may not be a temporary pause as the economy hits another rough patch.
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"The pulse of the consumer has gotten slower," said John D. Morris, a retail analyst at Harris Nesbitt, an investment firm. "March and April are not pretty, and it suggests that the consumers are feeling the pinch of a slower economy, higher interest rates and gas prices."
Morris estimated that discounting is up 20 percent for the March and April period for the 18 mall-based apparel stores he follows. That compares to a 10 percent decline in the spring 2004 period over the previous year.
"There is real concern on the part of most consumers about the future of economic growth and long-term job stability," said Ken Perkins, president of Retail Metrics LLC, a research firm in Swampscott, Mass.
Also, the spring offerings aren't proving to be much of a lure for shoppers, who are being turned off by an overdose of bright colors -- from tangerine orange to bright yellow -- this season, analysts said.
A year ago, major stores focused on pink, while offering a sampling of other bright colors. This year, the nation's clothing racks have become a mishmash of different colors and prints. Except for the flowy circle skirts and tunics, not much else is selling, said David Wolfe, creative director at The Doneger Group, a New York-based buying office.
"When you give people too much choice, you can't make a decision," Wolfe said.
Nevertheless, the slowdown is a disappointment to retailers, which are expected to report sales results for April on Thursday.
After an unimpressive holiday season, consumers boosted their spending in January and February, beating analysts' estimates, but sales slipped in March. Even the luxury stores like Neiman Marcus, with their well-heeled customers, had less robust sales gains than in the past. Analysts said, however, that they will be concerned only if the weaker sales for luxury stores continue for the next few months.
For the combined January and February period, sales at stores opened at least a year, known as same-store sales, averaged a 4.2 percent gain, according to The International Council of Shopping Centers-UBS tally of about 70 merchants. Same-store sales are considered the best indicator of a retailer's health.
In March, the same-store sales tally was 4.1 percent. On the surface, the increase was respectable. But without the impact of an earlier Easter, which occurred in March this year, compared to April a year ago, that pace was closer to 2.5 percent, according to Michael P. Niemira, chief economist at The International Council of Shopping Centers.
Niemira expects the nation's retailers to report a modest 2 percent gain for April.
Perkins expects many stores will fall short of expectations, though teen retailers may do well.
Wal-Mart Stores Inc. expects to post a 0.9 percent same-store sales gain for April. Its initial projection was for same-store sales to be up no more than 2 percent. It said Saturday that food sales are outperforming general merchandise, which indicates to Perkins that consumers are not making a lot of discretionary purchases.
Target Corp. has maintained that April sales gains will come in at the low end of its 2 to 4 percent projected range.
The weaker sales are occurring as the economy is skidding. Last month, the government reported that the overall economy grew at an annual rate of just 3.1 percent in the January-March quarter, the slowest increase in two years.
Meanwhile, oil prices soared to record levels in March and hit a new peak of $57.27 a barrel at the beginning of April. Prices have since retreated and now hover above $50 a barrel.
And the job market is still shaky. Employers added just 110,000 jobs in March, the fewest in eight months. The Labor Department is expected to report April figures on Friday.
All of this has hurt consumer confidence, which declined in April for the third consecutive month.
Such worries are evident at the nation's malls.
Howard Gatoff, 44, of Columbus, who was shopping at a Target store at the Polaris Towne Center mall in the area, said he was cutting back on spending a little more than usual, not because of higher gas prices but because of a general lack of confidence in the economy and higher interest rates, which make borrowing more expensive.
"I always watch what I spend, but maybe I'm watching a little more closely now," said Gatoff, adding that he's putting off plans for a big vacation this year, unlike 2004 when he took a trip to Paris.
Associated Press Writer Matt Leingang in Columbus, Ohio, contributed to this report.
www.neimanmarcus.com
www.target.com
www.walmart.com |
