Retailers' reports show tepid May for shoppers
June 3, 2010 Retailers' May sales reports, released Thursday, underscore how
fragile the consumer spending recovery remains.
The International Council of Shopping Center index for revenue
at stores open at least a year rose 2.6 percent in May, in line
with a reduced growth forecast that ranged anywhere from 2 percent
to 2.5 percent.
Michael P. Niemira, ICSC's chief economist, had originally
expected a 3.5 percent gain. May's results follow a 0.8 percent
gain in April, and a 9.0 percent increase in March.
May's results are being compared with a weak May 2009 that saw
the figure drop 4.6 percent.
A mix of stores found business challenging during the month.
Target Corp.'s chairman, president and CEO Gregg Steinhafel,
noted in a statement that its recent performance reinforces his
belief that we will continue to "experience volatility in the pace
of economic recovery." The chain posted a small gain that was
below internal forecasts.
Department store chain J.C. Penney and many teen merchants
including Abercrombie & Fitch Co. and American Eagle Outfitters
Inc. reported declines in revenue at stores open at least a year.
Costco Wholesale Corp. reported a gain slightly below Wall
Street expectations. Gap Inc. reported a small gain overall, but
its namesake chain in the U.S. saw revenue decline. The results are
being compared with depressed spending a year ago.
Among the bright spots were Victoria's Secret parent Limited
Brands Inc. and T.J. Maxx parent TJX Cos., both of which reported
bigger-than-expected increases.
Revenue at stores open at least a year is a key indicator of a
retailer's health. Another report from Mastercard Advisors'
SpendingPulse showed that shoppers took a pause as they cut back on
almost everything from appliances to footwear and clothing at the
mall. SpendingPulse measures spending in all forms including cash
from May 2 through Saturday.
Cool weather and a quirk in the calendar - a late Memorial Day
weekend that hurt May's business but should boost June's figures -
dampened spending. But weakness in the past six weeks is due to
more than weather and calendar flukes, analysts said. They cited
high unemployment, stock market jitters and the dwindling of
government-funded rebates on energy-efficient appliances.
The Labor Department reported Thursday that new claims for
unemployment insurance fell for the second straight week. But the
declines came after a sharp increase three weeks ago, and claims
remain at elevated levels.
"May was pretty lackluster. It looked like consumers were
coming out of their lethargy. There seemed to be a fledging
spending recovery," said Ken Perkins, president of research firm
RetailMetrics "But that is called into question."
"I don't think you can explain away all the weakness just based
on the calendar shift," said Michael McNamara, vice president of
research and analysis for SpendingPulse.
The slim May and April gains, follow a solid first quarter when
shoppers opened their wallets more and showed more willingness to
pay full price as they took comfort in a rallying stock market and
signs of economic recovery. But fears that a debt crisis in Europe
could hammer global growth are causing heavy declines on Wall
Street and raising concern that the inroads made in the U.S.
economic recovery could unravel.
The Conference Board's consumer confidence index improved in May
for the third straight month, though it remained below what's
considered healthy. While the measure included volatile days on
Wall Street, it excluded the 376-point plunge on May 20, its worst
one-day drop in more than a year. Now there's concern confidence
could fall back if stock declines continue.
The Dow fell 7.9 percent for the whole month, its worst May
since 1940. Now economists worry that businesses will limit hiring.
Robert Yerex, an economist at Kronos, a work force management
company that tracks hiring among 69 large retailers, said stores
didn't hire as many workers in May as April. "There's concern
about a double-dip recession," he said.
Target said revenue in stores open at least one year rose 1.3
percent in May as consumers came to the cash register more but
spent less on each trip. The results fell short of the company's
own expectations but edged above analyst expectations of a 1.2
percent gain, according to a survey by Thomson Reuters.
Target forecast that the key revenue measure will be up in the
low single digits for the current month. Roxanne Meyer, a UBS
analyst, noted in a report that Target's subdued outlook likely
reflects increasing pressure from rival Wal-Mart Stores Inc.'s
stepped-up discounting.
Wal-Mart stopped reporting its results on a monthly basis last
year.
Costco's 9 percent gain was shy of Wall Street forecasts.
Among department stores, Penney had a 1.8 percent drop, worse
than the 0.6 percent decline expected. Macy's 1.4 percent increase
was slightly more than analysts' forecasts. Saks Inc., which
operates Saks Fifth Avenue, had a better-than-expected 5.8 percent
gain.
Gap Inc. had a 1 percent increase, helped by business overseas,
a little better than what analysts had expected. It's namesake
business in North America was down 2 percent compared with an 11
percent drop a year ago.
Teen retailers continued to struggle as many young customers can
no longer depend on their parents to help them finance clothing
purchases. Their customers are also facing grim job prospects.
Abercrombie and American Eagle both had a 3 percent drop.
Limited, however, enjoyed a 5 percent increase in May.