UPDATE: Gas Prices, Economy Leave Retailers With Mixed May Sales
June 02 2011 - 9:30AM
Dow Jones News
Consumers went shopping in May, but high gasoline prices and an
uncertain economy resulted in subdued results for retailers during
the month.
Retailers that sell gasoline at their sites and upscale
merchants turned in the best growth, with both continuing to see
strength while the momentum of many other retailers waned.
Costco Wholesale Corp. (COST), for instance, reported a 13% rise
for May at stores open more than a year. Analysts were expecting an
11.2% increase. Without gasoline sales and beneficial foreign
exchange rates, Costco said same-store sales would have been up
just 7%.
BJs Wholesale Club Inc. (BJ), another warehouse club, reported a
7.4% rise in comparable-store sales when 7.1% was expected.
Same-store sales without gas would have been 3%, the company
said.
Saks Inc. (SKS) reported a 20.2% jump in same-store sales, aided
by the calendar shift of a big spring sale. Analysts had projected
a 6.5% gain. Fellow high-end retailer Nordstrom Inc. (JWN) reported
a 7.4% rise when 5.9% was expected.
In addition to their customers being less affected by higher
gasoline prices, "the high end has done a better job of controlling
inventories, leading to further momentum in full price selling,
which seems to be aiding both the top and bottom lines," said
Michael Exstein, retail analyst at Credit Suisse.
Other retailers produced less vibrant sales for the month.
Target Corp. (TGT) saw same-store sales rise 2.8%, when 3.5% was
expected. The mass merchant's showing was at the low end of its
expected range as customers continued "to shop cautiously" while
dealing with high gas prices and other inflationary pressures,
Chief Executive Gregg Steinhafel said. Target said its May
comparable-store sales were strongest in its low margin grocery
business.
Department stores turned in a disappointing showing for the most
part. J.C. Penney Co. (JCP) said comparable-store sales declined
1%, while analysts were expecting a 3.3% rise. Fellow department
store Kohl's Corp. (KSS) reported growth of 0.8%, below analysts'
projections for 2.8%.
Macy's Inc. (M) was an exception among mid-tier department
stores. The retailer Wednesday posted a 7.4% rise in same-store
sales when a 5.6% increase was expected, and it lifted its
full-year same-store sales estimate. Chief Executive Terry Lundgren
said all units, from Macy's to upscale Bloomingdales and all online
operations "met or exceeded our aggressive expectations."
The 25 retailers tracked by Thomson Reuters posted 4.9% growth
in May same-store sales, missing expectations for a 5.4% gain. This
is retailers' first miss since December. The results follow 2.6%
growth a year earlier.
"There is a shakiness in the overall economy and it is being
reflected in the numbers that are coming in from retailers," said
Janet Hoffman, managing director of the retail practice at
Accenture. "The cards are stacked against the consumer right now
and retailers will have to work hard to bring them into
stores."
Even Victoria's Secret operator Limited Brands Inc. (LTD), which
has been on a tear, posted a 6% rise in same-store sales, shy of
the 7% Wall Street was looking for.
Gap Inc. (GPS) continued to struggle. It's same-store sales fell
4% when a 1% decline was expected.
Mixed results were seen by teen retailers, considered a good
barometer of discretionary spending. Buckle Inc.'s (BKE) 8.8% gain
beat the average expectation of 6.3% while Zumiez Inc.'s (ZUMZ)
7.8% rise edged out expectations for a 7.5% gain. But sales for
both Hot Topic Inc. (HOTT) and Wet Seal Inc. (WTSLA) fell short of
forecasts.
Some retailers that missed expectations said the economy and
weather seemed to have played a role. Destination Maternity Corp.
(DEST) posted an 8.6% drop in comparable-store sales when analysts
were looking for a 1% decline. Chief Executive Ed Krell pointed to
"the continued difficult environment for the consumer" and "severe
storms and flooding" that ripped through parts of the country
during the month.
Apparel retailer Cato Corp. (CATO) cited "continuing economic
uncertainty" as it posted a 3% drop in comparable-store sales.
Analysts had projected sales would be flat.
Aggressive Memorial Day sales toward the end of the month may
have provided some aid to retailers' May showing. "'Value"
retailers offered 30% to 65% off seasonal apparel and home
merchandise, while "better" retailers held markdowns in the 20% to
50% range," said Marie Driscoll, retail equity analyst at Standard
& Poor's Corp.
Stage Stores Inc. (SSI) didn't go the markdown route and ended
up missing expectations. The regional department store reported
flat same-store sales when a 3% gain was expected. "Our events in
the back half of the month were not promotional enough to sustain
the first half momentum," Chief Executive Andy Hall said.
Retailers were already looking at an uncertain second half of
the year because of price increases they will put in place to
offset higher cotton and labor costs. Now, they are facing further
headwinds from higher gasoline and food costs, and from continued
high unemployment.
U.S. consumer confidence fell to the lowest level since November
2010 in May. And housing prices moved closer to a double-dip
decline after improving slightly early last year when the U.S.
government was offering a tax credit for purchases.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
-Caitlin Nish contributed to this story.
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