Friday, June 8, 2007

Weak Retail Sales, Although Better Than April, Are Still Weak in May

Retail spending in May continued to be week, although not as bad as April according to the Wall Street Journal.

The industry's same-store sales, or sales at stores open at least a year, increased 2.5% last month, according to an index of 50 major chains compiled by the International Council of Shopping Centers. That is an improvement from April's 1.9% decline, but it falls well short of the 4.5% gain retailers recorded in May 2006 . . . ."Year to date, we've seen a modest pace of spending relative to last year, the year before that, or the year before that," Mr. Niemira said. "We have a consumer slowdown -- it's real, it's continuing and largely driven by the slowdown in housing."

If inflation in the past year was about 2.5%, then real retail sales are flat for the past year and much of the weakness has occurred since January.

. . . . persistent sluggishness in home sales and construction will continue to damp consumer spending overall, said Carl Steidtmann, chief economist at Deliotte Research. Economists debate how much influence the housing market has on spending. But Mr. Steidtmann says he is pessimistic about the outlook for a broad swath of home-related goods -- from furniture to garden tools.

Wal-Mart, the No. 1 retailer in terms of sales, reported a 1.1% gain in May same-store sales, at the lower end of its 1% to 2% forecast . . . . Sam's Clubs, same-store sales at its namesake chain rose just 0.3% amid persistent weakness in apparel and home-related goods. Wal-Mart, which has blamed weak sales on high gasoline prices and financial worries among its lower-income customers . . . . Wal-Mart was cautious about its outlook for June, projecting same-store sales will be flat to up as much as 2%.

Target., Minneapolis, posted a 5.8% increase in same-store sales and forecasts a 3% to 5% increase for June. The discounter is outperforming its giant rival Wal-Mart partly because its shoppers, who average household incomes around $50,000 a year, are less vulnerable to gasoline prices than Wal-Mart's, who average closer to $35,000, said Arun Daniel, an analyst at ING Investment Management Inc.

As in April the high-end retailers such as Nordstrom, Saks, etc. have done well with retail sales adjusted for inflation clearly in the positive category. Most other retailers, especially those specializing in apparel, have weak sales in May.

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