Retail sales brighten, but less than expected

Retail sales brighten, but less than expected

May 10–Late last month, as the weather began to warm into a semblance of spring, teens and bargain hunters who had spent months crunching their spending surged into retailers to shop.

Their activity helped push up a monthly measure of same-store sales by 3.8% in April, beating a 1.1% uptick in March as well as a 0.8% increase in April 2012, according to Thomson Reuters. The gauge considers revenue only at locations open at least a year, which helps strip the data of volatility.

South Los Angeles high school student Emelin Tejeda, 19, contributed $489 to the effort, buying a strapless royal blue gown at Mint Collection on Melrose Avenue that she plans to don for prom.

By the time she finishes picking up shoes and other primping necessities, she expects to have shelled out $700 for the party. But even though the splurging required the frequent restaurant patron to cut back on food spending in April, she said that her part-time job as a car wash cashier helped cover the expense.

“We’re getting more business than before,” she said. “It’s sunny, it’s hot, and that means I get more hours.”

The pickup in sales is encouraging, according to the International Council of Shopping Centers, which in its own measure of retail sales noted a 3% upswing compared with a year earlier. The group attributed the advance to “a stronger household wealth effect from higher home and stock market prices.”

The job market also is showing signs of improvement, with the Labor Department saying Thursday that unemployment benefit claims sank last week to 323,000 filings, a bigger drop than economists had expected. A report last month from outplacement firm Challenger, Gray Christmas Inc. suggested that summer hiring of teenagers would rebound this season.

The teen apparel category was expected to enjoy a 2.2% increase in sales last month but instead boomed 5.6% as retailers such as the Buckle and Zumiez handily beat estimates.

And discount retailers such as TJX and Ross, reporting growth of 8% and 7% respectively, also showed strength because of their “compelling assortments of branded apparel and home fashions offered at discounted prices,” according to a report from RBC Capital Markets analyst Howard Tubin.

But Wall Street was disappointed, having predicted a 4.3% gain in retail sales, and stocks of several retailers declined. Drugstores were especially weak; with the sector removed from the overall Thomson Reuters tally, retail sales rose 5% rather than 3.8%.

A Gallup poll Thursday showed that 60% of Americans say they enjoy saving money compared with the 37% who say they’d rather spend it — a widening chasm. Economic concerns — the payroll tax bump, the effects of the federal “sequester” spending cuts — also dampened shopping, as did inclement weather early in April, according to analyst Ken Perkins.

Perkins, who releases a separate retail sales summary via Retail Metrics Inc., said that by his measure, retail sales were up 2.8% despite forecasts of a 3.5% swell.

The missed expectations were especially concerning given that retailers had an extra Sunday selling day in April, he said: Easter, a day that usually sees slow sales, fell in March this year.

A key disappointment: L Brands Inc., which was expected to enjoy a 4.6% upswing but instead reported a 2% climb. Tubin, the RBC analyst, said weak bra sales at the company’s Victoria’s Secret label were partly to blame, as “most recent product introductions have not been able to offset volume lost from exited styles.”

The mixed bag may lighten in May, when the International Council of Shopping Centers anticipates a 2% to 3% boost in the retail sales growth rate as pent-up demand triggers more seasonal spending.

The upcoming swimsuit and sundress season is already “having a positive impact” on in-store and online sales at American Apparel Inc. this month, Chief Executive Dov Charney said in a statement. The Los Angeles retailer said its same-store sales rose 3% in April.

But analysts are growing increasingly skeptical of retail sales roundups, which a few years ago included data from several dozen reporting companies but in April featured numbers from only 13. Major retailers such as Wal-Mart Stores Inc., Macy’s Inc. and Target Corp. have ceased their monthly reports in favor of quarterly announcements.

When T.J. Maxx parent TJX Cos. and Ross Stores Inc. follow suit next month, the retail sales overview will become an even smaller sampling, with 11 chains reporting.