Consumer Spending Gives Retailers Some Relief
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Americans shopped tepidly during May, giving retailers modest relief from a dismal showing in April but still raising questions about how strong consumer spending will be in the months ahead.
As the nation's merchants reported results Thursday, the early winners included Limited Brands Inc. (LTD) and Costco Wholesale Corp. (COST) Among the disappointments were Wal-Mart Stores Inc. (WMT) and teen retailers Bebe Stores Inc. (BEBE) and Wet Seal Inc.(WTSLA).
"The general trend is clearly better than April but in line with expectations for what we saw in the spring," said Richard Jaffe, a retail analyst at Stiffel Nicolaus. "Are shoppers being selective? As always."
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According to Thomson Financial's results so far, 15 retailers missed expectations, while 13 beat projections. Two retailers met expectations.
The mixed results follow a rare drop in same-store sales in April — the industry's worst performance on record — raising concerns that higher gas prices and a weaker housing market are eating away at consumer spending. Same-store sales reflect business at stores open at least a year and are considered a key indicator of a retailer's health.
For now, however, the cutbacks in spending appear to be contained as the overall job market remains healthy.
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Wal-Mart had a 1.1 percent same-store sales gain, below the 1.4 percent predicted by analysts surveyed by Thomson Financial. The figure excluded fuel sales; including fuel, same-store sales rose 1.3 percent.
The company, which reported its worst performance on record in April, continues to struggle with its apparel and home businesses, and store executives said Thursday those categories should see big improvements in the fourth quarter.
The world's largest retailer, under pressure from investors to improve same-store sales and increase its stock price, announced last week it was scaling back its expansion plans of its supercenters. It also announced a $15 billion stock buyback. Meanwhile, the company is going back to advertising its low prices amid concerns among its shoppers about rising gas prices.
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"The price rollbacks on thousands of products throughout our stores help our customers make ends meet," said Eduardo Castro-Wright, president and CEO for Wal-Mart Stores U.S.
Still, the company said it expects same-store sales in June to be anywhere from unchanged to up 2 percent.
Costco had a May same-store sales increase of 7 percent. Analysts expected a 5.6 percent increase.
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Limited had a 3 percent gain in same-store sales, much better than the 1.6 percent decline that analysts expected.
Bebe had a 3.0 percent drop in same-store sales, worse than the 2.8 percent analysts had projected.
Wet Seal had a 1.9 percent decline in same-store sales; analysts had expected a gain of 3.2 percent.