Weak April retail sales bring May jitters

Allison Linn Senior writer • Profile • E-mail

Some of the nation’s largest retailers reported weak same-store sales in April, adding fuel to concerns that retail spending could face a longer-term slowdown if economic woes continue to weigh on consumers.

The weakness cut across a wide swath of retailers, with everyone from discounters like Target and Wal-Mart to department stores such as Macy’s and Kohl’s reporting disappointing results for the four-week period ended May 5.

The nation’s retailers had plenty of reasons for a poor showing in April, including unseasonably cold weather, a calendar change that put Easter sales in the previous reporting period and, in some cases, exceptionally strong sales in the March period. In fact, many had warned the previous month that they expected same-store sales, or sales at locations open at least a year, to be soft.

“It was always expected to be a weak period relative to March,” said Michael Niemira, chief economist for the International Council of Shopping Centers. The group said Wednesday that overall chain store sales fell 2.4 percent in the April period, the largest decline since record-keeping began in 1970.

But Niemira and others say an abundance of wintry weather and unusual holiday timing aren’t the only factors that may have kept people out of the stores last month — and may also keep them from buying everything from furniture to televisions in the months to come.

“We do know that there are longer-term stories impacting consumer spending,” Niemira said.

Those factors include the weak housing market and the fallout from high-risk mortgages during the boom years. Some industry watchers also are raising concerns about gas prices, which are threatening to hit $4 a gallon in the coming weeks. Americans also are facing longer-term financial issues such as increasing credit card and other types of debt, and extraordinarily low rates of personal savings.

“When you put all this together, it starts to look to me like a very scary situation for the consumer, structurally,” said Howard Davidowitz, chairman of the retail consulting and investment banking firm Davidowitz & Associates Inc. “In other words, to me, the customer is spent up.”

Davidowitz thinks the confluence of economic woes could prove to be especially burdensome for those retailers who are already struggling with slower growth and other woes, such as Wal-Mart Stores Inc.

On the other hand, Davidowitz is predicting companies that appeal to higher-income customers and have been resilient to other problems, such as Costco Wholesale Corp. and Target Corp., will fare better.

Wal-Mart said same-store sales for its U.S. Wal-Mart and Sam’s Club stores fell 3.5 percent for the April period, and it also provided a relatively soft outlook for its U.S. stores for the current month. The company cited such factors as weakness in clothing sales and the widespread pet food recall, and it also said its research showed that gas prices were weighing heavily on consumers’ minds.

Target, meanwhile, said sales in April fell 6.1 percent, but the company told investors it was still on track to meet its overall financial goals for the year.

Costco, which has a well-honed strategy of selling bulk discount items to well-heeled customers and businesses, said same-store sales at its U.S. and international locations rose 7 percent for the April period.

Department stores that appeal to middle-income shoppers weren’t immune from the April doldrums, but some more upscale clothing retailers fared better. Davidowitz noted that, despite the many pressures on middle- and low-income shoppers, factors such as the stock market and Bush administration tax cuts continue to benefit wealthy consumers.

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