U.S. retail recovery continues in April but pace slackens
The retail recovery continued in April, but at a more sluggish pace than in recent months.
It was a mixed month for the nation’s major retailers. The strongest performers included wholesale clubs and luxury chains, while the biggest disappointment came from stores catering to teenagers.
Among 28 major chain stores, sales rose 0.5% compared with the same month a year earlier, according to Thomson Reuters’ tally. Overall, sales increased at 10 retailers and fell at 18. Nearly 70% chains missed expectations including Abercrombie & Fitch Co., Hot Topic Inc. and Gap Inc.
An earlier Easter this year and poor weather toward the end of the month in some parts of the country led to weaker sales than in March, when retail sales soared a record 9.1%.
For many consumers, increased confidence, pent-up demand and improving financial situations have led to a pick-up in spending in recent weeks.
After she was laid off from her job as a bartender in September, Lana Staton stopped shopping except for groceries and the occasional trip to Wal-Mart or Target for household necessities. But the Long Beach resident began hitting the malls again last month after getting a new job as a communications operator in January.
At Los Cerritos Center this week, Staton, 32, was finishing up a late lunch at the food court before meeting a friend to shop the sales. “I’m not back to where I was, but at least I’m shopping again,” she said. “It feels really good.”
Because of the Easter calendar shift, industry experts cautioned that it was important to look at the combined March-April period. For the two months together, sales rose a strong 4.8%, Thomson Reuters said. Results are based on sales at stores open at least a year, an important measure of retail health because it excludes the effects of store openings and closings.
So last month’s slowdown in spending was not a major cause for alarm, said Michael Niemira, chief economist at the International Council of Shopping Centers. He said the momentum that began late last year was still healthy and he noted that retailers such as Target Corp. were reporting that consumers appeared to be spending more on higher-ticket items.
Still, Niemira said retailers might see a slight drop-off in spending in coming months as pent-up demand abates.
“My take on March-April is that it’s not sustainable at that pace,” he said. “We need to have more of the underlying economic fundamentals start to support spending.”
Strong results came from Costco Wholesale Corp. which posted an 11% gain; Neiman Marcus Inc., which said sales rose 10.9%; and off-price retailer TJX Cos., parent to the T.J. Maxx and Marshalls chains, whose sales rose 4%.
Shopping centers and retailers say they’re encouraged by the steady return of consumers.
“Sales and traffic are starting to pick up in all our centers,” said Randy Brant, head of real estate for department stores at Santa Monica-based mall operator Macerich. “More retailers are talking about expansion again, and consumer confidence is up.”
The mood among shoppers was upbeat at a gala on Tuesday to celebrate the newly relocated Nordstrom at Los Cerritos Center. Hundreds of guests checked out the upscale department store’s latest fashions as they sipped champagne and nibbled on appetizers from a dinner buffet.
“You’d never know there was a recession — they’re really going all out,” said Margaret McGahern of Lakewood, who paid $75 to attend the event. “I’ve picked up shopping in the last six months. It’s not so much of a gloom anymore.”
But Blake Nordstrom, president of Nordstrom Inc., said the company knows many of its customers are still hurting. While greeting shoppers in the store’s shoe section, he said that despite more positive results in recent months — the chain reported a 7.5% April increase — “we don’t feel we’re out of the woods.”
“There’s no question we’ve had some improvement in the last couple months but that’s in light of some very soft performance over the last two years,” Nordstrom said. “The economy’s got some serious issues, so we view it as a long-term thing that will slightly improve.”
Even for consumers who are shopping again, many said they’ve adopted a new frugality.
Shannon Grant, 45, went to Los Cerritos Center this week but only to pick up a replacement canister of powder from cosmetics chain Sephora.
“We’re shopping a little bit more but feeling conservative, too,” the stay-at-home mom from Bellflower said, adding that her husband was laid off a year ago and now her family had to relocate for his new job.
A big letdown last month came from the teen sector, which saw sales fall 6.3% after several months of strong performance. The youth market is often considered a barometer of discretionary spending because teens are typically unhampered by debt and bills so they tend to shop freely.
Sales fell 12.5% at City of Industry-based Hot Topic, 6.1% at Foothill Ranch-based Wet Seal Inc. and 5% at Aeropostale Inc. Upscale teen retailer Abercrombie & Fitch, which in January snapped its 20-month streak of negative sales, reported that its April sales fell 7%.
In fact, of the seven teen chain stores surveyed by Thomson Reuters, only one — action sports retailer Zumiez Inc. — posted a sales increase.
“At first glance it was certainly very disappointing,” said Betty Chen, an analyst at Wedbush Morgan Securities who follows several teen chains. “However, we are encouraged that several companies did call out solid trends at the end of April. If weather is cooperative, we do expect a pick-up in May.”
