April Retail Sales Healthy, but Buying Frenzy May Be Over

Some of Wall Street’s favorite retailers reported less-than-favorable results for April on Thursday, leading some analysts to suggest that consumers’ frantic buying pace might be slowing. But the retailing industry as a whole had a stronger-than-expected month, with some chains posting healthy sales.

Wall Street reacted quickly to low numbers from stores such as Gap and Target, sending Gap Inc. shares down $5.13 to close at $64.25 and Dayton Hudson, parent of Target, down $1.44 to $63.69. But analysts and retailers quickly noted that some of the weaker figures were still above expectations and that others looked weak next to extremely strong results for 1998.

Still, Michael Niemira, retail analyst for Bank of Tokyo-Mitsubishi in New York, speculated that the April numbers are the first signs of moderated spending.

“The consumer is beginning to worry about more things like energy price increases, like car price increases, and all that can be problematic if the consumer starts to really worry,” Niemira said. “We are starting to see some changes.”

LJR Redbook, a consulting firm, said overall retail spending at stores open at least a year--so-called same-store sales--rose 6.8% for the first four months of 1999, compared with 7% for the same period last year.

But some Wall Street experts noted strong sales within the full-price fashion and jewelry sectors as a sign that consumers continued to be confident. And even cautious analysts said that although sales may slow, they are likely to remain healthy, and they called Thursday’s stock sell-offs potential buying opportunities.

Analysts had predicted a strong March and a weak April because of what is known as the “Easter shift.” The holiday, a big selling point for many retailers, came in mid-April in 1998, giving last year a better-than-usual April. This year Easter occurred in early April, boosting March sales.

To weed out the shift, many company executives and analysts looked to retail performance over a nine-week period.

Overall, Goldman Sachs reported the retail composite index of stores it tracks was up 3% in April--or up 6% over the last two months. Bank of Tokyo-Mitsubishi put its index at 4.2%--or up 7.1% on a two-month basis. Those gains are well above the 3% the bank had forecast.

The stores hit hardest by the Easter shift included the same discounters that had galloped through most of the quarter. Wal-Mart Stores, used to double-digit same-store sales, posted a more modest 4.6% gain--and saw its stock fall $2.19 to $42.88.

Target’s same-store sales fell 1.1%--still better than the company had forecast--and Mervyn’s, which had reported gains in the mid-single digits up to now, fell 1.6%, slightly worse than expected. Both companies contributed to a same-store sales decline of 1.3% for parent Dayton Hudson over the year before.

Rather than the Easter shift, analysts said, Gap suffered from difficult comparisons with 1998 in some divisions and some earlier-reported problems in others.

GapKids, which had begun to show weakness in February, rebounded in March. The store’s problems, however, were unmasked again last month, when same-store sales dropped between 14% and 17% from last year’s.

The company’s adult stores were down between 4% and 7%, but its Banana Republic and Old Navy stores both posted gains of between 7% and 9%. Gap Inc.’s overall same-store sales were up 1% over a year ago.

Over a nine-week period, however, the parent company’s sales were up 11% from 1998, even against a strong 18% rise that year.

Warren Hashagen, Gap’s chief financial officer, said he was not surprised that the children’s business continued to show the problems he identified several months ago, mainly that the mix of clothes was skewed too much toward older children. That imbalance takes some time to fix, he said.

Other stores benefited from moving their promotions to counteract the Easter effect. May Department Stores reported a same-store sales increase over last April of 7.7%, which analysts attributed to aggressive discounting. Neiman Marcus was up 13.6%. Kmart sales were up 5.7%, pushing the stock price up $1.25 to $17.31 on the New York Stock Exchange.

Ann Taylor had yet another strong month, with sales up 10.3%; mall jeweler Zales posted a 6% same-store sales increase.

“I think that clearly we’re seeing strength in fashion and less interest in commodity fashion,” said Thomas Tashjian of NationsBanc Montgomery Securities. “Folks are shopping in department stores and aren’t as sensitive to seeking the promotional price only and having a little fun with it.”

Stores immune to an Easter shift were also strong, with Circuit City reporting a sales increase of 11% at stores open at least a year.