Crummy weather, a slowing economy and higher energy prices battered retail sales in May, increasing uncertainty among already skittish chain stores and prompting a flurry of sales and earnings warnings.
The bleak numbers stretched across the board, hitting department stores, specialty retailers and even discount stores. Retailers had been holding out hope for a recovery after a surprisingly strong April.
"Dismal would be the one word that describes it all," said Michael P. Niemira, an economist and retail analyst with Bank of Tokyo-Mitsubishi in New York.
The bank's monthly retail report showed that sales at stores open at least one year grew only 1.6% from the previous May, below the already lowered 2% growth Niemira had forecast. At that pace, annual same-store sales would be dragged down near levels last seen in recession-burdened 1991 and also in 1995.
"The comparisons to those prior periods tell me that it is much like a severe slowdown or a recession that the industry is facing," Niemira said. "Strategically, the industry ought to treat the economy as if it is in a recession."
Indeed the numbers show that consumers--when they were buying at all--were looking for bargains. The wholesale club category posted a healthy 5.3% gain in same-store sales, while discounter Wal-Mart Stores Inc. logged a respectable 3.8% increase and Family Dollar Stores Inc.'s sales increased by 2.8%.
As a group, however, even discount stores struggled in May, advancing just 2.7%, the lowest gain since late 1996, when the bank began releasing figures for that category.
Apparel chain stores were particularly hard hit, falling 5.4%. Sales at Gap Inc., which also operates the Old Navy and Banana Republic chains, fell 10%. And specialty retailer Pacific Sunwear of California Inc. in Anaheim, which sells many brands made by Southland surf and skate wear companies, saw its same-store sales slide by 9.8%.
Department stores also slogged through May with little help from tightfisted consumers. Sears, Roebuck & Co., the No. 2 U.S. retailer behind Wal-Mart, said same-store sales fell 3.3% in May compared with last year. Federated Department Stores Inc., which operates the Macy's and Bloomingdale's chains, saw its same-store sales fall by the same rate.
The sudden slowdown followed a somewhat surprising April when retailers recorded a 3.8% sales gain over the previous April.
Other chains posting results below internal expectations included Target Corp. and Kohl's Corp.
Although unseasonable weather helped dampen May sales of summer clothes, garden tools and pool supplies, retailers face more fundamental problems such as the sluggish economy and higher energy prices as they look to the year's second half, Niemira said.
And seesawing sales--April's cheery numbers were preceded by weak March sales--are making it difficult for store operators to know what to expect or how to plan for the second half of the year.
That includes Dave Hollander, co-owner of a Hermosa Beach company that operates four Becker Surf & Sport stores in the Southland. Becker's same-store sales were down 10% last month, prompting Hollander to pull back on fall orders.
"I had to call my vendors [Tuesday] and say hold fall until I can get a better handle on my inventory," he said. "I have so much more stuff than I ever had at this time of the year."
Among the scattered bright spots in May's numbers, apparel company Wet Seal Inc. in Foothill Ranch posted a 7.3% gain in same-store sales, and Gymboree Corp. rose a hefty 39%.
But the bulk of the news was bad, and sales and earnings warnings poured in like an avalanche as retailers braced themselves for a decidedly uncertain second half of the year.
Federated cautioned that its second quarter may disappoint Wall Street. The company did not reduce its earnings estimates for the year but said "the goal may be difficult to achieve."
AnnTaylor Stores Corp., which saw sales slide 9.6%, said it is now expecting 5% to 7% declines in second-quarter same-store sales. Gap warned that same-store sales for the second quarter will be even worse than the mid-single-digit declines that had been anticipated.
Saks Holdings Inc., whose Saks Fifth Avenue chain reported a 10.3% sales decline last month, said Thursday that it is taking additional steps to restructure operations around its core lines of luxury apparel and accessories, including 50 job cuts.
Ethan Allen Interiors Inc., which makes and sells furniture, said it will cut 350 jobs, just over 3% of its work force, as it consolidates three plants and takes a fiscal fourth-quarter charge of 10 cents a share.