Retailers Report Weak April Sales

Bad weather in much of the country and an early Easter resulted in poor sales in April for many retailers, further clouding the debate over whether consumers can sustain strong spending that has fueled the fledgling economic recovery.

Lower or disappointing retail sales reported Thursday--especially from strong discount retailers such as Target Corp.--contributed to some economists’ views that the recovery will be weaker than expected.

On the other hand, some analysts said, March and April sales numbers are notoriously unreliable, in part because Easter buying shifts from one month to the other and skews year-over-year comparisons. Easter this year landed in March.

So although April sales at retail chain stores open at least a year rose only 1.6% compared with a year ago, sales for both March and April were up an average of 4%, according to a Bank of Tokyo-Mitsubishi tally.

“If there’s a worry, it’s a worry that the pace of sales kind of slipped toward the end of the month,” said Michael Niemira, an economist and retail analyst with Bank of Tokyo-Mitsubishi in New York. “People are now asking if this is more than just a weather story, now that we’re seeing more pessimistic economic news in general.”

Consumer spending, which accounts for about two-thirds of the nation’s economic activity, proved to be even more important during the last 18 months, as consistently strong spending kept the recession from worsening.

With various indicators showing the recovery weakening after a strong first quarter, economists and investors are closely watching for any sign of a retreat in consumer spending.

Among the April surprises was a relative weakening in sales at discount stores.

Long the industry’s leaders, off-price merchants in April posted a 3.1% year-over-year sales gain in stores open at least a year, below estimates of a 4% gain, according to a Goldman Sachs retail sales tally. Goldman Sachs pegged the overall April sales gain at 0.8%, well off estimates of 2.8%.

Leading discounter Wal-Mart Stores Inc. reported a 3.3% sales gain, in the mid-range of estimates of a rise between 2% and 4%. Costco Wholesale Corp., with a 6% April gain, fell short of what some analysts had estimated would be an 8% rise.

Target’s discount stores reported a 0.8% increase for April, off from what many analysts anticipated would be a rise of between 4% and 6%. Target executives, however, maintained that sales met the company’s estimates.

Still, some retail leaders barreled ahead in April. Discounter Kohl’s Corp. reported a 5.3% sales increase despite its strong presence in the Midwest, where other retailers complained of unseasonably cold weather biting into sales.

Among department stores, a group greatly affected by the Easter shift, even sales losses looked good to many on Wall Street. That’s because those decreases were not as bad as feared or were reported along with projections for profit gains.

Federated Department Stores Inc., parent of Macy’s, Bloomingdale’s and other chains, posted a 5.9% decline in sales in April and a decline of 2.9% for the first quarter. But it said lean inventory and strict cost controls contributed to better-than-expected profit margins.

The company said first-quarter earnings would rise to between 40 cents and 43 cents a share, up from earlier estimates of between 25 cents and 30 cents.

J.C. Penney Co.’s department stores posted a 5.5% gain, mostly as a result of special promotions during April. Sears, Roebuck & Co. fell 2.8% and May Department Stores gained 3.9%, also a result of a shift in sales events.

“The value guys, while they are doing well, are not beating the numbers to the same degree that they were previously and in many cases are missing or hitting the low end of estimates,” said Todd Slater, a retail analyst with Lazard Freres & Co. in New York. “There is more relative improvement in the [same-store sales] for the specialty and department stores.”

Many investors seized on those numbers, sending shares of Wal-Mart and Target down while bidding up Federated and May. Wal-Mart fell $1.40 to close at $54.99, while Target dropped $2.29 at $42.03, both on the New York Stock Exchange. May rose 30 cents to $35.53, and Federated added $1.80 to $41.39, both on the NYSE.