Retail Sales Gain Beats Forecast
High gasoline prices didn’t stall shoppers in May as retail sales rose a better-than-expected 4.1% from a year earlier, an industry survey showed Thursday.
Retailers such as Guess Inc., Gymboree Corp., J.C. Penney Co., American Eagle Outfitters Inc. and Ann Taylor Stores Corp. reported sales gains of more than 10%. But Wal-Mart Stores Inc., the world’s largest retailer, advanced just 2.3%.
“It certainly is a surprise,” said Michael Niemira, chief economist for the International Council of Shopping Centers, which compiled the survey. He was expecting a 3% to 3.5% increase. Sturdy wage growth has been the “saving grace,” he said.
May’s gain, prompted partly by the sale of summertime clothing, prodded investors who also got the itch to go shopping. They snapped up shares of the month’s strong performers, including Los Angeles-based Guess, which saw its shares jump 7.2%.
The trendy apparel seller said same-store sales, or sales at stores open at least a year, rose 20% in May, almost twice the 11.3% that analysts polled by Thomson Financial were expecting. The retailer also said it now expected second-quarter profit to be 5 cents to 7 cents a share higher than it previously anticipated. Its shares rose $3 to $44.46.
The monthly sales number is calculated by the shopping center council, which tallied 53 retail chains nationwide. The 4.1% growth represents an increase in same-store sales.
Overall, retail stocks fared well. A Morgan Stanley index of 35 major retail stocks jumped 2%. It is up 6.7% year to date.
It is hard to say how gasoline prices, rising interest rates and signs of a cooling housing market will affect retail sales in the months ahead, Niemira said. “What the tipping point is, we don’t know.”
Although the economy is growing at a pretty good clip, benefiting retailers, that could change, economists caution.
“My worry is that the economy and employment will slow, probably toward the end of this year or early next year,” said Sung Won Sohn, chief executive and chief economist for Hanmi Bank in Los Angeles. “If and when the job market softens, that’s when we have to worry. And that time has not come yet.”
Retailers that cater to lower-income shoppers are the most likely to ultimately feel the pinch of higher pump prices, economists say.
Fuel prices are “a top concern” for Wal-Mart’s customers, Chief Financial Officer Tom Schoewe said in a statement.
The 2.3% gain in same-store sales reported by Bentonville, Ark.-based Wal-Mart was slightly weaker than the 2.9% that was expected. Rival Target Corp. reported a 5.7% increase, beating analysts’ 4.8% forecast.
Economists say there’s no evidence yet that higher-income residents are switching to lower-priced stores. But it could happen if home values fall as interest rates rise.
“The impact of high interest rates is going to affect higher-income households because they’re the ones with house prices that aren’t appreciating so fast,” said Scott Hoyt, an economist with Economy.com, a research and forecasting firm in West Chester, Pa.
Last month, consumers may have been redirecting their spending, Niemira said, noting the downbeat report on auto sales that also was released Thursday.
“It almost looks as if there was a shift in spending propensity away from automotive to nonautomotive,” he said.
May was a good month for department stores, which got a boost partly from Mother’s Day sales.
J.C. Penney, for example, said sales jumped 11.1%, sailing past the 2% that analysts were expecting. Sales were strong in all merchandise divisions, the Plano, Texas-based retailer said. Investors sent its shares up $3.95, or 6.5%, to $64.79.
California companies were among the showoffs -- and the laggards -- in May.
San Francisco-based Gymboree, which sells children’s clothes and other products, said sales rose 24% for the month, well above the 13.6% that analysts were anticipating.
On the other hand, high-end gadget seller Sharper Image Corp., based in the same city, was the biggest disappointment of any company tracked by Thompson Financial. It logged a 36% decline, compared with the 21.5% drop that was expected.
San Francisco-based Gap Inc. said sales fell 6% on disappointing sales of summer products. Its Banana Republic division notched a 3% gain, but its namesake and Old Navy chains lost ground.
Foothill Ranch-based Wet Seal Inc., which has been reporting strong gains over the last year, saw its sales slide 8.3%, contrasted with the 56.9% gain logged last May.
Anaheim-based Pacific Sunwear of California Inc., which analysts thought would advance 3.5%, saw sales slip 2.6%.
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Merry month
Year-over-year percentage change in May sales at stores open at least a year
*--* Company % change Gymboree +24.0% Guess +20.0 J.C. Penney +11.1 Federated +9.2 Nordstrom +7.8 Limited Brands +7.0 Target +5.7 Ross +5.0 Wal-Mart +2.3 Bebe +1.6 Pacific Sunwear -2.6 Gap -6.0 Hot Topic -6.0 Wet Seal -8.3 Sharper Image -36.0
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Sources: Times research, company reports
