May Retail Comps Bode Caution

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New York–We’re not out of the woods yet. Retailers posted their May comps and it’s clear that a major turnaround is not yet here. Thompson Reuters, which tracks 28 retailers, showed that sales at stores open at least a year rose 2.5%, which was 0.1% lower than Wall Street’s prediction of 2.6%. Not bad, compared to 0.5% in April, which lost sales to March due to the early Easter. The Standard & Poor’s Retail Index was flat.

By segment, discounters performed the best, with sales up 5.3%, slightly under Wall Street projections. Department stores saw a 1.2% boost while teen apparel stores fell 2.7%.

This wasn’t exactly a surprise, as May sales were expected to be “lukewarm” due to colder temps in early May and a late Memorial Day weekend which tends to push sales into June. In their first quarter reports, many retailers warned that second quarter sales might be sluggish. The International Council of Shopping Centers (ICSC) chief economist Michael Niemira had cut May sales growth projections from 3.5% to a 2% to 2.5% citing less spending at discount chains and colder temperatures that hampered sales of apparel seasonal merchandise. However, a pickup at the end of May, as noted by many retailers. could mean better June sales.

Some May comp store results:

Gap Inc. posted a 1% rise, with growth across all divisions except its namesake chain (which was down in North America 2%, although that was positive compared to its 11% drop a year ago). By division, comparable store sales for May rose 1% at both Banana Republic North America and Old Navy North America. International sales climbed 8%.

JCPenney had a 1.8% drop, worse than the expected 0.6 % decline. Macy’s slightly beat analyst forecasts with a 1.4% increase. Saks Inc., which operates Saks Fifth Avenue, had a 5.8% gain, better than Wall Street’s 4% projection. Limited Brands posted a 5% increase, above the estimated 2.1% gain. Nordstrom showed a 3.7% rise.

Teen Stores Face Tough Times

Market analyst think apparel retailers, especially those catering to teen consumers, are facing a tougher time due to rising costs production in Asia and their heavy reliance on back to school sales. Teen retailers struggled, as teens face tough job prospects parents and can no longer rely on their parents to buy them clothing. Abercrombie & Fitch and American Eagle both had a 3% drop that was slightly worse than what Wall Street forecast. Gap was up 1%. Aeropostale showed a 1% rise.

Retail market remains volatile

Consumer confidence remains erratic, with high unemployment and worries about debt issues in Europe (i.e. Greece). “There are still some lingering economic concerns here in the back of people’s minds,” said Ken Perkins, president of Retail Metrics. “The European crisis has just sort of exacerbated that.”

Credit Suisse retail analyst Michael Exstein projects more retail promotions, saying retailers have pretty much exhausted cost-cutting measures and now the emphasis will be on getting consumers to spend more. “As retailers gradually shift from defense to offense, it appears they are beginning to turn up the dial on advertising to help sustain the current sales momentum—or lack thereof,” Exstein reported.