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Retail Sales Heat Up in April

Warm weather and a late Easter lift revenue 6.6%, the biggest gain in two years, a survey finds. High gas prices could slow spending.

May 05, 2006|Leslie Earnest | Times Staff Writer

What gas prices?

Buoyed by a late Easter and a particularly warm spring, shoppers spent freely in April, as retail sales registered their strongest gain in more than two years. Sales at stores open a year or more rose 6.6% to $50.4 billion, according to the International Council of Shopping Centers' tally of 59 chains nationwide.

A growing job market and rising wages helped numb the pain at the pump, economists said. But consumers are becoming increasingly jittery about high gasoline prices, which eventually could slow sales. Rising interest rates and signs of weakening in the housing market pose additional concerns.

"Consumers are still spending aggressively," said Scott Hoyt, an economist with Economy.com, a research and forecasting firm in West Chester, Pa. But "I think we can see the seeds of the slowdown coming."

Most retailers continued to reap gains in April, when about two-thirds beat analysts' expectations, according to Thomson Financial. Drugstores, discounters, teen retailers and department stores all logged solid results.

Wal-Mart Stores Inc., the world's largest retailer, notched a 6.8% increase in sales at stores open at least a year, exceeding analysts' 5.7% forecast. That was its highest same-store sales gain since August 2003.

Competitor Target Corp. saw sales jump 10.4%, in line with predictions and its strongest showing since April 2000.

Both said they expected smaller advances this month.

Several California companies posted double-digit gains. Guess Inc., the Los Angeles-based seller of trendy apparel, said sales jumped 22.6%, beating analysts' average estimate of 15%. That sent its stock up $2.03, or 4.6%, to $46.70.

Teen retailer Wet Seal Inc. of Foothill Ranch posted a 17% increase, though that fell short of the anticipated 19.5%. Its shares fell 27 cents, or 4.7%, to $5.48.

Pacific Sunwear of California Inc., which sells surf and skate clothes made by local businesses such as Billabong and Volcom, logged a 14% gain. That was almost triple expectations and the Anaheim company's strongest showing since October. Pacsun's stock rose $1.07, or 4.7%, to $24.07.

Investors also were stoked about Pacsun rival Zumiez Inc. of Everett, Wash. Same-store sales rose 19.3%; its stock jumped 7%, gaining $2.33 to $35.21.

Macy's parent Federated Department Stores Inc. saw sales slip 0.8%, about half the anticipated decline. Nordstrom Inc. posted a 7.3% increase, topping the 4.8% estimate.

About 1.5 percentage points of the industry's 6.6% gain was attributable to Easter's falling in April this year instead of March, said Michael Niemira, chief economist for the shopping center group.

The generally warm weather boosted April sales for many retailers. Nationwide, it was the 13th warmest April in 112 years, said Bill Kirk, vice president of retail business operations for SDI Weather Trends in Pennsylvania. As a result, many stores were able to quickly unload spring items, including capris, skirts and lightweight dresses.

Even as the weather helped chains that have stores scattered across the country, some small California businesses suffered through a rainy, cooler April.

Rainfall was 279% above normal in Los Angeles last month, trailing an even wetter March. "That's a big, big negative," Kirk said.

And if that's not bad enough, the average temperature in Los Angeles last month was 59.3 degrees, making it one of the 25 coolest Aprils, he said.

Indeed, Southern California surf shop owners have been grumbling that gloomy weather has hurt sales of springtime merchandise, including board shorts and sandals.

"I attribute it to the weather being so strange," said Mark Richards, co-owner of Val Surf in North Hollywood, which has six shops in Southern California. "Everybody in this industry just pretty much lost spring. It didn't happen. We have to move on."

Other California businesses found the going tough in April.

Sharper Image Inc., the San Francisco-based seller of air purifiers and other gadgets, was one of the big losers, with sales plunging 32%, more than twice the expected 14%.

Gap Inc. -- parent of 3,000 Gap, Old Navy and Banana Republic stores -- slipped 3%. That was less than the 4.7% drop analysts were expecting from the San Francisco retailer but still the worst performance in the specialty apparel group charted by Thomson Financial.

Things could get dicier for many retailers, given high gasoline prices and this week's White House warning that they could stretch into the next few years.

The average price of self-serve regular gasoline Thursday was $2.918 a gallon nationally and $3.315 in California, both prices about 70 cents higher than a year earlier, according to AAA.

Surf shops won't be immune, Richards said.

"The gas issue is going to affect virtually every type of business in my estimation," he said. "It takes money to drive to the beach and to drive to the mountains."

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(BEGIN TEXT OF INFOBOX)

Spring forward

Year-over-year percentage change in April sales at stores open at least a year

*--* Company % change Guess +22.6% Gymboree +19.0 Wet Seal +17.0 Pacific Sunwear +14.0 Target +10.4 Limited Brands +9.0 Ross +9.0 Nordstrom +7.3 Wal-Mart +6.8 Bebe +5.7 J.C. Penney +2.6 Federated -0.8 Gap -3.0 Hot Topic -6.5 Sharper Image -32.0

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Sources: Times research, company reports

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