Consumers give stores some relief but still spend cautiously
NEW YORK -- Consumers gave some of the nation's retailers a little relief in April after months of dismal sales, gravitating toward discounters and wholesale clubs but generally still shying away from stores selling clothes and other non-necessities.
The sales reports issued Thursday were better than expected, but still pointed to a consumer contending with rising gas prices, sagging home values and worries about jobs. Wal-Mart Stores Inc. and Costco Wholesale Corp. were among the top performers last month, while most mall-based apparel stores struggled.
"Consumers are focusing on value and price points and stretching their dollars," said Ken Perkins president of RetailMetrics LLC, a research company in Swampscott, Mass. "They are feeling the pinch on multiple fronts."
"There's too much going on," in the economy, Perkins said. He and others expect shoppers to use the extra cash to pay down debt and catch up on utility and food bills.
According to a preliminary tally from Thomson Financial, 19 retailers beat estimates, while nine missed. The tally is based on same-store sales, or business at stores open at least a year; they are considered a key indicator of a retailer's health.
Analysts said some retailers were forced to discount to bring business in. With the retailing first quarter having ended at the end of April, companies will start reporting their earnings next week, and any heavy markdowns will likely erode the profits of some companies.
Perkins estimates earnings for the industry will decline by 14.9%, compared to a projection in January of 5.3% profit growth. Still, earnings would be worse if retailers hadn't been prudent about cutting costs and scaling back inventory, he said. In fact, Kohl's Corp. actually raised its earning outlook on Thursday.
The retail industry expected a lift in April sales figures because of an extra shopping day last month compared to a year ago. That quirk depressed March sales, while inflating April figures; analysts are looking at retailers' performance for the two months combined, expected to be weak overall.
A deteriorating economy, soaring food and gas prices, limited credit and slumping home prices continue to unnerve shoppers. The Conference Board said late last month that Americans are gloomier about the economy than just before the U.S. invasion of Iraq in March 2003.
