U.S. retailers reported unexpectedly poor sales last month as consumers spent frugally at stores including Costco and Saks.
Sales at the nation's major retailers fell 4.6% in May compared with the same period last year, the International Council of Shopping Centers said Thursday. The council had expected a 2% decline. Department stores and teen apparel chains, especially those selling higher-end merchandise, fared the worst.
"It's just reflective of the strains that consumers are still feeling," said Ken Perkins, president of research company Retail Metrics Inc.
"A lot of these 'green shoots' aren't translating into consumers' pockets right now," he said, referring to signs of improvement in the economy. "There's optimism about the economy bottoming out and getting better, but it's going to take a little time for consumers to find more disposable income."
Job anxiety continues to be a major factor in hampering consumer spending. At the Beverly Center in Los Angeles this week, real estate developer Tony Lee said he's had to stick to a strict budget because funding for new construction projects "is nonexistent" lately.
"My income is based on the market, so I hardly shop at all," said Lee, 37, of Studio City. "The only reason I'm shopping today is because I received two gift cards from Macy's."
Notably, Wal-Mart Stores Inc. has stopped reporting monthly sales figures and will instead release revenues on a quarterly basis. Wal-Mart said it made the switch to encourage Wall Street to take a longer-term view of the company, but it will also help the discount giant avoid the volatility that can come with reporting sales on such a frequent basis.
The company is one of several large chains including Sears and Home Depot Inc. that have stopped reporting monthly sales. But analysts worry that the absence of data from the world's largest retailer could make it more difficult to gauge how the industry is doing.
"We don't have the entire picture without Wal-Mart," said Michael Niemira, chief economist of the shopping center council. "The problem is, in the current environment you need more monthly data, you need those regular data to see if things are turning."
The shopping center council's projections did take into account Wal-Mart's plan to stop reporting monthly data. Had the chain participated, total retail sales for May probably would have been 3 percentage points higher, Perkins said.
Analysts estimate that Wal-Mart, which said Thursday that it would create 22,000 jobs this year to staff new or expanded stores in the U.S., accounts for about 15% of retail industry sales.
"It certainly has an effect because Wal-Mart was floating everybody else's boat for the last year and a half," Perkins said. "It was outperforming everybody."
Nearly two-thirds of the 30 retailers surveyed by Thomson Reuters missed expectations in May, including Saks Inc., American Apparel Inc. and Abercrombie & Fitch Co.
Analysts said overall results were dragged down by a weak performance by discounter Costco Wholesale Corp., which posted a 7% sales drop and carries the largest weight among the retailers included in Thomson Reuters' tally. Year-over-year comparisons were also difficult because of the benefit of economic stimulus checks last year, which prompted many consumers to flock to malls.
Results are based on sales at stores open at least a year, called same-store sales and considered a key indicator of retail health.
At the Beverly Center, store associates said when consumers did stop by to browse, they were often searching for discounts.
"First thing [customers ask]: 'What do you have on sale?' " said John Nunemann, a sales associate at the Lacoste store. "Now it's like half the store is on sale whereas before it was like two times a year."
Discounters and lower-priced stores continued to outperform more expensive chains in May. Ross Stores Inc. and TJX Cos., which operates T.J. Maxx and other off-price chains, both beat expectations with sales increases of 4% and 5% respectively. Kohl's Corp. reported a 0.4% sales decline, better than the 3.8% drop analysts had expected.
At Gap Inc., sales at the company's value-based Old Navy division increased 3% while Banana Republic, its higher-end brand, saw sales fall 14%. The San Francisco company's middle-tier Gap brand saw sales fall 11% compared with the same month last year.
"While sales results were mixed across divisions, we're pleased that merchandise margins were in line with last year," said Sabrina Simmons, Gap's chief financial officer. "Moving forward, we continue to focus our efforts on improving product assortments and making targeted investments to drive traffic to our stores."
Stocking the latest styles has helped business at Eilatan, a shoe retailer in the Beverly Center, floor manager Meggan ODell said. "More people are asking about sales, but they're still buying full price if it's something cool," she said. "If it's new and exciting, it helps."