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Retail sales surge in April despite higher gas and food prices

Big chains report an 8.9% increase from a year earlier, led by discounters and apparel stores. A later Easter is considered only partly responsible for the big jump. Luxury retailers look forward to strong sales.

May 06, 2011|By Andrea Chang, Los Angeles Times
  • The high-end retail sector, which includes stores such as Louis Vuitton, has performed well for months. Global luxury sales are expected to rise 8% in 2011, according to a report released this week.
The high-end retail sector, which includes stores such as Louis Vuitton,… (Gary Friedman / Los Angeles…)

Rising gas and food prices didn't stop shoppers from storming the malls last month, leading to a surge in sales and continuing the recent momentum in consumer spending — although industry experts doubted the pace will hold up as summer approaches.

Major retail chains reported an 8.9% year-over-year gain in April, led by strong sales at discounters and apparel sellers, particularly those catering to teens, according to Thomson Reuters' tally of 25 retailers.

"Consumers showed resilience in April," said Ken Perkins, president of research firm Retail Metrics Inc. "Easter sales were robust, providing a nice upside boost to the month."

At Westfield Century City in Los Angeles this week, many shoppers said they had loosened their purse strings, spending freely on presents for Mother's Day and on themselves.

"If I need something I'll get it. I'm not necessarily worried where the money is going to come from," said Holly Baird, 31, a publicist who had just bought two pairs of shoes and was on her way to look for jewelry. "Over the last few months at Bloomingdale's, I've spent the better part of $6,000."

Among luxury chains, Neiman Marcus reported an 8.3% gain in April and Nordstrom Inc. saw sales rise 7.6%.

The high-end sector, which had a robust first quarter and a turnaround year in 2010, has performed well for months. Global luxury sales are expected to rise 8% in 2011, thanks to high demand in the U.S., Europe and China, according to a report released this week by consulting firm Bain & Co.

April's strongest performers included Limited Brands, parent company of Victoria's Secret and Bath & Body Works, which posted a 20% sales increase; teen chain Zumiez Inc., with a 17.5% gain; and Costco Wholesale Corp., up 12%.

Results are based on stores open at least a year, known as same-store sales and considered an important measure of a retailer's health because it excludes the effect of store openings and closings.

Despite the robust showing last month, retail analysts cautioned that the results were inflated because of a later Easter date this year — April 24 versus April 4 in 2010 — which pushed a significant amount of sales out of March and into April.

And the results included gasoline sales at some wholesale clubs including Costco, which boosted the overall figure. Still, when the two months are combined, retailers came out ahead with a solid 5.3% increase, Thomson Reuters said.

Retail watchers noted that consumers could backtrack in the months ahead if prices continue to rise, especially as merchants struggle with higher prices for cotton. And the nation's high unemployment rate is still putting a damper on many Americans' spending.

On Thursday, the Labor Department said that the number of Americans applying for unemployment benefits climbed last week to the highest level in eight months. April national unemployment figures will be released Friday.

Although the retail numbers were strong, "the worry is there as we start to look ahead," said Michael Niemira, chief economist at the International Council of Shopping Centers. "We do think the pace of spending will start to moderate from this almost 5% trend we've been seeing from January to April; we think it will probably start to move lower in the 3% to 4% range."

Retailers are cautious, too.

Despite a 13.1% April sales increase at Target Corp., Chief Executive Gregg Steinhafel said the company's results "were somewhat below our expectations" and added that the discount giant would continue to focus on offering values in the coming months.

"This is more important than ever for our guests as they face increasing pressure on their household budgets," Steinhafel said.

But for many shoppers, things appear to be picking up.

On Wednesday, Doug Urbach, 48, headed to Westfield Century City after learning that the Louis Vuitton handbag he wanted to buy his wife for Mother's Day was sold out at the luxury seller's Hollywood & Highland shopping center location.

As he emerged from the store toting a huge chocolate brown shopping bag, Urbach, vice president of sales and distribution at a produce company, said his business had been doing better lately so he was able to spend more.

"Two years ago, I would have put it on the back burner," the Pasadena resident said of the $1,600 purchase. "It's nice to know the economy's back."

Gap Inc. reported an 8% April sales increase but issued a disappointing first-quarter earnings outlook. The company also announced that it had ousted Patrick Robinson, its Gap brand design chief; Robinson had been instrumental in launching the brand's premium denim concept two years ago.

It was the latest in a series of management changes at the San Francisco-based company, which has struggled as consumers turn to cheaper alternatives such as H&M and Forever 21, and higher-priced options such as J.Crew.

andrea.chang@latimes.com

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