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Consumers spent less freely in April than in the first three months

Major chain stores post a 0.8% sales increase in April, the lowest gain of the year and short of analyst expectations of a 1.5% rise.

May 04, 2012|By Shan Li, Los Angeles Times
  • Cold weather and fresh concerns about the economy were blamed for lower-than-expected retail sales in April. Above, a shopper passes Forever 21 at Westfield Culver City.
Cold weather and fresh concerns about the economy were blamed for lower-than-expected… (Bob Chamberlin, Los Angeles…)

Shoppers appeared more cautious about spending in April as cold weather and fresh concerns about the economy curbed people's urge to shop, prompting worries about a possible slowdown in spending in the summer months.

Weak April sales reported by major retailers and jitters about U.S. unemployment data helped push the stock market down Thursday, with the Dow Jones industrial average falling 61.98 points, or 0.47%, to 13,206.59. Retail analysts remained cautiously positive about the coming months, but warned that more bad news about the economy could further dampen consumer spending.

"The confidence is not there among consumers to predict, 'Hey, we'll have a really strong summer,' " said Judith Russell, editor of the Robin Report, a retail industry publication. "But there is probably going to be a boost overMother's Dayin the next couple of weeks."

Major chain stores posted a 0.8% sales increase in April compared with the same month last year, falling short of analysts' expectations of a 1.5% rise, according to Thomson Reuters' tally of 20 retailers. It was also the lowest monthly increase this year and a drop from March, when sales were up 4.3% from a year earlier.

At Westfield Culver City on Wednesday, many shoppers said they were still splurging on small items, but cutting back on more expensive shoes or apparel because of worries about their finances.

After selling several of her gold necklaces at a mall store, Rachel Chavez, 46, headed over to See's Candy to buy herself a treat forMother's Day. In good years, the Montebello resident said she would purchase a dress, but that was no longer an option.

"I really thought this year would be different, but it's not," Chavez said. "My husband's cleaning business is still way down. I'm going to start looking for a part-time job soon, since he doesn't need my help"

Industry watchers said the poor results were skewed by an early Easter and unseasonably warm weather, which spurred people to shop for warm-weather clothing in March. With April and March combined, retailers came out with a 2.5% gain, but it still lagged behind the 5.4% rise in the same period last year, Thomson Reuters said.

"April was a little disappointing," said Michael Brown, a partner in the retail practice at consulting firm A. T. Kearney Inc. "But much of it was very, very warm weather patterns that pushed sales early into March."

Recent signs of a slowdown in job growth and the continuing European debt crisis have renewed consumer worries about the economy, analysts said. Although the Labor Department said Thursday that unemployment claims fell for the first time in a month, to slightly above the four-year-low, other reports noted a steep decline in job growth in April. The Commerce Department reported that consumer spending had also slowed in March, rising 0.3%, compared with a 0.9% gain in February.

April national unemployment numbers will be released Friday.

Analysts expect steady but not stellar growth in the coming months. Many said April's results were just a hiccup caused by the weather and the holiday calendar, and that shoppers would continue to hit the malls for dresses, shorts and sandals.

"It's going to be relatively slow and modest growth through the summer," said Ken Perkins, a retail expert with Retail Metrics Inc. "Two to three percent growth would be my expectation, provided we don't see a significant drop-off of job growth."

Top performers in April reflected a mix of retailers. Action-sports chainZumiez Inc.led the way with a 10.1% bump. Luxury retailerNordstrom Inc.saw sales rise 7.1%. Benefiting from a continuing thrifty mind-set, off-price retailerRoss Stores Inc.reported a strong 7% increase andTJX Cos.saw a 6% rise. Limited Brands Inc., parent company ofVictoria's Secretand Bath & Body Works, said sales rose 6%.

Other retailers did not fare as well. Struggling teen clothierWet Seal Inc.said sales fell 9.6%, while department store chainKohl's Corp.reported a 3.5% drop.

Costco Wholesale Corp.,Target Corp.andMacy'sInc. all missed expectations. Costco saw sales increase 4%, Target reported a 1.1% rise andMacy's said sales rose 1.2%. Both Target andMacy's blamed holiday calendar shifts that scrambled Easter shopping patterns.

All told, about 53% of retailers fell below expectations, Thomson Reuters said.

Results are based on sales at 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 effects of store openings and closings.

Analysts predict that shoppers will hit the malls to pick up gifts forMother's Day, but with a watchful eye on their wallets and on the news. Bad news about jobs, housing or turmoil overseas could prompt consumers to rein in their spending again.

After recently landing a part-time job at Sephora, Sheila Masters, 26, finally allowed herself to buy some new clothes for the first time in two years. At Westfield Culver City, the Los Angeles college student bought a striped dress and shirt at Forever 21 for $27.

"I'm only buying this stuff because I really, really needed it," Masters said. "Otherwise, my pay goes for gas and food."

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