NEW YORK (AP) - Tax rebate checks gave consumers a little extra money in
their pockets during May, but most were still spending conservatively, buying
necessities such as food and gas and shying away from splurging on clothing or
furniture. The result was some better-than-expected sales for the nation's
retailers, with lower-priced merchants like discounters and wholesale clubs
showing the strongest gains.
Accordingly, Costco Wholesale Corp. and Wal-Mart Stores Inc. were among the
strongest performers, but fewer rebate dollars made their way to the mall, and
retailers such as Gap Inc. and American Eagle Outfitters Inc. missed
expectations.
"It was a great month for discount retailers, but the rest of retail is
struggling to capture a share of the consumer's wallet," said Patricia Edwards,
a portfolio manager and retail analyst at Wentworth, Hauser & Violich in
Seattle.
Overall, results were better than the gloomy May analysts predicted as
consumers still shopped despite rising energy costs, declining home values and
tightening credit, and some analysts saw some glimmers of a possible pickup in
business later this year. And tax rebate checks helped offset rising gas prices,
said Ken Perkins, president of RetailMetrics LLC, a research company in
Swampscott, Mass.
"It certainly looks as though gas tanks didn't siphon off all of the rebate
stimulus," he said. "Consumers were able to spend in May."
Michael P. Niemira, chief economist at International Council of Shopping
Centers, said May results, coupled with a hoped-for decrease in gas prices in
the coming months, could be the start of a turnaround in the sector. Gas prices
now average close to $4 a gallon nationwide, and while they are expected to edge
higher in the short term, are predicted to decline after that.
"The tax rebate money is starting to help a little bit, but it will probably
become a bit more widespread in coming months," Niemira said.
But retailers were still wary. Even Wal-Mart, which surpassed analyst
forecasts, acknowledged consumers' reluctance to spend.
"Our customer is clearly under pressure when it comes to higher gas prices,
higher food prices for that matter," said Tom Schoewe, Wal-Mart's chief
financial officer.
As of May 30, the Treasury Department said 57.43 million tax rebate payments
have been sent out totaling $50.041 billion, just under half the $106.7 billion
the government expects to send out.
Craig R. Johnson, president of the consultancy Customer Growth Partners in
New Canaan, Conn., predicted consumers will save or pay down debt with about 60
percent of their rebate money and spend about 40 percent, providing an "overall
modestly positive, but clearly positive," boost to sales continuing through the
summer and back-to-school shopping season.
The UBS-International Council of Shopping Centers retail sales tally for May
rose 3 percent, surpassing the 1 percent growth estimate. Fiscal-year-to date,
the average monthly same-store sales tally has risen 2 percent.
Retail sales have been largely disappointing since the holiday season, with
lower-priced stores like Wal-Mart and Costco among the few standouts. Consumers
have had to contend with ever-rising food and gasoline bills, forcing them to
pay more for the basics and stopping them from buying clothing and other
non-discretionary items. Worries about the ongoing housing slump and struggling
economy have taken a further toll, making consumers think twice before even
mildly splurging.
Even when sales showed some improvement in April and May, it was clear that
consumers are still extremely cautious -- and even when gas prices recede, no
one expects consumers to go on a mass spending spree.
Wal-Mart was one of the few retailers to specifically mention a benefit from
stimulus checks. The world's largest retailer said same-store sales rose 3.9
percent, or 4.4 including fuel sales while analysts surveyed by Thomson
Financial predicted a 1.6 percent rise.
Schoewe told reporters on Thursday at a media gathering in Rogers, Ark.,
that $350 million worth of tax rebate checks had been cashed in the stores so
far, although he didn't know what percentage of that money was actually spent at
Wal-Mart. He said the checks, along with an improvement in Wal-Mart's
merchandise, helped May sales results surpass expectations.
Rival Target Corp., which has a somewhat more upscale clientele, said
same-store sales fell 0.7 percent, while analysts expected an 0.2 percent drop.
Health care, electronics and perishables were the company's strongest sales
categories in May, while men's apparel, jewelry, and lawn and patio sales were
weakest.
Costco said same-store sales rose 9 percent, ahead of the 6.9 percent
analysts were expecting.
TJX Cos., which operates discount apparel and home furnishing stores, said
same-store sales rose 2 percent, edging higher than the 1.8 percent analysts
expected.
Department stores reported weaker results, but many still beat analyst
expectations, and the luxury sector was strong.
J.C. Penney Inc. said same-store sales fell 4.4 percent, better than the 5.8
percent analysts expected.
Luxury retailer Saks Inc. said same-store sales fell 8.7 percent, while
analysts predicted a 7.5 percent drop, but that was mainly due to the shift of a
clearance event into April. Combined April and May same-store sales rose 8.6
percent.
Upscale department-store operator Nordstrom Inc. reported a 10.9 percent
increase in same-store sales, while analysts predicted a smaller 8.1 percent
rise.
Mall-based apparel stores continued to struggle. Overall, according to a
poll by Thomson Financial, specialty apparel same-store sales fell 3.8 percent,
a bigger drop than the 3.1 percent analysts expected.
Limited Brands Inc. said same-store sales fell 6 percent, missing the 5.5
percent drop analysts expected. The company's stores include Victoria's Secret
and Bath & Body Works.
Gap Inc.'s same-store sales fell 14 percent, hurt by results from its Old
Navy Stores. The result was worse than the 9.5 percent decline analysts
expected.
Teen retailers, who tend to be a little more recession-proof than other
apparel merchants, had mixed results.
American Eagle Outfitters Inc. said same-store sales fell 9 percent, worse
than the 4.8 percent drop analysts predicted. Meanwhile, Aeropostale Inc. had a
6 percent rise, meeting analyst expectations, helped by positive reaction to its
summer merchandise.
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