Tags: US | Retail | Sales

Gap, Target Lead Disappointing April Retail Sales

Thursday, 06 May 2010 08:29 AM


Americans eased back in April from their March shopping spree, partly because Easter came earlier. But the spring selling season is ending up respectable, an encouraging sign for the economy.

As merchants report their monthly figures Thursday, discounters including Costco Wholesale Corp. emerged as the biggest winners. Limited Brands Inc. and Macy's Inc. had solid gains.

Teen merchants including Wet Seal Inc. continue to struggle with declines. Target Corp. suffered a 5.9 percent drop in revenue at stores opened at least a year. Gap reported a 3 percent decline in revenue at stores opened at least a year.

The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer's health because they exclude growth at stores that open or close during the year.

"Consumers took a breather in April," said Ken Perkins, president of RetailMetrics, a research firm. "But overall, retailers have to be pleased with the spring selling season."

Still, Perkins added that the consumer spending recovery is still likely to be slow amid persistent high unemployment and tight credit.

Analysts had expected last month to see a slowdown because an early Easter had pumped up sales in March while depressing business by the same amount in April. That's why analysts are studying the combined March and April receipts to get a better gauge of consumer spending.

Cooler weather last month also played a hand in hurting sales of seasonal goods such as shorts. The month, however, ended what's expected to be a decent first quarter for many retailers. In fact, a slew of merchants, including Target Corp., Gap Inc., J.C. Penney Co. and Macy's Inc. all raised their earnings outlook amid encouraging signs that shoppers were buying full-priced merchandise.

Major retailers are scheduled to start reporting financial results starting next week.

And even as the economy continues to improve, consumers are still cautious as they open their wallets more. Consumers' confidence in the economy rose last month, but the Conference Board business group's index remains below the level that's considered healthy.

And unemployment remained high. The government is expected to report on Friday that the jobless rate remained at 9.7 percent even as employers added 200,000 jobs last month.

Costco's April revenue at stores open at least a year rose 11 percent. Analysts surveyed by Thomson Reuters expected an 11.2 percent increase.

Target Corp. suffered a 5.9 percent drop in revenue at stores opened at least a year, but for the combined March and April period, the retailer said it posted a 3.0 percent gain, which it said was its strongest performance in two years.

"We believe that a greater-than-expected portion of sales that otherwise would have occurred in April were pulled forward into March,"said Gregg Steinhafel, chairman, president and CEO in a statement. Still, Target said its net income for its first quarter should meet or exceed analysts' expectations because sales of merchandise in its high-profit categories remained strong.

Wal-Mart Stores Inc., the world's largest retailer, stopped reporting monthly results last year.

Among department stores, Macy's Inc. said revenue at stores opened at least a year rose 1.1 percent, better than the 0.4 percent decline that analysts had expected. For March and April combined, Macy's enjoyed a 6.2 percent gain. J.C. Penney Co. posted a 3.3 percent decline in revenue at stores open at least a year, below the 0.8 percent dip that analysts had expected.

Luxury retailer Saks Inc. posted a 3.2 percent gain. The results were below the 4.4 percent estimate, but business was done with less discounting than a year ago. The company said that it lowered the discount on its four-day Friends & Family event to 20 percent from 25 percent and reduced another sales event to one day last month from four days a year ago.

Gap reported a 3 percent decline in revenue at stores opened at least a year, well below the 1.3 percent increase that analysts had expected. But the fashion chain, helped particularly by rebounding business at Old Navy, said that it ended the first quarter with a gain of 4 percent, resulting in the chain boosting earnings guidance for the first quarter.

Limited reported that revenue in stores open at least one year rose 4 percent last month, matching analyst expectations.

Wet Seal reported a 6.1 percent decline in revenue at stores open at least a year. Analysts had expected a 2.5 percent drop.

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