June 19, 2024

A Robust Rise in April’s Retail Sales Comes With a Hint of Concern

Sales at stores open at least a year, a measure of retail buoyancy known as same-store sales, increased 8.9 percent on average in April, according to Thomson Reuters’ tracking of 25 retailers. That was one of the biggest increases in the last few years, and it topped analyst expectations of 8.2 percent.

Chris Donnelly, a senior executive in the retail practice at Accenture, said the results were good but no one should get carried away.

“It was expected to be a big jump — if you look at analyst expectations, and even the companies’ own expectations,” he said, “and frankly, some companies didn’t jump as much as they were expected to do.”

Even so, the companies that missed forecasts by the biggest margin — Kohl’s, Saks Fifth Avenue and J. C. Penney — still posted good results. Kohl’s same-store sales increased 10.2 percent, compared with analyst estimates of 15.1 percent. Sales at Saks rose 5.8 percent, compared with estimates of 10.3 percent. And J. C. Penney increased 6.4 percent; analysts had expected 8.5 percent.

“Everyone’s pretty happy that April turned out so well, but looking forward, there’s still a lot of concern,” Mr. Donnelly said, noting that gasoline prices and raw material costs are rising sharply.

Gasoline prices are up about 30 percent so far this year — close to an average of $4 a gallon — and retailers are trying to figure out the impact if prices stay there or continue to rise. Higher gas prices tend to affect traffic at physical stores.

“When the national average price of gasoline exceeds $3.20 a gallon, that’s when we start to see indications of change,” said Michael McNamara, vice president for research and analysis at SpendingPulse, which also tracks gas sales. “People pump fewer gallons, and drive less, and that tends to have impact on retail because people cut back on Saturday driving.”

Stage Stores, which reported results on Thursday, said its first-quarter sales increase of just 0.2 percent was damped by gas prices.

“Rising gas prices made for a more cautious consumer,” Andy Hall, president and chief executive, said in a statement.

Last week, Wal-Mart’s chief executive, Michael T. Duke, issued the same warning. “There’s no doubt that rising fuel prices are having an impact on our customers,” Mr. Duke said at an event in New York. “There’s more pressure.” The sharp drop in oil prices over the last four days has not yet begun to affect prices at the gasoline pump, but if sustained, it could provide relief.

Three of the midrange department stores reporting sales on Thursday had some of the best results, with Macy’s, Dillard’s and Kohl’s all posting increases of same-store sales between 10.2 and 11 percent.

The companies attributed the increase in large part to Easter coming in late April, as opposed to last year when most of the Easter-related shopping occurred in March.

Even so, comparing combined March and April results from this year to last year, the stores were improving. Dillard’s, for instance, said its combined March and April same-store sales were up 4 percent over 2010, and Macy’s said the combined months’ results were up 5.3 percent this year over last.

Limited Brands had an increase of 20 percent for all its brands, bolstered by a 25 percent increase at its Victoria’s Secret unit. Analysts had expected a 12.2 percent increase for Limited over all, and a 16.3 percent increase at Victoria’s Secret.

The Limited said in a recorded message that pretty much everything at Victoria’s Secret was performing well, from yoga shorts to new packaging for its fragrances. It also increased its earnings guidance for the second quarter, to 37 to 39 cents a share, up from its previous guidance of 26 to 31 cents a share.

Gap Inc. had one of the most surprising results.

Gap’s sales have been faltering so badly that when Thomson Reuters reports same-store sales for the apparel category, it also includes a number that excludes Gap, to more accurately reflect where the majority of stores are. On Thursday, Gap Inc. announced that it had dismissed its head designer for the Gap brand, Patrick Robinson. Three months ago, it dismissed the Gap brand’s top business-side executive.

In April, however, Gap posted an 8 percent increase in same-store sales in a month analysts had expected a 0.8 percent decrease. The Old Navy and Banana Republic divisions pushed that increase, rising by 14 and 11 percent respectively. But the Gap unit was also in positive territory for the first time in 2011, with an increase of 2 percent.

Spending in the apparel sector over all increased 10.4 percent in April as compared with April a year ago, according to MasterCard Advisors SpendingPulse, which estimates sales from cash, check and credit cards.

“Sectors like apparel had a significant Easter bump, and they are really inflating the growth rate,” Mr. McNamara of SpendingPulse said.

E-commerce sales were up 19.2 percent, according to SpendingPulse, the largest increase since July 2007. And luxury spending continued to be strong, increasing 9.6 percent.

High gas prices can be a boon for e-commerce sales, as customers save gas by having clothing shipped directly to their houses.

“Almost in conjunction with the lower pumping numbers, we’ve seen acceleration of the e-commerce growth,” Mr. McNamara said.

And while high gas prices affect discount stores’ customer base, they also means the stores might attract more affluent customers. Discount stores as a sector had the highest same-store sales increase in April, rising 12.1 percent, which was 1.3 percent higher than analysts had expected.

“It hurts the spending power of your folks, but at the same time a lot of people tend to trade down,” Mr. Donnelly said.

Article source: http://feeds.nytimes.com/click.phdo?i=4ae8ba988ec36d1a4cfa1b1817dd17b1

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