Consumers are spent.
Retail sales tumbled a record 2.4 percent in April from a year earlier, according to the International Council of Shopping Centers’ preliminary tally of 53 retail chain stores — the worst performance since the trade group began tracking sales in 1970.
Rising gas prices and a housing slump are putting a crimp on shopping, particularly for home goods. And just about all of the stores surveyed, except upscale department stores and wholesale clubs, are feeling the effects.
Perhaps more telling, sales growth in February through April combined are running at half the 4 percent pace of a year ago, according to the retail trade group’s figures. And there is no sign of a pickup any time soon. The trade group expects same-store sales for May to increase by 2.0 percent to 2.5 percent.
“We expected a slowdown in 2007 but not to the degree we’re seeing,” said Michael Niemira, the group’s chief economist in New York. “Anything that is home-related is really hurting. It’s really a trouble spot for the retail sector and, unfortunately, there’s not a lot they can do about it.”
The April results are distorted by a shift in the date of Easter, which made comparisons with the year-earlier period difficult. It also was the coldest April in a decade, which hurt sales of spring clothing. March sales rose a robust 5.9 percent.
Among the biggest surprises: Wal-Mart Stores Inc., the world’s largest retailer, said sales at stores open at least a year fell 3.5 percent, the biggest drop since it began reporting monthly sales 28 years ago. Sales at Wal-Mart’s namesake stores fell 4.6 percent, dragged down by apparel and home goods, even as sales at its Sam’s Club warehouse chain rose 2.5 percent.
The Bentonville, Ark.-based company said it expects same-store sales in the U.S. for May and for the fiscal second quarter to rise 1 percent to 2 percent. The company is scheduled to announce its first-quarter earnings on Tuesday. . Same-store sales are a closely watched measure of a retailer’s health.
J.C. Penney Co., Sears and Macy’s have all cited softness in their home goods businesses in recent months.
Sears Holdings Corp. Chairman Edward Lampert characterized the retailer’s home fashions business as “challenging” at the Hoffman Estates-based company’s annual meeting recently. Sears doesn’t report monthly sales, but it warned investors last week that first-quarter earnings are expected to get a boost from one-time gains even as same-store sales at Kmart fall 4.7 percent, its biggest quarterly decline in at least a year, and 2.4 percent at Sears, reflecting in large measure a drop in sales of home appliances.
Likewise, Penneys blamed an unexpected 8 percent decline in its total direct division, a unit that includes Internet and catalog, on “softness in home categories.” Penneys also noted that at its stores, “bigger ticket home categories continued to be soft.” Same-store sales fell 4.7 percent in April.
Executives at Federated Department Stores Inc., parent of Macy’s, have been talking about slower sales in home-related goods for months. Federated posted a 2.2 percent same-store sales decline in April, below its 2.5 percent to 4 percent projected increase and a performance that CEO Terry Lundgren termed “disappointing.” The retailer expects same-store sales in May to be flat to down 2 percent. It plans to report its first-quarter earnings on Wednesday.
“With the direction it’s going, I’m not sure there’s any immediate light at the end of the tunnel,” said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates in Atlanta. “It’s going to be rough sledding for a few months until the whole psychology about housing prices and housing sales and mortgages starts to stabilize.”
Upscale department stores stood out as the bright spot in an otherwise troubling month. Same-stores sales rose 3.1 percent at Nordstrom Inc., 1.0 percent at Neiman Marcus Group Inc. and 12 percent at Saks Inc. Warehouse clubs also did well, led by a 7.0 percent gain at Costco Wholesale Corp.
“We continue to see strength among retailers that serve upmarket households,” said Frank Badillo, senior economist at Retail Forward, a Columbus, Ohio-based research firm. “I don’t think we’re going to see this reversed. As more manufacturing jobs shift overseas it’s going to make for an even more difficult situation for unskilled workers in this country, and that trend isn’t likely to change.”
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