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Strong April is retailers’ Easter present
Question of the Day
NEW YORK (AP) — Retailers reported surging April sales that were helped by a late Easter, extending strong spending momentum since late last year.
However, some stores that cater to low-income shoppers are starting to warn that their customers are facing increasing pressure from high gas prices.
As merchants report their results Thursday, a diverse group including Costco Wholesale Corp., Victoria's Secret’s parent company and teen retailer the Buckle posted soaring revenue and beat Wall Street expectations.
“The Easter bunny delivered the goods. It showed that the consumer was resilient and sales were better than expected despite some growing headwinds,” said Ken Perkins, president of RetailMetrics LLC, a research firm. But he added, “We are beginning to see the leading edge of consumers starting to pull back.”
Target Corp. reported a gain below internal expectations and said its shoppers face increasing pressure on their household budgets.
Stage Stores Inc., a moderate-price department store chain, reported solid gains, but President and CEO Andy Hall noted that “rising gas prices made for a more cautious consumer.”
Last week, Mike Duke, CEO of Wal-Mart Stores Inc., said the company already is seeing higher gas prices having an impact on shoppers, who are cutting back on discretionary items as their spending power erodes. He said Wal-Mart is seeing its customers consolidate shopping trips, though they’re spending more on each excursion.
The world’s largest retailer no longer reports monthly revenue figures.
Overall, revenue at major retailers soared a better-than-expected 8.5 percent last month over April 2010, according to the International Council of Shopping Centers.
The figures are based on stores open at least a year. That is considered a key indicator of a retailer’s health because it excludes results from stores opened or closed during the year.
The increase is not as robust as it looks because Easter fell on April 24 this year, three weeks later than last year. That inflated the figure by anywhere from 3 to 5 percentage points, hurting March by the same amount. March sales rose 2 percent.
April’s increase marked the biggest gain since March 2010, when the index rose 9 percent, helped by a similar Easter quirk.
Analysts study the two months combined to give an accurate reading of consumer spending for what retailers call the spring season. In May, merchants start shipping summer goods to stores.
For the March-April months combined, retailers delivered a 5.25 percent increase, marking the strongest spring period since 1999, when it was rose 6.2 percent.
Michael P. Niemira, chief economist at the ICSC, said, however, that he saw some moderation in spending, based on his study of month-to-month seasonally adjusted figures. By his calculation, from March to April, revenue at stores open at least a year rose 0.3 percent, compared with a 2.2 percent increase from February to March.
“This says we need to be cautious. This signals that some of the worry about rising gas prices is indeed impacting sales,” he said.
Gasoline has increased for 43 days straight, hitting a national average of $3.982 per gallon on Wednesday, according to AAA, Wright Express and Oil Price Information Service. Pump prices have risen 91 cents per gallon since the beginning of the year.
Prices also are rising for such foods as dairy and meat. Clothing stores are expected to pass on higher prices to shoppers starting this summer, though cotton shirts and underwear are already more expensive.
In recent weeks, Kohl’s and other major department store have cut orders for fall because they worry shoppers may resist price increases.
Rising unemployment applications and other weak economic data this week have prompted some analysts to fear that higher fuel prices may be causing employers to slow hiring.
Costco’s revenue at stores open at least a year climbed 12 percent in April. Analysts surveyed by Thomson Reuters predicted an 8.9 percent increase. Removing the impact of higher gas prices and strengthening foreign currencies, revenue at stores open at least a year gained 7 percent in April.
Target reported a 13.1 percent increase in revenue at stores opened at least a year. Analysts had expected a 13.2 percent. The gain, however, was below the discounter’s own internal target, which called for an increase in the midteens.
Gregg Steinhafel, chairman, president and CEO of Target, said low prices are becoming more important as shoppers face “increasing pressure on their household budgets due to higher energy costs and increasing prices of food, apparel and home merchandise.”
Limited Brands Inc., which operates Victoria's Secret and Bath & Body Works, raised its earnings outlook Thursday and said revenue grew 20 percent in April at stores open at least a year. The figure was much better than the 12 percent increase analysts had predicted.
Among department stores, Macy’s reported a better-than-expected 10.8 percent gain for April as shoppers picked up new spring attire. J.C. Penney Co. Inc. posted a 6.4 percent gain, but it was below the 8.5 percent increase Wall Street expected.
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