US retailers’ sales rise in May, spending stays moderate

Saturday, 8 June 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Major US retail chains, including Costco Wholesale Corp. and Victoria’s Secret, on Thursday reported sales increases for May that suggested consumer spending continues to improve moderately.

Costco said sales at stores open at least a year, or same-store sales, rose 5% last month, coming in slightly below Wall Street forecasts because of lower gasoline prices. Fresh food and tools for home repair were strong categories.

L Brands Inc., parent company of Victoria’s Secret and Bath & Body Works, said same-store sales rose 3%, compared with Wall Street’s expectations of 3.2%. The company expects a similar jump in June. Gap Inc. results were lifted by brisk sales at its namesake chain and at lower-price chain Old Navy, with companywide same-store sales up 7%, well above expectations.

Same-store sales for the 11 US chains that report May sales rose 4.8%. Wall Street was expecting a 3.7% increase for the four weeks ended 2 June, according to Thomson Reuters. Gap accounted for almost all of the outperformance. Shares in the S&P Retail Index closed the day up 1.2%.

A drop in gas prices, a steadily improving job market, higher home values and a jump last month in the stock market have contributed to improvement in consumers’ mood and willingness to spend, Accenture Analyst said. “People who are in a job are comfortable with what they have, and stability leads to optimism,” Accenture Managing Director Chris Donnelly, told Reuters.

But the economic recovery is still not all that robust: private employers added 135,000 jobs in May, the ADP National Employment Report said on Wednesday, which was much less than expected. So, shoppers are still cautious and price conscious, Donnelly said.

At its peak in 2006, the monthly same-store sales index included 68 companies ranging from Wal-Mart Stores Inc to Starbucks Corp., making it a much more significant gauge of consumer spending than the current index of 11 companies. The International Council of Shoppers Centres expects same-store sales to rise 3% to 3.5% in June, the same pace as recent months.

Costco, which offers members deep discounts on everything from gas to gardening tools, has been one of the big winners in the recession and the slow recovery that has followed. Stein Mart Inc., a chain that offers low-cost fashion, has also benefited. Its same-store sales were up 8.2%, well above the 2% rise analysts projected. Discount general merchandise chain Fred’s Inc. showed a smaller-than-expected fall in sales, while teen retailer The Buckle and drugstore chain Walgreen Co. also reported better than expected sales.

American Apparel Inc. continued its turnaround and reported a 10% jump in same-store sales, the biggest gain among the companies reporting. In addition to Fred’s, two other chains reported a drop in May same-store sales. Cato Corp. said same-store sales fell 2%, a smaller drop than expected. Rite Aid Corp same-store sales fell 1.5%, largely because of the introduction of several generic drugs, which are less expensive for consumers, in the last year. But sales of general merchandise like toothpaste and greeting cards at Rite Aid rose.