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Retail sales gains subdued
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June 1, 2000: 8:53 a.m. ET
Kmart and Penney inch up in May; Wal-Mart and Sears show strength
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NEW YORK (CNNfn) - Retail sales edged up in May as consumers continued to spend, though not at the breakneck pace as in previous months.
Analysts say it is too early to tell whether the numbers, combined with a slowdown in other sectors of the economy, are a sign that the Federal Reserve's recent spate of interest rate hikes is taking effect.
Retailers reported an overall increase in sales Thursday driven mainly by hard line goods such as electronics. But apparel sales remained flat or dropped for some retailers, hurting some major chains' results.
The results are in contrast to other economic measures, such as construction and manufacturing, which have experienced slowdowns in the wake of rising interest rates.
Some strong sales gains were notched up by the two top U.S. retailers, Wal-Mart Stores Inc. and Sears Roebuck & Co., but even Wal-Mart's gain slipped from last year's growth rate. Meanwhile, Kmart and J.C. Penney Co. managed only slim sales gains, and some smaller chains saw sales fall at their established stores.
Consumer electronics retailer Best Buy (BBY: Research, Estimates) reported a 24 percent sales increase, and simultaneously said it expects to exceed fiscal first-quarter earnings estimates by 20 percent.
The numbers indicate weaker apparel sales rather than an overall slowdown in sales of other consumer goods, analysts said, cautioning that the numbers should not be taken as a sign that the economic pace is slowing.
Electronics and furnishings strong
"It was a little bit slower than it has been, but consumer electronics and home furnishings are still very, very strong," said Richard Baum, a retail analyst with Credit Suisse First Boston. "If we were truly in a secular slowdown, we would see slowdowns in all categories."
Many apparel retailers, including Old Navy and Limited Structure, focused on the "junior" and "miss" market, targeting girls and women 15 to 25 years of age, Baum said. This caused a glut of inventory that exceeded demand, ultimately hurting sales.
Baum noted that apparel sales for women age 2`5 and over did well as evidenced by numbers from Talbot's, Ann Taylor and other specialty retailers.
Paine Webber Analyst Jeffrey Edelman said May sales were too mixed to make any kind of informed judgment about whether the economy is truly slowing its breakneck pace.
"Sales were mixed for the most part. I thought they were a little bit on the light side," Edelman said. "Things were slower. Now was it slower because the economy was slower? Partially. Was weather a factor? Certainly. But long term we just don't know how this is going to play out."
Kmart edges up, Wal-Mart gains slow
 Kmart (KM: Research, Estimates) saw sales at stores open a least a year -- a closely watched measure of retail strength known as same-store sales -- rise only 0.9 percent for the four weeks ended May 24. Overall sales for the Troy, Mich.-based discount chain gained 2.7 percent to $2.8 billion.
Kmart, the nation's third-largest retailer, named a new chairman and CEO Wednesday. Shares of Kmart gained 5/16 to 8-13/16 in trading Thursday.
Penney (JCP: Research, Estimates), the nation's fifth-largest retailer, saw same-store sales edge up 1.1 percent in its department store unit for the four weeks ended May 27, while its overall department stores gained just 1 percent to $1.1 billion.
The company's Eckerd drug store chain performed better, with same-store sales up 9.5 percent and sales at all stores rising 5 percent to $996 million.
Overall sales at Penney -- including Eckerd, catalog sales and direct marketing -- rose 2.1 percent to $2.4 billion.
J.C. Penney shares slipped 3/16 to 17-15/16 in trading Thursday.
Dillard's Inc. (DDS: Research, Estimates), a Little Rock, Ark.-based department store chain, reported same-store sales dropped 1 percent in the month while overall sales slipped 0.3 percent to $607.5 million.
Its shares gained 1/16 to 15 Thursday.
Bradlees Inc. (BRAD: Research, Estimates), another mid-size department store chain, posted a 4.0 percent drop in same-store sales in the period, although overall sales edged up 0.9 percent to $119.7 million. It blamed unseasonably cool weather in the Northeast for part of its problems.
Bradlees shares slipped 1/16 to 14-7/8.
Dow component Wal-Mart (WMT: Research, Estimates), the world's largest retailer, had a 7.4 percent gain in same-store sales, compared with a 7.7 percent gain in the year-ago period. Overall sales climbed 23.2 percent to $14.6 billion.
Wal-Mart shares fell 3/4 to 56-7/8 Thursday.
Sears helped by electronics -- Limited up, Gap down
Meanwhile discount retailer Kohl's (KSS: Research, Estimates) reported an overall 37 percent sales increase in May and a 9.8 percent same-store sales increase.
Kohl's shares gained 1-11/16 to 53-7/16 in Thursday afternoon trading.
Sears (S: Research, Estimates) posted a 3.5 percent gain in domestic same-store sales for the period while overall worldwide sales gained 5.6 percent to $3.2 billion. Sears said it was helped by strong home appliance and electronics sales, although it also reported most apparel sales were relatively flat.
Sears shares rose 15/16 to 37-7/8 Thursday.
"Big ticket sales at Sears continue to be strong, and that's an important barometer of discretionary spending," said Bernard Sosnick, a retail analyst with Fahnestock & Co. "And the shortfalls were mainly concentrated in apparel, which is weather sensitive, so it's hard to conclude that it's the economy slowing down."
Federated Department Stores Inc. (FD: Research, Estimates), the Cincinnati-based company that operates chains such as Macy's, Bloomingdale's and Stern's, posted a 4.2 percent gain in same-store sales in its department stores, while overall sales gained 3.8 percent to $1.3 billion.
Its shares were down 3/16 to 38-11/16 Thursday.
May Department Stores (MAY: Research, Estimates) reported May sales of $1.05 billion, a 4.3 percent increase over $1.01 billion in the year-ago period. Same-store sales rose 1.2 percent.
Shares of May rose 13/16 to 30-7/8 in trading Thursday.
Pacific Sunwear (PSUN: Research, Estimates), with its Pacific Sunwear and d.e.m.o. stores that target teens and young adults, said its sales rose 33 percent to $36.3 million from $27.3 million in the year-earlier period. Yet overall same-store sales rose just 0.5 percent for the period.
 The Anaheim, Calif.-based company blamed sluggish sales of summer seasonal merchandise for the flat growth, and warned that it would miss second-quarter earnings estimates of 29 cents a share if same-store sales do not rise at least 6 percent for June and July.
Shares of Pacific Sunwear dipped 4 to 12-1/16 in trading Thursday.
Limited Inc. (LTD: Research, Estimates), a major apparel retailer, posted a same-store sales increase of 7 percent. Overall sales increased 0.5 percent to $732.3 million, but the year-earlier number included about $44 million in sales from two chains that were sold last August. Excluding those results, overall sales rose 7 percent.
Limited shares fell 13/16 to 23-5/16.
However, Limited's key competitor, Gap Inc. (GPS: Research, Estimates), reported unexpectedly weak May sales late Wednesday. The largest U.S. apparel retailer saw same-store sales fall 2 percent, although new store openings lifted overall sales by 19 percent to $780 million.
Gap's shares slipped 9/16 to 34-1/2 in trading Thursday.
Specialty retailer Neiman Marcus Group reported a 6.9 percent increase in May sales to $207.7 million from $194.3 million a year earlier. Same-store sales rose 6.6 percent to $207.1 million from $194.3 million.
Saks Inc. (SKS: Research, Estimates) reported a 1.9 percent increase in sales to $468.4 million from $459.7 million in the year-ago quarter. However same-store sales rose a mere 0.7 percent.
Women's and men's apparel led the company's sales along with accessories, cosmetics, shoes, fashion and fine jewelry, intimate apparel, gifts and home products.
Shares of Saks gained 1/16 to 11-5/8 Thursday. 
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