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Retail sales soar
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June 4, 1998: 4:24 p.m. ET
Weather, consumer spending help chain stores post strong gains in May
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NEW YORK (CNNfn) - Discount and department store chains both posted healthy gains in same-store sales last month, buoyed by the continued strength of the U.S. economy, shopper-friendly weather and a new outlook on pricing strategies by the nation's leading retailers.
Overall, retailers posted about a 7 percent jump in comparable store sales for May, with key specialty stores and discount chains leading the way. Same-store sales represent sales of those stores open at least a year.
Analysts had projected growth of anywhere from 5 percent to 9 percent.
"These double-digit numbers by many of the retailers are outstanding, even stronger than I had anticipated," said Loeb Associates analyst Walter F. Loeb. "There were very strong numbers across the board for retailers with a value offering. You could see the consumer was out in the stores buying."
Topping the charts was Gap Inc. (GPS) which posted a 24 percent jump in monthly sales, indicative of the nation's renewed love affair with fashion.
Bear Stearns analyst Dana Telsey said pent-up demand among shoppers, particularly women, has given apparel retailers a much-needed boost. (264K WAV or 264K AIF)
Kohl's Corp. (KSS) of Menomonee Falls, Wis., posted a 17.4 percent jump in comparable-store sales for the four-week period. Overall, sales climbed nearly 30 percent.
And continuing its double-digit growth streak, Bentonville, Ark.-based Wal-Mart Stores (WMT) reported an 11 percent increase in May sales. The nation's largest discount department store posted sales of $10.3 billion.
"We are extremely pleased with our sales performance for May," said Kohl's Chairman William Kellogg. "All markets continue to perform well. With the warm weather, we benefited from the early buying of summer merchandise."
The company also benefited from the seemingly unstoppable growth of consumer confidence, the addition of more lower-income consumers into the spending stream and a now well-established even-keel approach to pricing, analysts say.
"Retailers are getting smarter in the way they do business," said Donaldson Lufkin & Jenrette analyst Gary Balter. "They are reducing their inventories and keeping prices steady. Consumers are beginning to realize that they can't just wait for the sales like they used to."
Maintaining competitive but stable prices, he said, has helped the industry churn out steady returns for investors.
K-Mart Corp., of Troy, Mich., the nation's third-largest retailer, also posted strong gains with a 6.9 percent increase in May sales. Helped largely by renewed vigor in its women's and children's apparel sales and the strong performance of home electronics and appliances, the company reported sales of $2.6 billion.
At the same time, hard good sales, home appliances and horticulture equipment propelled Hoffman Estates, Ill.-based Sears, Roebuck and Co.(S) to a 5.4 percent jump in domestic store sales.
"Continued strong performance in hard goods led our solid full-line store results," said Chairman and Chief Executive Officer Arthur Martinez. "Soft good sales were strong in cosmetics and fragrances, and intimate apparel, as well as floor coverings. Solid performance from our specialty stores was supported by sales increases in our furniture, hardware and dealer store formats."
May Department Stores (MAY), of St. Louis, reported same-store sales of $943 million, a 3.6 percent increase over last year.
Trailing its fast-rack rivals, Federated Department Stores, of Cincinnati (FD), the parent company of Macy's and Bloomingdale's, posted a modest 1.8 percent increase.
A taste for specialties
Specialty stores last month claimed the lion's share of growth, with retailers like Gap growing 24 percent and Talbots (TLB) posting a 13.4 percent increase.
Talbots' President and Chief Executive Arnold B. Zetcher said there may be more where that came from.
"We are pleased with our sales performance for the month of May," he said. "Customer demand for our spring merchandise has been consistently strong since mid-March, leading us to believe that we have successfully returned to true Talbots classic styling and that our merchandise direction is on the right track. However, as it is still early in our fiscal year, we continue to remain cautious in our outlook going forward."
If the pace of sales continues, analysts say 1998 may be a year to remember for retailers and investors alike.
"I continue to see strong sales for the rest of the year," Loeb said. "Fashion is more in demand and will continue to be strong and as a result, consumers will come to the store and continue buying."
-- by staff writer Shelly K. Schwartz
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