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Retailers' May sales weak
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June 7, 2001: 12:02 p.m. ET
Wal-Mart posts modest gain, but less than April's; Penney, Federated lower
By Staff Writer John Chartier
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NEW YORK (CNNfn) - The nation's biggest retail chains reported mostly lower sales in May – hurt by cool, wet weather and a slowing economy that kept a lid on consumer spending.
Though Wal-Mart Stores Inc., the world's biggest retailer, posted a sales gain, Sears Roebuck & Co. (S: down $0.33 to $40.19, Research, Estimates), J.C. Penney Co. (JCP: down $0.30 to $22.62, Research, Estimates) and Federated Department Stores Inc. (FD: down $1.13 to $43.77, Research, Estimates) all reported lower sales in May.
"It's charitable to use the word 'dismal,'" said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "It's a reflection both of the weather and the contraction of the economy, and it really seems to have hit everybody."
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Consumers are spending less amidst cool spring weather and a sluggish economy (CNN/FILE) | |
Retailers' profits have taken on added significance of late since they're an indicator of consumer spending, which fuels about two-thirds of the economy and is widely watched by Federal Reserve Chairman Alan Greenspan and other policy makers.
Consumers have cut spending as economic growth has slowed but analysts say spending has been fairly resilient given the hundreds of thousands of job cuts announced by U.S. companies this year.
The Fed has lowered interest rates five times so far this year in a bid to boost spending by businesses and consumers and ward off a recession. And the central bank will be watching consumer behavior closely ahead of its next meeting on June 26.
"It's going to continue on this level for some time," Barnard said of retail sales. "Maybe if the weather really improves, we'll find a little pop to retail sales, but even if it does improve, there will still be the contraction in the economy."
Bentonville, Ark.-based Wal-Mart (WMT: up $0.32 to $51.07, Research, Estimates) said sales at stores open at least a year, known as same-store sales, rose 3.8 percent in May, down sharply from the 7.4 percent rise of a year earlier and the 6.5 percent gain reported for April.
Specialty retailer Gap Inc. (GPS: down $0.95 to $30.44, Research, Estimates) reported a whopping 10 percent drop in same-store sales for May due to weakness in summer items at its Gap, Banana Republic and Old Navy stores.
Federated Department Stores, owner of Macy's and Bloomingdale's, reported lower May sales and warned that it would miss second-quarter and full-year forecasts if sales didn't improve.
Sears, the nation's No. 2 retailer, said May same-store sales fell 3.3 percent and total domestic store sales declined 2.3 percent. The Hoffman Estates, Ill.-based company blamed the slowing economy and cool weather for the decrease, but noted strong performance in its specialty automotive and hardware stores. Major appliance sales also had a strong performance.
Plano, Texas-based Penney, the nation's fifth-largest retailer, said same- department-store sales fell 1.2 percent in the month. Total sales decreased 4.5 percent in the month.
Discount chains Target Corp. (TGT: up $0.16 to $37.50, Research, Estimates) and Kohl's Corp. (KSS: up $2.16 to $62.75, Research, Estimates) bucked the trend with slight same-store sales increases for the month. Minneapolis-based Target said sales increased 0.9 percent from a year earlier, though they were slightly below the company's expectations.
Menomonee Falls, Wis.-based Kohl's posted a 2.1 percent increase in same-store sales and a 17.6 percent jump in overall sales. Analysts have consistently cheered Kohl's for its clean stores with wide aisles and mix of products sold at high margins.
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And May Department Stores Inc. (MAY: up $0.43 to $33.30, Research, Estimates), owner of the Lord & Taylor department store chain and David's Bridal shops, said same-store sales increased 1.1 percent.
Many specialty retailers took a pounding Thursday, with Pacific Sunwear (PSUN: down $1.47 to $20.80, Research, Estimates) reporting a 9.8 percent drop in same-store sales in May, Sharper Image (SHRP: up $0.40 to $11.50, Research, Estimates) reporting a 1 percent decline, and Abercrombie & Fitch (ANF: down $2.74 to $40.36, Research, Estimates) notching a 2 percent sales decrease. Limited Inc. (LTD: down $0.32 to $16.18, Research, Estimates) reported a 3 percent drop in same-store sales.
Meanwhile, consumers have not seen the worst on the unemployment front. Weekly jobless claims jumped to the highest level in nearly nine years last week, the Labor Department reported. That, combined with Tuesday's report that productivity posted its biggest decline in eight years, is sparking fears that the slowdown may not be over soon. 
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