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Retail sectors spring up in April

Sales jump 1.4 percent, mostly powered by strong sales of autos and department store clothing.

By MARK ALBRIGHT
Published May 13, 2005

Retail sales perked up in April. But while the rebound stretches across many categories, it was not across-the-board and many Florida retailers remained cautious about how long the uptick will last.

In the strongest showing in six months, retail sales rose 1.4 percent in April, according to the U.S. Commerce Department.

Much of the gain was propelled by sales of autos and department store apparel. The performance came after a weak March in which rising interest rates and soaring gas prices caused many economists to suggest economic growth was slowing.

"The soft patch isn't looking as soft as we thought it was," David Wyss, chief economist at Standard & Poor's Corp. said Thursday after he bumped up his prediction the economy will grow by a half percentage point to a range of 3.5 to 4 percent in the first half of 2005.

In Florida, retailers were happy with the April sales bounce, but remain unconvinced it will linger long enough to bulk up their inventories. The Florida Retail Index, based on a survey of 142 Florida retail executives taken in mid April, dropped by 4.7 percentage points, signaling their expectations for the next three months "reflected a more cautious outlook," said Bart Weitz, director of the University of Florida retailing program.

"All the fundamentals like job growth and business inventories remain strong," said Rick McAllister, president and chief executive officer of the Florida Retail Federation.

The number of new U.S. jobs created rose by 274,000, and new claims for unemployment benefits rose by 4,000 to 340,000 last week.

In general merchandise, warehouse clubs and department stores did much better than discount stores such as Wal-Mart and Target, whose customers are more likely to live paycheck to paycheck and be affected by gas prices.

"We are beginning to see the effect of high gasoline prices and rising interest rates,, but overall consumers have proven to be resilient," said John Walsh, an economist with Bernard Sands, a firm that monitors retailers for suppliers.

Retail experts prefer to measure an individual chain's performance by sales gains in stores open more than a year. Such a measure excludes sales growth from new stores, making it a better reflection of a retailer's hold on its customers and their willingness to spend.

Easter, a big event for apparel retailers, fell in April last year. This year it fell in March. That means apparel sales should have lost steam in April. Plus, weather delayed the start of serious spring shopping.

That didn't hurt chains that cater to higher income customers. Sales in stores open more than a year were up 8 percent at Costco, 14 percent at Neiman Marcus, 7 percent at Nordstrom, 3.6 percent at JCPenney and 2.8 percent at Federated Department Stores Inc., which owns Macy's.

Discount chains suffered. Target said its comparable store sales gain was a meager 1.3 percent in April, less than the company plan. Wal-Mart Stores Inc. posted a 0.9 percent sales increase in stores open more than a year, a figure that was propped up by a 4.9 percent increase at Sam's Club.

Wal-Mart executives, however, conceded that many of their problems were caused by the calendar, or were self-inflicted. Wal-Mart missed Wall Street estimates on profits and warned that second quarter profits will be lower than expected.

"Our results were not up to Wal-Mart standards," said Lee Scott, president and chief executive officer of the nation's biggest retailer. "Easter came early and spring came late."

Deborah Weinswig, an analyst with Citigroup/Smith Barney, sees "mixed" results in May.

She is"encouraged by the broad-based strength at the department stores" which she views "as a favorable indicator of consumer demand."

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified May 13, 2005, 00:56:15]