Rent-to-own News - Retailers post modest May sales gains

Shoppers are showing signs of pulling back on discretionary spending non-essentials as gasoline and groceries eat up more of their paychecks.

Those pressures led retailers on Thursday to report only modest revenue increases in May, the latest sign that the economy is hitting a soft patch, according to the New York Times.

Most of the spring, consumers seemed to be shrugging off rising prices. Now, gasoline at more than $1 per gallon more than last year and higher grocery bills are “finally taking a bite and affecting sales,” said Ken Perkins, president of research firm Retail Metrics. “It definitely raises the caution flag going into the summer.”

The retail figures follow disappointing reports on auto sales, manufacturing, hiring and construction spending on Wednesday. The Dow Jones industrial average skidded 280 points Wednesday, losing more than a quarter of the year’s gains, on rising economic fears.

Consumer spending is closely watched because it accounts for about 70 percent of the nation’s economic activity and is critical for a strong economy.

Of 24 retailers, about 60 percent missed expectations and 40 percent beat expectations, according to Thomson Reuters.

“Our guests continue to shop cautiously in light of higher energy costs and inflationary pressures on their household budgets,” the Target Corporation’s chief execitove, Gregg Steinhafel, said.
Target’s revenue at stores open at least a year rose 2.8 percent, below the 3.5 percent analysts expected, according to FactSet. The measure is considered a key indicator of a retailer’s health because it excludes results from stores opened or closed during the year.

Charming Shoppes, the parent of the clothing chains Lane Bryant and Fashion Bug, also reported shoppers were holding back because of rising food and gas prices.

Stores that cater to middle- and lower-income shoppers are feeling the pain far more than more expensive stores. The luxury retailer Saks reported revenue in stores open at least one year jumped 20.2 percent, far higher than the 6.5 percent analysts expected, as shoppers bought designer clothing, shoes, handbags and accessories.

The figure rose 7.4 percent at Nordstrom, also beating expectations.

Among department stores, Macy’s was another standout. The company’s revenue figure rose 7.4 percent, ahead of expectations, and the company raised its second-quarter guidance.
But other department stores fared worse. Dillard’s, J.C. Penney and Kohl’s all missed expectations.

Weather could have weighed on results. May was unseasonably cold and wet, and there were floods along the Mississippi and Ohio rivers and 350 tornadoes reported, according to weather research firm Planalytics.

Summer could be even more difficult, because the surging price of cotton is expected to start showing up in clothing prices. Prices have been creeping up already, Perkins said, but could rise anywhere between 5 percent to 20 percent this summer.

Higher prices plus what appears to be a slowing job market and moribund housing market “sets up potential slow sales this summer,” Perkins told the Times.