Food, Fuel Costs Drag on Retail Sales in April

Higher food and gasoline prices cut into consumers’ spending on clothes and other non-necessities in April, slowing a three-month shopping spree and giving the nation’s retailers modest sales results.

It was also clear as merchants reported sales figures Thursday that cooler weather hurt business. Companies across most sectors, including industry leader Wal-Mart Stores Inc., posted disappointing results.

“I feel [the price hikes] are already hitting the low-end customer,” said Ken Perkins, research analyst at Thomson First Call.

He added that 8 out of 10 discounters missed earnings expectations in April.

Perkins said lower-income consumers still hadn’t benefited from the economic recovery and were still worried about their jobs.

The International Council of Shopping Centers’ sales tally for 72 retailers was up 4.4%, below the 5% gain that it had expected. The ICSC-UBS tally is based on what the industry calls same-store sales, or sales at stores open at least a year, which are considered the best indicator of a retailer’s health.

Retail stocks posted the largest decline since January, as the Standard & Poor’s index of 30 big chains fell 2.1%.

An early Easter prompted many consumers to do their shopping in March, depressing April’s business by about 1.5 percentage points, said Michael Niemira, chief economist at the ICSC.

But he and other analysts also believe that retailers, particularly discounters, are starting to see the effects of higher gasoline and food prices.

Analysts say the job market must continue to improve to keep consumers spending.

Niemira said if stores maintained a 4.4% pace for the rest of the year, 2004 would end up with the best performance since 1999, which saw a 6.7% gain. There was also another positive for some retailers -- Gap Inc., Talbots Inc. and TJX Cos. raised their first-quarter profit outlooks, noting that consumers were buying at full price rather than waiting for markdowns.

Wal-Mart announced a gain of 4.4% in April, slightly below the 4.5% estimate of Wall Street analysts surveyed by Thomson First Call.

Target Corp., dragged down by its Mervyn’s clothing division, had a disappointing 4.9% gain in same-store sales in April. That was below the 5.4% that Wall Street had anticipated.

Department stores, which have been showing signs of improvement lately, had mixed results.

High-end retailers Neiman Marcus Group and Nordstrom Inc. again posted strong sales, but May Department Stores Co. and Sears, Roebuck & Co. had disappointing results.

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Mixed bag

April retail sales rose a disappointing 4.4%. High-end merchants fared better than discounters.

Percentage change from a year ago in sales at stores open at least a year

*--* Company %change Guess +17.5% Nordstrom +13.2 Pacific Sunwear +12.7 Federated +5.4 J.C. Penney +5.3 TJX +5.0 Target +4.9 Wal-Mart +4.4 Gap +3.0 Limited Brands +2.0 Ross +2.0 Sears +1.8 Gymboree +1.0 Hot Topic +0.7 May -7.5

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Sources: Times wires, company reports