While May retail sales results were tough to read as a trend and did not offer up any solid consensus on the health of retail, the reports issued last week by dozens of public companies did appear to re-affirm the feeling that the U.S. retail economy is indeed in full recovery. It was perhaps each observer’s own point of view that reflected the results for the first month of the second quarter as we saw various publications refer to the results from everything from “tepid” to “solid” to “rocked”.

We found a few retailers citing a Memorial Day weekend shift into the June period and higher gas prices as reasons for comp store declines, but the sector for the most part saw higher sales for the month on warmer weather that drove Spring apparel sales and a solid economic recovery that sees more people back to work each month and productivity and factory orders increasing each quarter.
According to Michael Niemira, chief economist at the International Council of Shopping Centers, retail same-store sales were up 5.7% in May versus the same period last year. The ICSC estimate, based on a survey of 74 retailers, easily surpassed the group’s estimate of a 4.6% gain for the month.

“These results dispelled the concern everyone had about the impact of higher gas prices on sales,” said Niemira. “That could change… if shoppers spot noticeably smaller bank-account balances and trace them to higher gas prices.”

Wholesale clubs led all retail segments, showing a 14.3% jump in comp sales for May. Costco was a leader here with a 18% gain in U.S. store comp sales for the month. Discount chains, as a whole, gained 4.8%, with Target Stores reporting a 5.8% gain and Wal-Mart increasing 5.0% in May.

Department stores were mixed, with the luxury guys again outpacing the segment as a whole. The Saks Fifth Avenue group saw comps jump 19.4%, Nordstrom climbed 9.4%, and Neiman Marcus posted an 8.5% increase for the month, while Dillard’s, May Company, and Sears all reporting negative comps for the month. As a whole the Department Store segment saw comps up 1.1% for the month.

Pacific Sunwear continued its positive string of monthly comps store sales gains in May, albeit at a slower pace that saw the mall teen retailer post its first non-double-digit comp gain since March of last year. Consolidated company same-store sales increased 7.8% for the month, with the PacSun same store comping up 8.3% on top of a 12.5% increase in May last year and d.e.m.o. same-store sales comping up 3.0% for the month on top of a 20.1% comp sales gain in the year-ago period. Total company sales were up 18.5% to $72.4 million versus total sales of $61.1 million for May 2003.

PSUN estimated that the shift in the Memorial Day weekend into the June numbers impacted May comps by approximately 220 basis points in gain.

The PacSun stores saw the Guy’s comps rise high-single-digits while Girl’s was down low-single-digits. Footwear again comped up more than 20% and Accessories comp sales were up high-single-digits. The d.e.m.o. chain reported that both the Girl’s and Guy’s businesses were up in low-single-digits, while Accessories were up mid-single-digits for the month.

The Buckle appears to be putting together its own string of positive comp sales months, posting its sixth straight month in the positive after a rough 2003. May comps were up 8.3% versus a flat comp sales performance in the year-ago period. Year-to-date comps are up 11.0% versus a 0.6% decline in the YTD period last year. BKE now excludes Internet sales from its comp sales calculation.

Total sales for May increased 14.9% to $27.3 million from sales of $23.8 million in the year-ago month.

According to the ICSC survey Apparel specialty stores on average climbed 5.3% for the month, led by Aeropostale with a 27% increase and American Eagle, which increased 11.4% for the period. The Gap was up 6.0% in May, with U.S. Gap stores comping up 11% for the period.

In the family footwear sector, Shoe Carnival was back in positive territory again, ekeing out a 0.5% comp store sales gain for May versus a 3.8% decline in may last year. Comps are still negative for the YTD period, off 1.5% so far this year on top of a 5.1% decrease for the YTD period last year. Total sales for the month were up 8.8% to $43.1 million from sales of $39.6 million in May last year.

Surprisingly, it was Athletics that appeared to be the drag for SCVL in May, reversing a trend that saw the category driving sales for much of the year. Men’s and Women’s Athletics were down low-single digits for the month, while total footwear inched up 0.4% for the period. The balance of the Women’s business was basically flat and Men’s was up low-single-digits. Children’s footwear, which includes Children’s Athletics, was down low-single-digits. Accessories were up low-single digits.

Famous Footwear pointed to the shift in the Memorial Day weekend as reason for the reversal of its recent positive trend in comps store sales. May comps were down 2.2% on top of a 1.6% decline in May last year. The company said that excluding the shift in the holiday weekend, comps would have been flat to last year. Same-store sales for the fiscal year-to-date period were up 1.4% versus a 4.5% decline in the previous YTD period.

One industry watcher opined that Famous was hurt more by the shift due to its heavier concentration of stores in outlet centers which rely more on holiday traffic to drive business.

Retail sales at Famous Footwear rose 0.2% to $85.1 million in May, compared to $84.9 million for the same period last year, with a net decline of 11 stores since the end of May last year.

DSW Shoe Warehouse apparently saw little or no impact from the holiday shift, posting a 7.8% comp store gain for May on top of a 4.5% increase for the same period last year. YTD comps are now up 9.8% versus a 1.5% decline in the same YTD period in 2003.

The fast-growing division of Retail Ventures, Inc., parent of the Value City and Filene’s Basement discount chains, now makes up more than 36% of sales for the total company versus just under 32% in the year-ago YTD period. That share jumped to almost 39% of total RVI sales in May as DSW posted a 23.9% increase in sales to $85.7 million from $69.1 million, or 34% of total RVI sales, in the year-ago month.

In other economic news, we could be headed for higher interest rates soon after the U.S. Labor Department announced a quickly improving jobs picture for the country. The May job report released Friday showed that U.S. employers added an larger-than-expected 248,000 jobs in May, exceeding Wall Street expectations for 216,000 new jobs.

The brighter news for May, coupled with an upwardly revised total of 346,000 new jobs in April and 353,000 in March, gave the three month period a total of 947,000 new jobs created making it the strongest three-month stretch in four years.

“Clearly, the jobless recovery is behind us,” said economist Gary Thayer of A.G. Edwards and Sons in a Reuters report. “The economy probably does not need as much stimulus … so the Fed is likely to start raising rates soon.”

The unemployment rate remained at 5.6% in May, unchanged from April.

Virtually every major private sector of the economy added jobs in May, from retailing to construction industries. There was a dip in government employment.

Retailers – and Dubya – should clearly benefit from this trend that has seen nearly 1.2 million jobs added since the beginning of the year. The other upside for the economy is a stabilizing Iraq, with a new interim government named and progress being made in efforts against the insurgency. OPEC appears to be helping as well as the decision last week by the group to increase production sent oil prices lower at a time when prices at the pump sat at an all-time high in the U.S.

More jobs, plus the prospect of lower gas prices, coupled with a better feeling about the progress in the Iraq war, could lead the American consumer to keep the momentum at retail moving along. Greenspan will just need to cooperate and not boost rates too fast and stymie the growth.

The ICSC report is estimating a 6.0% same-store sales increase for June. The shift of the Memorial Day weekend should help that number. The shift may be offset by the shift of the Fourth of July weekend into July this year as well, but all should even out by quarter-end when all three months are taken as a whole.