For the second consecutive month, a holiday calendar shift and damp, cool weather throughout much of the country has dropped retail same-store sales below most analysts’ expectations.

 

May, a month that is typically boosted by summer apparel sales, was hindered by a later-than-usual Memorial Day weekend and inclement weather throughout much of the month. According to the International Council of Shopping Centers, which tracks 31 retail chains, excluding Wal-Mart, same-store sales for the month improved by 2.6%, representing growth that was in line with ICSC forecasts but is viewed by much of the industry as largely disappointing.


More sobering is the fact that, despite slight growth for consolidated retail stores, the 2010 reporting period was up against a horrendous May 2009 that saw consolidated comps fall 4.6% on weakness from nearly every major sub-segment. Add to that the fact that analysts expecting a healthy May significantly downgraded initial forecasts due to admonition by retailers, and May 2010 will serve as a bitter reminder to many that the road to recovery will be a tenuous one.


However, just as industry analysts cautioned the market against over-reacting to a remarkably strong first quarter that saw retail comps average more than 5% growth on a per-month basis; experts say a weaker-than-expected May will likely yield favorable results for June as holiday sales from May will be pushed back and warmer weather trends materialize. Likewise, still to come is the crucial back-to-school period in late-July and August, a selling window that will be absolutely vital to retailers seeking to recoup lagging sales from the front-half of the summer. 


The second consecutive month of 2010’s sluggish sales was marred by many of the characteristics congruent with the results during the heart of the recession. The top performers for the month were Discounters and Wholesalers, which once again cashed in on the cautious consumer’s propensity for saving.

 

Luxury, which has been a consistent  bright spot this year in the face of a meager market, continued to outperform the industry as it recorded it sixth consecutive month of growth. Other department stores, as usual, were a bit of a “mixed bag.” JC Penney (-1.8%) and Stage Stores (-1.2%) each missed analysts’ estimates, while Dillard’s (flat) and the ever-reliable Kohl’s (+3.5%) surmounted forecasts. Among stragglers, the biggest drop off was reported by mall-based teen apparel retailers, with the usual suspects, including A&F (-3.0%), Hot Topic (-9.0%) and Wet Seal (-5.3%) reclaiming their spots at the bottom of the chart and a few newcomers including The Buckle (-5.4%) and American Eagle (-3.0%) missing estimates as well.  (See Chart Page 5)


While many apparel retailers cited the weather as a primary catalyst for lagging sales, most agreed that warmer weather during the tail end of May is a propitious sign for June sales. Others launched promotions during the back end of the month to help boost results.


At Macy’s (+1.4%), Chairman and CEO Terry Lundgren estimated the calendar shift affected same-store sales by about 3.5%, which the high-end retailer hopes to recoup during June. Macy’s also benefitted from a spike in online sales, which grew 23.2% for the month and was up 31.2% for the year-to-date period.  At Nordstrom (+3.7%), management said missed estimates were largely a result of a timing shift of Nordstrom’s Half-Yearly Sales for Women and Kids’ sales, which the company estimated to have impacted margins by 350 to 400 basis points.


At discounter Target (+1.3%), comps were “somewhat below” internal estimates due to weakness in California and Arizona. In a statement, CEO Gregg Steinhafel said sales results for the month “reinforce our belief that (Target) will continue to experience volatility in the pace of economic recovery.” At The TJX Cos. (+4.0%), President and CEO Carol Meyrowitz said TJX stores saw sales “pick up substantially” in the second half of the month as the weather turned warmer. The TJX Cos., which operates T.J. Maxx, Marshalls and HomeGoods, among others, garnered favorable results from The Marmaxx Group (+3.0%), which includes Marshalls and T.J. Maxx, along with strength from the Northeast region, which Meyrowitz said is the company’s largest region and benefitted from warmer weather and apparel sales. “As we enter the summer selling season, we continue to run the business with extremely lean inventories and [we continue to] see excellent buying opportunities…” Meyrowitz added.


For the struggling Teen segment, Gap, Inc. (+1.0%), Aeropostale (+1.0%) and Zumiez (+7.1%) bested expectations but were unable to offset weakness from the usual dawdlers. At Gap, Inc., the company’s consistent Banana Republic brand (+1.0%) returned to growth following a rare miss in April while Old Navy (+1.0%) eked out a gain as well. At A&F (-3.0%), the song remained much the same despite easy year-ago comparisons, with the troubled Hollister brand (-6.0%) and A&F Kids  (-10.0%) more than offsetting minimal growth from the A&F namesake (+2.0%). Management for the retailer said in a recorded message that the absence of a summer sale contributed to weakness. At American Eagle   (-3.0%) which kicked off the year with three consecutive months of growth but has fallen off since, comps fell off from year-to-date growth (+3.0%) that was buoyed by first quarter strength.
The ICSC anticipates same store sales for June will be up about 3.0% on easy year-ago comparisons and the Memorial Day shift. 

 
In related news, a recent report released by the Labor Dept. confirmed that 431,000 jobs were added to the United States economy in May, but 411,000 of those workers were hired for the U.S. census. Overall, the U.S. unemployment rate improved to 9.7% from 9.9%, but the report indicated that the majority of the new jobs were for temporary work.