By  on June 6, 2014

The belated arrival of spring released some pent-up demand and helped produce sales gains in May, but the remnants of high first-quarter inventories are serving as a potent reminder of retail’s uncertain state.

The small sample of stores that continue to report monthly comparable sales registered better-than-anticipated results for May, even weighed against strong year-ago numbers. Excluding drugstores, Thomson Reuters put the median change for the month at plus 4.6 percent, a full point above expectations.

While most stores beat estimates, there were numerous reminders of the consumer apathy that’s confronted stores since about the end of last year’s third quarter. While Gap Inc. posted a 1 percent comp gain, the Gap brand was down 3 percent while Old Navy and Banana Republic grew 2 and 3 percent last month, respectively.

L Brands Inc. was up 3 percent for the month, but Victoria’s Secret’s 2 percent increase was shy of the 2.4 percent gain expected by analysts.

Zumiez Inc., expected to grow just 0.6 percent, turned in a 3.6 percent increase, while its teen sector competitor, The Buckle Inc., fell short of an anticipated 0.3 percent increase with a 3.1 percent decline.

Adrienne Tennant, analyst at Janney Capital Markets, surmised that “the aggressive promotional cadence seen across the [teen] space may be hampering [Buckle’s] ability to capture market share” despite an assortment of “desirable branded goods.”

Tennant is among those pointing to the inventory overhang that dates back to last holiday, and in some cases before that, as a continuing challenge to stores.

“Retailers are working through excess spring season inventory during [the second quarter] and have already guided for associated margin pressure,” she said. “We continue to believe that inventory levels, along with promotional levels, are sequentially improving from fall 2013 and expect them to continue to improve in fall 2014.”

She observed that promotions have moved from “generally deeper” during the third and fourth quarters of last year to “flat to slightly deeper” during the first half of this year.

The publicly held companies reporting comps tend to outperform overall retail results. RetailNext’s analysis of more than 15 million visits to brick-and-mortar stores showed a 5.7 percent decline in sales for the month on an 8 percent dip in traffic and 11.6 percent decline in the number of transactions.

But while conversion rates fell slightly — 0.2 percent — there was encouraging news about consumers once they reached the stores. Average transaction value was up 7.1 percent and sales per shopper were up 2.6 percent. Those were not only the strongest results so far this year but also just the second increase of 2014 for sales per shopper. Sales, traffic and transactions have all been down every month of the year.

To Deborah Weinswig, an adviser to RetailNext and executive vice president and head of global retail research and intelligent for Fung Group, the positive turn on the metrics and comp results for May “did make people feel better, as if we’re on the other side” of a prolonged slump now.

“It seems that, once she’s in the store, the consumer is excited by what she’s seeing,” Weinswig observed. “It was clear in May that the best results came around Mother’s Day and Memorial Day. When you don’t have events now, sales are really at risk. At all levels, people are buying fewer, better goods. Whether it’s the assortment or some kind of an event put on by the store, the consumer is looking for the retailer to surprise and delight her.”

The strong comp showing contributed to a 1.2 percent increase in the S&P 500 Retailing Industry Group, which ended the day at 888.99. The major indices advanced at roughly half that pace, with the Dow Jones Industrial Average up 0.6 percent to 16,836.11 and the S&P 500 ahead 0.7 percent to 1,940.46.

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