By  on May 14, 2008

WASHINGTON — Retail sales at specialty stores increased 0.7 percent to $19.02 billion in April, but fell 0.1 percent to $16.97 billion at department stores as that channel continues to struggle.

The underlying economic challenges faced by merchants were evident in a seasonally adjusted 0.2 percent drop in April sales for all retail and food service providers, dragged down by soft automotive sales, after increasing 0.2 percent in March, the Commerce Department reported Tuesday.

Compared with a year ago, specialty stores posted a 3 percent sales increase and department stores reported a 2.3 percent decline. Many retailers faced easy year-over-year sales comparisons in April, possibly the best they will see in 2008, said Ken Perkins, president of Retail Metrics. Warmer weather also released some pent up demand for spring apparel and seasonal merchandise, he said.

When individual retailers reported April same-store sales last week, most posted gains, but economists cautioned that the numbers were tempered by flat or negative same-store sales in March.

“The April retail sales figures overall were not too bad in view of widespread reports of extremely grumpy consumer sentiment,” said Brian Bethune, chief U.S. financial economist for Global Insight. “Overall, consumer spending continues to chug forward, albeit at very slow rates.”

Given the difficult economic environment, “this report is probably not as strong as some people are taking it to be,” said Scott Hoyt, senior director of consumer economics at Moody’s

The federal tax rebate checks that are rolling out could prove to be a bright spot, economists noted, but it is uncertain how much and where those improvements will occur. Hoyt said the question is whether the rebates will be spent on food and energy to offset higher prices, or whether consumers will spend them as intended on discretionary purchases, such as apparel.

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