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Retail Sales Drop in May

Department and specialty stores post declines.

WASHINGTON — Consumers continued to spend cautiously in May, as specialty stores and department stores posted slight sales declines, but discounters saw a small uptick, the Commerce Department’s monthly report released Thursday showed.

Sales at apparel and accessories stores fell a seasonally adjusted 0.2 percent in May to $20.7 billion. Sales at department stores declined 0.2 percent to $14.7 billion. The only sign of strength was in the general merchandise category, which includes discounters and department stores, which rose 0.5 percent in May to $55 billion.

In May, sales at specialty stores were 3.8 percent higher than in May 2012 on a seasonally adjusted basis, while sales at general merchandise stores were up 1.1 percent and sales at department stores were down 3.9 percent year over year.

“When you look at the numbers overall for apparel and accessories stores…there is some evidence of a slowdown,” said Kevin Regan, senior managing director at FTI Consulting.

John Lonksi, chief economist at Moody’s Capital Markets Group, said apparel and accessories store sales had two strong prior months — up 0.7 percent in Mach and 1 percent in April.

“On an annualized basis, that would be growth of 8 to 12 percent, and that is simply not sustainable,” Lonski said. “That dip in May was simply a correction that lowered apparel store sales to a more sustainable level.”

Discounters continued to hold up the general merchandise category.

“Major discounters [such as Wal-Mart and Target] are appealing to a vast majority of consumers,” Regan said. “Department stores were down again. Sears and J.C. Penney are the two that are having a tough time performing with any kind of success and that continues to drag down the group.”

In the overall economy, retail sales rose 0.6 percent to $421.1 billion.

“Stronger employment data and increasing home and equity prices lifted confidence and spending this spring,” said Jack Kleinhenz, chief economist at the National Retail Federation. “The economy is improving, albeit slowly, but we still have a long way to go. Stagnant salaries continue to constrain further economic acceleration. While sequester [government spending cuts] and tax increases dampened sales growth in the first quarter, it appears that the economy absorbed most of the blow.”

Leslie Levesque, senior economist at IHS Global Insight, said consumers are not buying big-ticket items, apart from autos.

Instead they are “buying more of what they need rather than what they want,” she said. “However, consumers have been gaining confidence. The outlook on labor market conditions has improved and consumers are considerably more optimistic in their economic outlook. There are several positives on the consumer front: Inflation is low, gasoline prices have been accommodative, the housing market is looking brighter and the stock market is strong. Looking ahead, we expect real consumer spending growth in the 2 to 2.5 percent range for the year.”