Retailers post strong April but fret over future

Retail revenue surged in April helped by a late Easter holiday. The gains build on a trend that began late last year, but higher gas prices threaten to cut into consumers' spending power. ...

Retail revenue surged in April helped by a late Easter holiday. The gains build on a trend that began late last year, but higher gas prices threaten to cut into consumers' spending power.

Overall, revenue at major retailers was 8.5 percent higher than last April, according to the International Council of Shopping Centers' tally of 28 retailers' results. That was better than the 5 percent to 6 percent increase projected by the trade group's chief economist, Mike Niemira.

The figures are based on revenue at stores open at least a year. That is considered a key indicator of a retailer's health because it excludes results from stores opened or closed during the year.

The increase is not as robust as it looks because Easter fell on April 24 this year, three weeks later than last year. That inflated the April figure by three to five percentage points and hurt March by the same amount. March revenue rose 2 percent.

Analysts study the two months combined to give an accurate reading of consumer spending for what retailers call the spring season. For March-April combined, retailers delivered a 5.25 percent increase, the strongest spring period since 1999, when the figure rose 6.2 percent.

"(Retailers) have to be happy with what the Easter Bunny left them, but it's going to be a very bumpy ride ahead for everyone except the luxury sector," said Sherif Mityas, partner at retail practice A.T. Kearney. Higher fuel prices are starting to make low-income shoppers focus more on "needs, rather than wants."

"If you are not going to get that extra item in the basket, that spells trouble for retailers," he added.

That could increase competition for shoppers' attention. Stores that have exclusive or standout merchandise will be the winners.

Gap Inc., Aeropostale Inc., and moderate-priced Stage Stores warned their profits would come in lower than expected, while Wet Seal, Men's Wearhouse, The Cato Corp., Victoria's Secret parent, and Ross Stores Inc. upgraded their earnings outlooks Thursday.

Among others reporting revenue gains that beat analysts' expectations were Costco Wholesale Corp. and teen retailer The Buckle. Luxury chains like Saks Inc. and Nordstrom Inc. had solid gains.

Target Corp. reported a 13.1 percent gain in revenue at stores open at least a year, below its own expectations, and said its shoppers face increasing pressure on their household budgets.

Gregg Steinhafel, chairman, president and CEO of Target, said low prices are becoming more important as shoppers face "increasing pressure on their household budgets due to higher energy costs and increasing prices of food, apparel and home merchandise."

Stage Stores Inc., a moderate-price department store chain, reported a gain but President and CEO Andy Hall noted that "rising gas prices made for a more cautious consumer."

Bon-Ton Stores said it had to mark down spring clothing earlier as sales of moderate-price women's clothing slowed.

Last week, Mike Duke, CEO of Wal-Mart Stores Inc., said it's already seeing higher gas prices affecting shoppers. They are cutting back on discretionary items as their spending power erodes and combining shopping trips to save gas.

The world's largest retailer no longer reports monthly revenue figures.

Excluding inflation from fuel, which perked up revenue at stores like Costco that sell gas, retail revenue rose 7.4 percent, Niemira said.

Rising prices for food and toiletries helped lift revenue at discounters. Costco said that the price of food and sundries rose about 3 percent in April compared with last year. Fresh food in particular experienced even larger increases, in the mid- to high single-digit range, the retailer said.

Niemira said April saw some moderation in spending compared with March, based on his seasonal adjustment of retail figures. By his calculation, from March to April, revenue at stores open at least a year rose 0.3 percent, compared with a 2.2 percent increase from February to March.

"This says we need to be cautious. This signals that some of the worry about rising gas prices is indeed impacting sales," he said.

Gasoline prices have increased for 43 days straight, hitting a national average of $3.982 per gallon on Wednesday, according to AAA, Wright Express and Oil Price Information Service. Pump prices have risen 91 cents per gallon since the beginning of the year.

Prices are also rising for food like dairy and meat. Clothing stores are expected to pass on higher prices to shoppers starting this summer, though cotton shirts and underwear are already more expensive.

In recent weeks, Kohl's and other major department store have shrunk orders for fall because they worry shoppers may resist price increases.

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