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Shoppers appeared to be more cautious last month in spending for clothing and other items as rising gas and food prices took up a bigger chunk of their disposable income, raising some concern about a possible slowdown in sales over the summer.
Major retail chains reported a modest 4.9% gain in sales last month compared with a year earlier, below analysts’ predictions of a 5.4% rise, according to Thomson Reuters’ tally of 24 retailers released Thursday.
At the Westfield Culver City mall, shoppers said that rising temperatures had put them in the mood to browse for swimsuits and other summer apparel. But most said they were planning to spend modestly.
“We’re looking for sales and trying to buy only pieces that we really need,” said Lorena Aceves, 41, a supervisor at a workers’ comp claim-processing agency who was checking out floral sundresses and bikinis at Target. “Not planning to get anything fancy, maybe one or two items.”
Her daughter, Vanessa Rodriguez, 18, nodded in agreement Wednesday. “Last week, I spent my whole allowance filling up my car. I can’t afford to buy anything after that,” the high school senior from Culver City said.
More than half the retailers missed Wall Street expectations, although several, such as Costco Wholesale Corp. and a handful of luxury chains, reported big year-over-year gains in May.
“Overall, the numbers were strong on the surface,” said Michael Niemira, chief economist at the International Council of Shopping Centers. “However, we are seeing some inflation issues with prices of gasoline and rising food costs, which seem to have rippled through and affected middle- to lower-end retailers.”
Industry experts noted that sales during the Memorial Day weekend were less than expected and may signal troubles ahead for retailers.
“Perhaps we will see some pent-up demand in June, but we are concerned that the consumer, particularly at the lower end, may simply have a fixed spending amount and may simply spend less as apparel prices rise,” Adrienne Tennant, a managing director at investment firm Janney Montgomery Scott in Philadelphia, wrote in a Thursday note to investors.
Discounters and off-price retailers performed well in May as frugal consumers continued to hunt for bargains. Sales at Costco rose 13%, and others posted more modest increases. Ross Stores Inc. rose 4%, Target Corp. gained 2.8% and TJX Cos., parent company of T.J. Maxx stores, grew 2%.
Results are based on stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health because it excludes the effect of store openings and closings.
High-end stores posted stronger results in May, buoyed by a recovering stock market and rising global demand. Nordstrom Inc. saw a 7.4% bump, Neiman Marcus Inc. reported a 12% rise and Saks Inc. posted a 20.2% increase.
Looking ahead, more affluent beachgoers and those planning summer trips are expected to open their wallets and splurge for surfboards and swimsuits after several years of frugality, said Doug Palladini, the president of the Surf Industry Manufacturers Assn.
“Retailers have brought surf wear more aggressively back into inventory and the outlook is generally very optimistic,” he said, pointing to action sports retailer Zumiez Inc., which reported a 7.8% gain in May, as a sign of strong demand for surf-related apparel.
However, retail experts caution that continued unemployment, a weak housing market and rising commodity prices probably will restrain middle- to lower-income consumers from making unnecessary purchases.
Reports this week of weak private-sector hiring last month and fresh lows in U.S. home prices sent the stock market stumbling. May national unemployment figures will be released Friday.
“It’s going to be a tough road for retailers during the summer and into back-to-school season,” said Ken Perkins, president of research firm Retail Metrics Inc. “The big issue is whether the soft patch the economy is running into now will affect consumer confidence and the ability to spend in the longer term.”
Consumers may also be put off by rising prices as retailers pass along higher costs for cotton and overseas labor, Perkins said, estimating that retail sales may slow to 2% growth in the latter half of the year.
The back-to-school season will be heavily promoted and watched by retailers who, nervous about consumer spending losing steam, view it as a good indicator of what’s to come during the holidays, said Laura Gurski, partner in the retail practice at Chicago-based management consulting firm A.T. Kearney.
“Very good retailers will start advertising early and try to stay out in front of the curve this fall,” Gurski said.
For now, some shoppers are tired of saving and are willing to splurge a little on something summery.
On Wednesday, real estate agent Marina Zecevic headed to Westfield Culver City with a friend to buy beachwear for her coming trip to Mexico. After three hours of shopping, she had snapped up a lavender purse, two pairs of sandals and some lingerie for a total of $100.
“I’m trying to restrain myself,” the 53-year-old from Westwood said. “But summer’s coming and you think, ‘Let’s have something nice to wear to the beach.’”
