Retail slump season omen?

first_imgThe news rattled Wall Street. The Dow Jones industrial average fell 147.74, or 1.11 percent, to 13,215.13, giving back five sessions’ worth of gains. It was the biggest point drop in the blue-chip index since a 242-point plunge on March 13. Broader stock indicators also saw their largest one-day point declines since March 13. The Standard & Poor’s 500 index lost 21.11, or 1.40 percent, to 1,491.47, falling back below the 1,500 mark that it surpassed last week for the first time since September 2000. The Nasdaq composite index dipped 42.60, or 1.65 percent, to 2,533.74. Analysts had already expected last month to be weak after an early Easter motivated many consumers to do their holiday shopping in March, siphoning away part of April’s business. But sales were much softer than expected, raising concerns that retailers will also see disappointing results in the months ahead. The UBS-International Council of Shopping Centers sales tally of 53 stores posted a decline of 2.4 percent, the biggest drop since the index started tracking the data back in 1970. The tally is based on same-store sales, or sales at stores open at least a year, which are considered a key indicator of retailers’ health. Michael P. Niemira, chief economist at the ICSC, called the drop in same-store sales a rarity, noting it marked the third time since 1970 that the overall index declined. For the combined March and April period – which provides the best read on the spring selling season – the tally was up only 1.8 percent, below the 2.8 percent forecast. While analysts will be closely watching how May fares, since the month will provide a better indication of consumer outlook, concerns are rising that shoppers can no longer bear the weight of the economy’s woes. “The slowdown is at hand,” said Niemira. He noted that over the past three-month period, same-store sales have averaged a 2 percent growth, exactly half the pace the industry experienced in the same year-ago period. The housing market slump, which had already hurt sales of home-related goods over the past year, seems to be having a greater impact on retail sales. For years, shoppers had tapped into home equity as a source for cash, but rising interest rates have curbed that practice, and rising mortgage defaults may be spooking consumers. Even the job market, which has been a pillar of consumer spending, is showing some signs of strain as the government reported earlier this month that employers added the fewest positions last month in two and a half years. And while the market has hardly collapsed, it appears job seekers will have more difficulty in landing a position. The latest data on unemployment claims, however, was soothing since it showed that the number of laid-off workers filing claims fell for a fourth straight week. Janet Hoffman, managing partner of the North American retail division of the consulting firm Accenture, said stores also are to blame. “The retailers missed on some of the product choices,” said Hoffman noting that much of the fashions reminiscent of mod styles of the 1960s – mini dresses and big geometric patterns – turned off many customers. The good news, however, is that first-quarter profits seem to be intact, with only a handful of merchants, including Abercrombie & Fitch, reducing their profit outlooks Thursday, according to Morris. Most retailers report earnings this month. Wal-Mart reported a 3.5 percent decline in same-store sales. Analysts surveyed by Thomson Financial expected a 1.1 percent decrease.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! NEW YORK – What was once a dull pain behind the eyes is threatening to become a full-blown migraine for the nation’s retailers. On Thursday, they reported one of their worst monthly sales performances ever, raising concerns that higher gas prices and a weakening housing market are eating away at consumer spending. Given projections for more housing problems and higher fuel demand during the summer, prospects for retailers seem even dimmer. “Consumers are not feeling quite as healthy from an economic standpoint as they did last year at this time,” said John Morris, managing director at Wachovia Securities. As retailers released their April sales figures, Wal-Mart Stores Inc. recorded a rare drop – the weakest performance since the world’s largest retailer began publishing monthly sales in 1980, according to John Simley, a company spokesman. But April’s disappointments crossed all segments of the industry, striking stores as varied as apparel retailer Abercrombie & Fitch Co. and Macy’s operator Federated Department Stores Inc. last_img read more

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