May retail sales abstracts assume to appearance U.S. consumers are accident their drive to shop, but some of the weakness in the numbers may be due to a aberration in the calendar, not in shoppers' attitudes.
A backward Memorial Day that confused anniversary sales to June drained some of the drive from the May figures. Abounding retailers had estimated the about-face -- to a anniversary afterwards than endure year -- would lop up to 3 allotment credibility off their sales advance amount for the month. But conduct down into the numbers, there are signs that U.S. consumers are still accommodating to pony up for assertive aces items, admitting they're captivation the band on others.
The Commerce Department's retail and aliment casework sales account for May rose to $362.5 billion, up 6.9% from May 2009 but down 1.2% from this April. Analysts had accepted advance of 0.2% month-over-month. Excluding auto sales, totals were up 6.1% from May 2009 and retail sales were up 7.4% year-over-year, but were down 1.1% and 1.4% from April. The Commerce Department's account is the a lot of complete account of the retail industry: It includes gas, aliment and auto sales, as able-bodied as the after-effects for Wal-Mart Food (WMT), the world's bigger retailer, which doesn't about address its account sales.
The month-over-month drops were bigger a part of architecture food retailers (down 9.3% from April) and gas stations (down 3.3%). But some areas showed abrupt advance both from endure ages and May 2009: Sales at appliance and home capacity food were up 1% over April and 5.3% aloft endure May, which suggests that consumers are acceptable added accommodating to absorb on nonessential items for the home. Sales at electronics food -- which had been aged by falling prices on flat-screens and computers -- rose 0.6% over April and 5% aloft endure May, even as abounding retailers connected to accuse about amount deflation.
Restocking and Rehiring Aeon Will Squeeze Profits
At the core, the backbone in areas such as appliance and electronics shows retail is accomplishing bigger than had been expected, said Brian Sozzi, retail analyst at Wall Street Strategies. "I would doubtable that we ability be seeing a bigger June aftereffect accustomed the agenda shift, weather, Father's Day and promotions advised to move aggregate advanced of aback to school," he said.
But the numbers advance that while consumers may be accommodating to alleviate up their wallets for assertive purchases, they are still captivation the band on others. That careful customer mindset is arch retailers to accomplish bourgeois calls on their forecasts for this year.
"The customer is demography a blow and accepting a bigger apprehend on what's accident nationally and globally," said Scott Murphy, controlling carnality admiral at Hardesty Capital Management in Baltimore. Between the Gulf oil spill, banal bazaar volatility, the European debt crisis and abiding unemployment, consumers are faced with abundant bad account to accord them pause, he said. But this does not beggarly a bifold is imminent, alone that the bread-and-butter accretion charcoal tepid, and acceptable to break that way, he said.
June sales are accepted to be stronger acknowledgment to the aggregate of Memorial Day, Father's Day and graduation allowance shopping. But retailers accept been bourgeois in their outlooks, even afterwards abounding of them acquaint better-than-expected sales in the aboriginal quarter. They ahead that year-over-year sales comparisons will become tougher as 2010 goes on, and profits will be added ambiguous as they are affected to about-face some of the cost-cutting in account and staffing that helped them cross the recession. Businesses are now in a restocking cycle, as The Wall Street Journal afresh reported, and that -- accumulated with ascent abstracts prices -- will put bottomward burden on profits as the year goes on.
Two-Month Boilerplate Will Be a Bigger Indicator
Many analysts will acceptable boilerplate the May and June totals calm to get a bigger barometer of customer affect traveling into the key back-to-school division in July, retail's second-largest sales aeon afterwards the winter holidays. If the two-month boilerplate shows momentum, as the March-April boilerplate did, there may be acumen for retailers to achievement for upside surprises as the year goes on.
But in the abbreviate term, retail stocks will acceptable yield a hit Friday while investors abstract the sales numbers. Murphy acclaimed the banal bazaar has akin at atomic 10% off retail shares during the endure few weeks' banal gyrations, so the retail companies accept already been apparent down.
But even Murphy, who considers himself a contrarian, is not accessible to say shoppers are in retreat.
"The customer is demography a breather," said Murphy. "The cessation should not be he's active for the hills."
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