Retail Sales In April Top Views Despite Drags On Consumer

Marilyn Much Thu May 8, 6:51 PM ET

After a dismal March, retailers rang up solid sales last month, with most topping views as shoppers grabbed bargains and snapped up warm-weather goods.

April sales at stores open at least a year rose 3.3% vs. a year ago, beating Wall Street forecasts of 2.3%, said Ken Perkins, president of Retail Metrics. A hefty 55% beat views.

It was the best sales gain since last November and the biggest upside surprise since March 2007.

Wal-Mart (NYSE:WMT - News) shares climbed 0.6%, near a recent four-year high. But the S&P Retail Index fell 1.9% as oil prices hit yet another new high.

April followed a dreary March, when same-store sales fell 0.4% as cool weather and an early Easter kept shoppers out of the malls.

As the weather got warmer last month, chains got a boost from pent-up demand for spring apparel and seasonal goods.

Still, the sales lift in April was largely cosmetic, Perkins said. March-April comps rose just 1.1%.

Retailers were up against easy comparisons vs. April 2007, when same-store sales fell 1.8%. The early Easter benefited chains last month, getting an extra selling day.

The calendar shift lifted April sales by 2% to 2.5%, said Michael Niemira, chief economist at the International Council of Shopping Centers. By his calculations, April sales grew 3.6% from a year ago.

Upscale retailer Saks Inc. (NYSE:SKS - News) used stepped-up promotional activity to drive a hefty 23.9% jump in same-store sales. That crushed views for a 0.8% gain. Excluding the promotions, Saks indicated April comps would have risen in the high-single digits.

Big promotions weren't industry-wide.

"What the industry has been doing in apparel is curtailing inventory and keeping prices low," Niemira said.

Plenty Of Head Winds

Still, April was just a temporary reprieve. Overall, consumers continue to face a lot of head winds.

Gas and food prices are climbing.

"No matter how you cut it, it's a drain on discretionary spending," said Niemira.

The U.S. economy is losing jobs, maybe not at a recessionary pace but it's certainly a drag on consumers. The housing correction and credit crunch also are negatives.

"The consumer remains under significant pressure," said Perkins. "The fact that retailers surprised on the upside is encouraging. But I don't think it signals any marked improvement in the average consumer's financial situation."

The economic stimulus rebates that began hitting bank accounts this month may help lift spending.

Niemira figures that the rebates will boost spending by $20 billion after subtracting the amount that will be saved and used to pay debt.

"That's a pretty hefty stimulus," Niemira said. "Retailers are hoping to get a nice lift."

Niemira sees a 2% gain in May same-store sales. They rose 2.5% in May 2007, he said.

June sales could be even stronger as the full effect of the tax rebates kick in, Niemira added.

In April, discounters and off-price chains fared well. Wal-Mart's sales rose a solid 3.2%, sailing past views. The world's biggest retailer enjoyed the biggest upside surprise in 13 months.

Strong sellers were grocery, health and entertainment items.

Flat-panel TVs and video games were hot -- a sign that consumers are still making discretionary purchases, says Niemira.

Still, Wal-Mart cautioned that the economy continues to get tougher and the "paycheck cycle" is more pronounced.

Chief rival Target's (NYSE:TGT - News) sales rose a less-than-expected 3.1%. And management sees a weak May, noting ongoing weakness in markets such as Florida that are seeing housing-related stress.

Wholesale clubs did well as bargain hunters snapped up goods. Same-store sales at BJ's Wholesale (NYSE:BJ - News) rose 17.8%, smashing views. Costco' (NasdaqGS:COST - News)s gained 8%, ahead of forecasts.

Teen chains also were big winners. Same-store sales shot up 34% at the Buckle (NYSE:BKE - News) and 25% at Aeropostale (NYSE:ARO - News).

McDonald's (NYSE:MCD - News) U.S. same-store sales rose 2% after a rare decline in March. The fast food giant's global comps rose 5%.