Retailers stayed on the fast track in May with solid sales
gains that beat views Thursday for the second straight month.
Warmer weather and savory deals prompted consumers to unleash
pent-up demand from the winter's lull and shop for spring and
early summer seasonal goods.
Sales at stores open at least a year rose 4.6% from a year
earlier, according to Ken Perkins, president of Retail Metrics.
Fueled by a strong beat fromCostco Wholesale (
), the showing was ahead of analysts' forecasts for a 3.4%
L Brands (
) andRite Aid (RAD) all beat views.
"The results were decent and reflective of better weather
conditions that got consumers out," said Perkins. "Retailers made
it worth their while with relatively deep promotions."
During the month, store chains, particularly in the apparel
space, offered some very sweet deals, such as 30% to 35% off the
entire store, says Perkins.
After harsh weather patterns dampened sales for many retailers
in the first three months of the year, chains made a strong
comeback in April with a 6.2% rise in same-store sales vs. a year
That improvement continued into May, says Michael Niemira,
chief economist for the International Council of Shopping
Centers. He calculates May same-store sales grew 4.6% vs. a year
"It's hard to argue it was necessarily just a weather story,"
he said. "Temperatures were about what they were last year. Given
that the aggregate monthly same-store sales trend over the last
12 months was about 3.7%, getting a bit of growth above that
trend is encouraging. It's reassuring in the broad sense that
we're getting this rebound after the winter problems."
Cabin Fever Effect
Pent-up demand or the "deferred spending" from the winter,
which began showing up in April and continued into May, is
helping to drive the rebound, he says.
"We're also seeing that same type of pattern in the broader
economy with a bounce-back after a weak first quarter," he adds.
"That reinforces that the consumer fundamentals are good."
Niemira says that comments in recent earnings reports have
noted that bounce-back. "That's quite encouraging," he said.
Some improvements in the economy also helped retailers during
the month, adds Perkins.
"Consumer confidence was up a little bit, and the labor market
has been better the last three months," he said. "So consumers
are feeling a little better about their overall situations."
But Perkins cites some major headwinds: "Retailers still have
a tough road ahead as they face intense price competition from
all of their brick-and-mortar competitors as well as from online
players likeeBay (EBAY) andAmazon (AMZN). And a vast majority of
consumers are still not seeing wage gains."
Warehouse-club operator and regular top retail performer
Costco led the pack in May with a solid 6% gain in total-company
and U.S. core same-store sales. The gain was ahead of views for a
4% rise in total-company same-store sales and a 4.9% increase in
U.S. core same-store sales. Costco has topped views in four of
the first five months of this year.
Top apparel retailer Gap posted a 1% rise in same-store sales
Thursday after the close vs. forecasts for a 0.3% rise. That
follows a 9% gain in April same-store sales.
Victoria's Secret parent L Brands saw a 3% gain in same-store
sales last month, ahead of forecasts for a 2.1% rise. It got a
nice lift from its Bath & Body Works stores, which saw a 5%
rise in same-store sales for the month.
Action-sports retailer Zumiez turned out a healthy 3.6%
increase in May same-store sales, sailing past estimates for a
Drugstore operator Rite Aid posted a 3.5% rise in same-store
sales for the month early Thursday, topping estimates for a 2.2%
Rival Walgreen saw a 4.4% increase in May same-store sales,
ahead of forecasts for a 4.1% gain.
Specialty apparel retailerCato (CATO) posted a 3% gain in May
same-store sales, in line with forecasts.
Off-price retailerStein Mart (SMRT) posted a 0.4% rise in May
same-store sales, missing views for a 1.2% rise. That followed a
hefty 8.9% gain in April same-store sales.
Another miss came from teen retailerBuckle (BKE), which saw a
3.1% drop in same-store sales last month vs. estimates for a 0.3%
Niemira estimates that June same-store sales will rise about
3.5% vs. a year earlier. Retailers will be up against slightly
tougher comparisons vs. June 2013, when comps rose 4.1%.
Since April and May got a lift from pent-up demand, Niemira
sees same-store sales in the summer months growing at between 3%
and 3.5% "unless there is some breakout performance in the
economic statistics that will cause us to re-evaluate the
Overall, he expects second-quarter economic data to show a
rebound of about 3.5% growth in GDP from the 1% decline in the
first quarter. Economic growth, he adds, is the "key driver" of
the longer-term trend.
Perkins remains cautious about retailers' prospects.
"It's a very difficult environment right now across the
board," he said. "It requires them (retailers) to hone their
merchandising skills and bring in unique merchandise as well as
being very competitive in terms of price points, particularly on
commodity-type goods that can be found anywhere else, like basic
clothing and small appliances."
Retailers, he adds, will likely remain promotional to drive
interest and traffic.