Following a tepid April showing, shoppers shrugged off increasing anxiety about economic and job market weakness last month, spending at a healthy clip on spring apparel, Mother’s Day and graduation gifts.
Total net sales for the 19 chains we track (drug stores won’t report until next week) increased 5.6% from a year ago to $22.39 billion in May, while same-store sales rose 4.1% on top of a 6.5% gain last year – this was the 33rd straight monthly rise after 12 consecutive months of declines.
For the first 5 months of 2012, total sales increased 6.7% to $111.4 billion and comparable store sales rose 5.2% on top of a 6.1% gain in 2011.
According to the National Retail Federation, May is the fourth-biggest month of the year, bolstered by Mother’s Day, high school and college graduations, and the bridal season. In addition, unseasonably warm weather across much of the country continued in last month, helping to drive foot traffic to stores.
Shoppers spent early and often to start the year, driven by extremely warm temperatures and a much earlier Easter than last year. Following a prolonged post-Easter slowdown, spending picked up in May as consumers responded to Mother’s Day and Memorial Day promotions, as well as 8 consecutive weeks of falling gas prices.
Strength was broad-based, with 17 of the 19 chains reporting comp gains and 69% beating analyst estimates.
Leading the gains, as usual, were off-price stores TJX and Ross Stores, both of which saw comps rise 8% in May, significantly better than analyst estimates for a 5.3% gain.
Macy’s (+4.2%) and Target (+4.4%) both continued their positive momentum in May, likely benefiting from customer defection at JC Penney in light of its restructuring efforts.
Limited Brands (+6%), Zumiez (+13.7%) and Stage Stores (+8%) rounded out the top gainers, with each handily beating expectations.
Wet Seal (-8.8%) and Kohl’s (-4.2%) were the only chains to report negative comps and both missed consensus estimates. Kohl’s CEO Kevin Mansell said “May sales were lower than our expectations and, as a result, we now expect second quarter comparable store sales to be modestly negative.” He added that hed expects lower inventory to hinder sales until the Back-to-School season.
Though the strength in May was impressive, especially considering the tough comparisons to last year, we expect spending to moderate heading into back-to-school season. Most confidence measures have receded from post-recession highs, with consumers increasingly worried about job and economic growth.
“While the recent decline in gasoline prices and slower pace of initial claims may have bolstered consumer comfort over the past week, overall sentiment remains in the doldrums,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Given the looming crisis in Europe and the weak pace of hiring in the economy, risks to the consumer outlook remain elevated roughly midway through 2012.”
