Retailers' May Sales Expected To Show Buying Remains Choppy

Retailers, suffering a truncated holiday weekend and restrained consumer sentiment, are anxious to put May's lackluster sales behind them, looking ahead to June and back-to-school buying.

Overall, retailers are expected Thursday to post a 2.7% rise in sales for May at stores open at least a year after a 4.8% decline a year ago, according to the 28 retailers tracked by Thomson Reuters. While headed in the right direction and limiting the need for heavy discounting, the sales numbers aren't strong enough to support raising prices.

This May received little benefit from Memorial Day because retailers ended their reporting period for the month on Saturday.

Discounters and mass merchants are projected to buoy the retail group by reporting a 5.7% gain in same-store sales growth. The discount group and mass merchant group includes Costco Wholesale Corp. (COST), BJ's Wholesale Club Inc. (BJ), and Target Corp. (TGT). Wal-Mart Stores Inc. (WMT), the biggest member of the discount group, no longer reports monthly same-store sales figures. Analysts will be looking for indications of how things are going at Wal-Mart when the retailer hosts its annual meeting on Friday.

Department stores are expected to post a 0.9% gain in comparable-store sales. Saks Inc. (SKS) and Nordstrom Inc. (JWN) are projected to report the best results in the group, benefiting from easy comparisons with last year. The high-end stores have also been seeing a comeback of the luxury shopper, but last month's crisis in Greece and U.S. stock market tumble may have placed a damper on big spending since a lot of high-end consumers' wealth is linked to equities.

Teen apparel retailers are the only group expected to see a decline, of 1.7%, as parents remain concerned about the economy and many teens struggle to find jobs. Analysts are also critical of some of the teen retailers, saying they are missing fashion trends or pricing their apparel too high. Abercrombie & Fitch Co. (ANF), American Eagle Outfitters Inc. (AEO) and Hot Topic Inc. (HOTT) are all expected to report a decline in their May same-store sales. Aeropostale Inc. (ARO), Buckle Inc. (BKE) and Zumiez (ZUMZ) are expected to show gains.

The lack of a full Memorial Day weekend to build May sales events around combined with general inertia to make the month the second in a row where buying lacked significant spark.

In comments they made when reporting first-quarter results during the past couple of weeks, retailers said May started softly. Douglas Scovanner, chief financial officer at Target, said May 19: "Our sales results so far in May are running somewhat behind our expectations," and other Target executives called the retail environment "volatile."

Richard Galanti, chief financial officer at Costco, said last week that customers "are buying more food and sundries and less $1,000 TVs."

The May reports for stores open at least a year, a key gauge of buying demand, will arrive a week after the Conference Board said consumer confidence is showing signs of improvement, with people's expectations for business and employment at pre-recession levels. But income expectations remain downbeat "and this plays a key role in spending decisions," said Lynn Franco, a director at the Conference Board.

Mays soft sales are expected to continue the lackluster showing that began in April. The months were preceded by stronger showings in February and March, with the latter especially robust because of the Easter holiday.

"Overall, I expect the timing and pace of the consumer recovery to be choppy," said Bill Dreher, retail analyst at Deutsche Bank.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

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