Cautious consumers failing to spend
June 4, 2010, Friday
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Print Edition
Print Edition
AMERICANS, uninspired by cool weather and with fresh concerns about the economy, spent with caution in May after a tepid April.
Retailers' May sales reports, released yesterday, underscore how fragile the consumer spending recovery remains.
A mix of stores found business challenging during the month.
Target Corp's chairman, Gregg Steinhafel, noted that its recent performance reinforced his belief that the United States will continue to "experience volatility in the pace of economic recovery." The chain posted a 1.3 percent gain that was below internal forecasts.
Department store chain Stage Stores Inc and teen merchant Wet Seal Inc both reported declines in revenue at stores open at least a year.
Costco Wholesale Corp's 9 percent gain was shy of Wall Street forecasts for a 9.7 percent increase. Gap Inc reported a small gain overall of 1 percent but its namesake chain in the US saw revenue decline. The results are being compared with depressed spending a year ago.
Among the bright spots was Victoria's Secret parent Limited Brands Inc, which reported a bigger-than-expected increase.
Revenue at stores open at least a year is a key indicator of a retailer's health. Another report from Mastercard Advisors' SpendingPulse showed that shoppers took a pause as they cut back on almost everything from appliances to footwear and clothing at the mall.
Stock market jitters
SpendingPulse measures spending in all forms including cash from May 2 through Saturday.
Cool weather and a quirk in the calendar - a late Memorial Day weekend that hurt May's business but should boost June's figures - dampened spending. But weakness in the past six weeks is due to more than weather and calendar flukes, analysts said. They cited unemployment, stock market jitters and the dwindling of government-funded rebates on energy-efficient appliances.
"May was pretty lackluster. It looked like consumers were coming out of their lethargy. There seemed to be a fledging spending recovery," said Ken Perkins, president of research firm RetailMetrics, "But that is called into question."
"I don't think you can explain away all the weakness just based on the calendar shift," said Michael McNamara, vice president of research and analysis for SpendingPulse.
The lackluster May and April, follow a solid first quarter when shoppers opened their wallets more and showed more willingness to pay full price as they took comfort in a rallying stock market and signs of economic recovery. But fears that a debt crisis in Europe could hammer global growth are causing heavy declines on Wall Street and raising concern that the inroads made in the US economic recovery could unravel.
The Dow fell 7.9 percent for the whole month, its worst May since 1940.
Retailers' May sales reports, released yesterday, underscore how fragile the consumer spending recovery remains.
A mix of stores found business challenging during the month.
Target Corp's chairman, Gregg Steinhafel, noted that its recent performance reinforced his belief that the United States will continue to "experience volatility in the pace of economic recovery." The chain posted a 1.3 percent gain that was below internal forecasts.
Department store chain Stage Stores Inc and teen merchant Wet Seal Inc both reported declines in revenue at stores open at least a year.
Costco Wholesale Corp's 9 percent gain was shy of Wall Street forecasts for a 9.7 percent increase. Gap Inc reported a small gain overall of 1 percent but its namesake chain in the US saw revenue decline. The results are being compared with depressed spending a year ago.
Among the bright spots was Victoria's Secret parent Limited Brands Inc, which reported a bigger-than-expected increase.
Revenue at stores open at least a year is a key indicator of a retailer's health. Another report from Mastercard Advisors' SpendingPulse showed that shoppers took a pause as they cut back on almost everything from appliances to footwear and clothing at the mall.
Stock market jitters
SpendingPulse measures spending in all forms including cash from May 2 through Saturday.
Cool weather and a quirk in the calendar - a late Memorial Day weekend that hurt May's business but should boost June's figures - dampened spending. But weakness in the past six weeks is due to more than weather and calendar flukes, analysts said. They cited unemployment, stock market jitters and the dwindling of government-funded rebates on energy-efficient appliances.
"May was pretty lackluster. It looked like consumers were coming out of their lethargy. There seemed to be a fledging spending recovery," said Ken Perkins, president of research firm RetailMetrics, "But that is called into question."
"I don't think you can explain away all the weakness just based on the calendar shift," said Michael McNamara, vice president of research and analysis for SpendingPulse.
The lackluster May and April, follow a solid first quarter when shoppers opened their wallets more and showed more willingness to pay full price as they took comfort in a rallying stock market and signs of economic recovery. But fears that a debt crisis in Europe could hammer global growth are causing heavy declines on Wall Street and raising concern that the inroads made in the US economic recovery could unravel.
The Dow fell 7.9 percent for the whole month, its worst May since 1940.
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