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Retail sales rise 3.9% in May, topping expectations

By Shan Li, Los Angeles Times –

LOS ANGELES — Shoppers cautiously hit the malls to refresh their wardrobes in May, but slower job gains and flagging consumer confidence are raising some concerns about whether a crimp in spending might be coming this summer.

“Spending is up a little, and we know consumers are putting a little bit more on their credit cards,” said Judith Russell, editor of the Robin Report, a retail industry publication. “The job market has stabilized, but unemployment is still in most cases too high,” forcing shoppers to remain careful about unnecessary purchases.

On Thursday, major chain stores posted a 3.9 percent sales increase in May compared with the same month a year earlier, slightly above analysts’ expectations of a 3.6 percent rise, according to Thomson Reuters’ tally of 18 retailers.

At the Glendale (Calif.) Galleria this week, many shoppers reported feeling more confident about their finances, but said they were still carefully watching their spending and opening wallets for sale items only.

After living a bare-bones lifestyle during school, Rose Wolf, 31, just recently nabbed a nursing job and celebrated by snapping up a $13 black top from Forever 21.

“I’m just getting used to having a regular income and not constantly being frugal,” the Los Angeles resident said Wednesday. “I feel very lucky to have a job. Overall, things are on the up and up for a lot of people.”

Retail experts say shoppers were lured to the malls by falling gasoline prices and Mother’s Day and Memorial Day promotions. Warm weather also prompted consumers to gravitate toward the bright hues saturating summer fashions.

“We are seeing a huge burst of color on the scene, and it’s being embraced by everyone from kids to fairly conservative male shoppers,” Russell said. “Colored skinny denim, maxi dresses, sundresses and beachwear have been really strong.”

Healthy May sales were tempered by some poor economic data. The Conference Board said Tuesday that consumer confidence last month suffered its largest drop since October. The Labor Department said Thursday that unemployment claims rose last week to a one-month high. National unemployment numbers for May will be released Friday.

Among top performers, action-sports chain Zumiez Inc. led the way with a 13.7 percent bump. Luxury retailer Nordstrom Inc. saw sales rise 5.3 percent. Benefiting from a continuing thrifty mind-set, off-price retailers Ross Stores Inc. and TJX Cos. saw an 8 percent rise. Limited Brands, parent company of Victoria’s Secret and Bath & Body Works, said sales rose 6 percent.

Discount giant Costco Wholesale Corp. reported a 4 percent jump in sales, while Target Corp. posted a 4.4 percent rise.

Some retailers did not fare as well. Struggling teen clothier Wet Seal said sales fell 8.8 percent, while department store chain Kohl’s Corp. reported a 4.2 percent drop.

San Francisco-based Gap Inc., which has seen sales pick up recently, reported a lower-than-expected 2 percent jump. Still, Chief Executive Glenn Murphy said the retailer was “pleased with overall customer response to summer product in May.”

All told, about 69 percent of retailers beat expectations, Thomson Reuters said.

Results are based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health because it excludes the effect of stores’ openings and closings.

After a relatively balmy spring, many consumers have already picked up most items on their shopping list, analysts say. They predict slow spending in the next few months as retailers scramble to adjust their assortments and sales to draw shoppers.

“The heat wave in March forced consumers to make a lot of purchases they would normally make in the summer,” said Laura Gurski, global head of the retail practice at consulting firm A.T. Kearney.

Gurski said that if gasoline prices continue to decline, any money saved in the busy travel months ahead may boost budgets for kids heading back into the classroom in the fall.

“Gas prices are important for driving back-to-school sales,” she said. “Back-to-school doesn’t mean just clothes; it’s small appliances for the college students as well.”

Industry watchers say that more negative news about the job market or the economy may spook shoppers into curbing their spending.

After a few years of unemployment, Kevin Turner of Beverly Hills, Calif., said he just recently started getting calls again from schools requesting his services as a motivational speaker.

But at the Americana at Brand shopping center across the street from the Glendale Galleria, the 47-year-old opted to forgo buying anything new and treated himself instead to dinner at the Cheesecake Factory.

“When you reach a certain point, you don’t want to buy in excess, especially during a recession,” Turner said. “I feel like I have enough.”

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