Retailers report weak May sales uncertainty cited

June 04, 1993|By Michael Dresser | Michael Dresser,Staff Writer

May was the month excuses ran out for the nation's major retailers.

From mighty Wal-Mart to beleaguered BJ's, disappointment was the order of the day as the nation's retailers reported weak sales results for last month.

During the three previous months, retail industry analysts have been able to explain lousy sales by pointing to lousy weather. Give us good weather in May, they said, and sales will start popping.

But in May, the sun shone bright over much of the country, but retailers remained in the shadows.

Otto Grote, a longtime retail analyst at Derby Securities in New York, said he was so "appalled" by the May figures that he was preparing an "exit strategy" for investors in retail stocks.

"May is the first month [of 1993] that really represents a test, and we have flunked that test with flying colors," he said.

Wal-Mart Stores, the nation's largest retailer, set the tone with a 6 percent gain in sales at stores that were also open a year earlier. While that comparable-store sales figure looked good beside that of other retailers, it was below Wal-Mart's typical double-digit increases or even the projections of between 7 percent and 8 percent in monthly gains that it made earlier this year.

Many others did far worse.

Actual declines were posted by Caldor Corp., down 1.9 percent; Value City, down 2.5 percent; and Ames Department Stores, down 3.6 percent. Joppa-based Merry-Go-Round Enterprises' 4 percent decline reflected the woes felt by many specialty retailers. BJ's Warehouse's 7.3 percent decline mirrored the continuing weakness in the wholesale clubs.

As bad as those figures looked, they were minimal compared with that of Gantos Inc. The Grand Rapids, Mich.-based clothing chain reported an eye-popping 14 percent comparable-store sales decline as its management admitted errors in merchandising strategy.

The roster of companies with declines was matched by an equally long list of chains with lackluster gains: No. 2 Kmart Corp. and No. 4 Dayton Hudson were each up 1.1 percent; No. 5 J. C. Penney Co., up 1.9 percent; and No. 9 The Limited Inc., up 2 percent.

Bucking the trend was No. 3 Sears, whose 5.9 percent gain reflected strong purchases of big-ticket durable goods such as appliances. A 14 percent gain by the Neiman Marcus Group suggested that there was still some life in the upper-income range of the economy.

Landover-based Hechinger Co. also outpaced the field with a 7 percent gain, achieved almost solely by the success of its Hechinger Stores Division. That unit, located mostly around Washington and Baltimore, showed a 13 percent comparable-store gain, paced by its Home Projects Centers. That surge offset the flat sales at Hechinger's Home Quarters warehouse division.

The relatively few success stories could not dispel the pervasive gloom, however, and analysts were left struggling for explanations.

"If we don't get a pickup in June, we run a risk that this entire retail sector is going to abort, and with it will go the economic recovery," Mr. Grote said.

He said the only reason he is holding back on a full-scale bailout from retail stocks is that there were indications of strong sales in the South.

Mr. Grote, who said the declines in previous months were 70 percent weather-related and 30 percent the result of President Clinton's economic proposals, put the ratio for May at 30 percent weather to 70 percent Mr. Clinton. Uncertainty over Mr. Clinton's tax and health care proposals were taking a severe toll on consumer confidence, he said.

But Steve Ashley, an analyst with Cleary Gull Reiland McDevitt & Collopy, said the reason people in Milwaukee weren't buying had little to do with Washington.

"It's kitchen-table economics -- how safe do you feel," he said. "It's not whether your president's getting a haircut or not."

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