The rain in May fell softly on the shoppers

Lackluster retail sales suggest Fed's policy is dampening things, too


June 02, 2000|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Sales rose only modestly at the nation's chain stores in May, with retailers blaming cool, rainy weather in the latter part of the month.

Analysts said the lackluster performance could be evidence that consumers have begun pulling back in response to higher interest rates.

A tally of about 70 national retailers showed sales up by an average 4.6 percent at stores open at least a year, according to the Bank of Tokyo-Mitsubishi's retail sales index. Sales gains since the start of the year had been averaging 5.4 percent, fueled by rising wages and low unemployment, said Michael Niemira, a Bank of Tokyo vice president.

"We didn't see any real blockbuster performances; we didn't see any outstanding numbers, and what we are beginning to understand is the yearlong series of interest rate hikes by the Federal Reserve is finally beginning to show signs of taking effect," said Kurt Barnard, president of Barnard's Retail Trend Report, an Upper Montclair, N.J., consultant.

"Retail sales are continuing robust and consumer spending is continuing robust," Barnard said. "But ... the growth of consumer spending and the growth of retail sales is progressing at somewhat a slower pace than we've seen in quite a while."

The Federal Reserve has raised short-term interest rates six times since last June, hoping to control inflation by increasing the cost of borrowing.

But industry watchers disagreed about the extent of the influence of higher interest rates.

"It's more Mother Nature than Alan Greenspan," Niemira said. "The areas that remain strong are the ones that are more economically sensitive - household goods, electronics and jewelry sales. What was weak was really the apparel sales and seasonal goods that really saw softness later in the month."

Sales varied widely from chain to chain, even within categories of retailers.

Industry leader Wal-Mart Stores Inc., which also runs Sam's Club stores, posted a gain of 7.4 percent. Yet competitor Target Corp. saw its same-store sales rise just 1.5 percent. Discounters generally fared better than department stores and continued to steal market share from the competing format.

BJ's Wholesale Club Inc. reported a 5.5 percent sales gain, reflecting a strong demand for apparel, computers, health and beauty aids and jewelry, the chain said. "Most seasonal sales categories benefited from a return to more normal spring weather in the first three weeks of the month; however, cold, rainy weather in week four affected sales ahead of the Memorial Day holiday," said Jack Nugent, president and chief executive officer.

In the department store category, sales fell 1 percent at Dillard. Sales inched up 1.2 percent at the May Department Stores Co., parent of the Hecht Co., and 1.1 percent at J. C. Penney Co. Inc. - though Penney managed to beat projections for unchanged sales. Sales were up a better 4.2 percent at Federated Department Stores Inc., and 6.6 percent at upscale Neiman Marcus Group Inc.

At Sears, Roebuck and Co., the nation's largest department store chain, sales rose 3.5 percent, also beating forecasts. Overall apparel sales at Sears remained flat, but the retailer said it was helped by strong demand for home appliances, electronics, fine jewelry and fitness equipment.

Specialty stores turned in a range of results, with sales up 7 percent at Gap Inc. while plummeting 14 percent at Abercrombie & Fitch Co.

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