Jun 5, 2007

May retail sales could spell relief after weak AprilBy Jennifer WatersMarketWatch.com

Chicago (MarketWatch) — Most U.S. retailers will be breathing a sigh of relief Thursday when they report May sales results that are expected to be better than they were in April, but a dose of disappointing numbers could create worry about consumer spending.

Bed Bath & Beyond raised that warning flag Tuesday when the home-furnishings retailer took a sharp knife to its sales and earnings expectations for the second quarter and the full year.

It blamed the weak housing environment for its first-ever warning, and the news unsettled investors and cast a pall over the entire industry. Consumers are struggling with rising gas prices — which are 17% higher than they were in March and 4% above last year’s price. May’s results should draw a fairly clear picture of how tight things are.

“While May (same-store) sales will show a nice improvement from April, the numbers are likely to be quite mixed,” Lazard Capital Markets analyst Todd Slater said. April sales at stores open longer than a year were a disappointment that retailers said was the result of unseasonably bad weather and consumer concerns about spending.

Though Memorial Day weekend sales probably helped boost sales toward the end of May, customer traffic into malls and shopping centers “remained sluggish,” Slater said, prompting retailers to turn to discount promotions to step up sales.

Slater said he did not believe May results would make up for April’s weakness. He forecast “anemic” May sales.

Thomas Weisel Partners analyst Liz Dunn said she agreed, noting that her store checks uncovered a 5% decrease in mall traffic and an overall “challenging” environment during the month.

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