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Retailers Report Smaller Sales Declines in April

Consumers enticed by warmer weather and glimmers of hope for the economy bought a few more items in April, helping discounter Wal-Mart Stores and many mall clothing chains post better results for the month than expected.

Business in many areas remains weak, however, and analysts expect a drawn-out recovery as unemployment remains high and other economic woes persist.

Among merchants that reported sales Thursday, mall-based clothing stores including Gap, American Eagle and Wet Seal posted smaller declines than analysts had forecast. The Children's Place, T.J. Maxx owner TJX Cos. and The Buckle saw bigger gains than expected.

But warehouse store operator Costco Wholesale reported a deeper-than-expected same-store sales drop, hurt by the closing of its stores on Easter.

"It looks as though the rate of decline is diminishing," said Ken Perkins, president of research firm RetailMetrics. "There were a number of factors putting more money into people's pockets, but the macro headwinds are still significant."

One of the biggest worries for people is job security. New claims for jobless benefits fell to the lowest level in 14 weeks, the Labor Department said -- a possible signal that the wave has peaked. Still, the number of unemployed workers getting benefits hit a new record.

Wal-Mart is continuing to take market share away from rivals as shoppers look for deals in the recession. Grocery, health and wellness products, entertainment and home furnishings were among its best-selling items.

Shoppers look at home theater televisions at the Best Buy store Monday, Sept. 11, 2006 in Richfield, Minn. Best Buy Co. Inc., the nation's largest consumer electronics retailer, said its second-quarter earnings rose 22 percent on a 13 percent increase in revenue. The results beat Wall Street expectations, but Best Buy left its full-year guidance unchanged. (AP Photo/Jim Mone)
Jim Mone
Shoppers look at home theater televisions at the Best Buy store Monday, Sept. 11, 2006 in Richfield, Minn. Best Buy Co. Inc., the nation's largest consumer electronics retailer, said its second-quarter earnings rose 22 percent on a 13 percent increase in revenue. The results beat Wall Street expectations, but Best Buy left its full-year guidance unchanged. (AP Photo/Jim Mone)

"We gained new customers, improved our market share position, and found that when customers had more money to spend, they spent it more often at Wal-Mart," Vice Chairman Eduardo Castro-Wright said in a statement. Sales at stores open at least a year, or same-store sales, are a key indicator of retailer performance since they measure growth at existing stores rather than newly opened ones.

Wal-Mart reported a 5 percent same-store sales gain, much better than the 2.9 percent increase that analysts surveyed by Thomson Reuters had expected. That excludes fuel sales.

But Castro-Wright said the second quarter will be challenging compared with a year-ago period, when people received their government stimulus checks.

Overall, retailers' business in April was helped by warmer weather, tax refunds, and a shift in the Easter holiday from mid-March last year to April this year. Signs of an improving an economy -- a stock market rally and better news about the housing market -- have helped improve shoppers' confidence.

Sentiment levels are still hovering near historic lows, however, as shoppers worry about their jobs, available credit and their shrunken retirement funds.

Discounter Target said same-store sales edged up 0.3 percent in April, not quite the 0.4 rise expected, but predicted first-quarter results will likely beat expectations. Grocery and health care products were among the best sellers. Clothing and home products were weaker.

Costco, though, said its April same-store sales dropped 8 percent, more than the 6.8 drop that analysts expected. Excluding lower gas prices and the stronger dollar, same-store sales were flat.

Among clothing and department stores the tone was better, though luxury stores still struggled with sharp sales drops. Macy's had a 9.1 percent same-stores sales decline, worse than the 7.5 percent forecast. But the department store chain boosted its first-quarter outlook.

J.C. Penney's 6.6 percent drop was a little worse than the 6.4 percent decline that analysts had expected, but better than the company's own guidance. It also upgraded its first-quarter profit outlook.

Among luxury retailers, Saks suffered a 32 percent sales drop for the month. Analysts had expected a 30.5 percent decline.

Gap had a 4 percent decline, better than the 7.8 percent drop expected.

Among teen merchants, Wet Seal reported a 2.2 percent decline, much smaller than the 7 percent drop analysts had expected. American Eagle Outfitters had a 5 percent drop in same-store sales, much better than the 8.8 percent decline anticipated. The Buckle enjoyed an 18.2 percent gain in April, beating estimates for a 10.6 percent rise, while The Children's Place had a 5 percent gain when expectations had been for sales to be flat.

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