Retail Sales: Are Consumers Down for the Count?

Analysts are expecting retailers to post higher same-store sales in May, but with trends showing some signs of consumer spending weakening from the start of the year, investors are grappling with the bigger question regarding the state of the consumer. The problem: The answer may not be found in Thursday's batch of monthly sales reports.

Man shopping for clothes
UpperCut Images | Getty Images
Man shopping for clothes

May is a tough time for retailers. Mother's Day and graduations provide some reason for consumers to buy, but it's not a must-shop time of year.

Recent traffic data from ShopperTrak showed that the number of customers shopping for clothing, accessories, and footwear fell 3.6 percent in the 4 weeks ended May 29, according to a research note from Global Hunter Securities analyst Richard Hastings.

"We are comfortable with these numbers, but we are modestly concerned that some retailers in recent weeks have mentioned slower traffic and spottier trends going into the end of April 2010," Hastings said.

Paging through the monthly sales reports, look for comments about store traffic trends. It will be important to see how consumers are shopping and what they are buying.

Earlier this spring, consumers started buying discretionary items, and we recently heard from NPD Group that shoppers were buying more accessories, so it will important to see if consumers are continuing to stray from the basics.

Continued unemployment and a shift that pushed a portion of the Memorial Day weekend sales into the month of June could both weigh on results for May.

In addition, the Federal housing tax credit has expired, and that means the "echo" spending consumers have made on home goods also will disappear.

Analysts on average are expecting same-store sales to rise 2.6 percent in May from the prior year, according to Thomson Reuters. Estimates for May's sales have been trending down ahead of the reports, but they are still much better than last year's 4.8 percent decline.

Among the department stores, Nordstrom is expected to report the strongest year-over-year same-store sales growth, with sales expected up 4.8 percent, according to a Thomson Reuters survey.

Costco Wholesale is expected to report the strongest monthly increase among the discount chains, with sales expected to rise 9.7 percent, Thomson Reuters said.

Retailers of teen apparel should see the weakest sales among retailers. Hot Topic is expected to post an 8.3 percent decline in same-store sales, Wet Seal's sales should decline 6.0 percent, while American Eagle is expected to post a 2.5 percent decline, according to according to a Thomson Reuters survey.

Although the monthly sales reports will be closely watched for their insights into consumer spending, the reports aren't the gauge they used to be on consumer spending as many retailers, including Wal-Mart Stores , the world's largest merchant, no longer report monthly sales results.

A list of Thomson Reuters' same-store sales estimates follows:

May Same-Store Sales Estimates

May 2010 Estimates
Costco Wholesale (excluding gas) 7.3%
BJ Wholesale (excluding gas) 4.0%
Target 1.2%
JC Penney (0.6%)
Kohl's Department Store 1.5%
Dillards Department Store (2.0%)
JW Nordstrom 4.8%
Saks Department Store 4.0%
Stage Stores 0.5%
Macy's 0.9%
Gap 0.6%
TJX 2.7%
Limited 2.1%
Ross Stores 2.8%
Stein Mart (5.3%)
Abercrombie (2.3%)
American Eagle (2.5%)
Aeropostale (0.9%)
Hot Topic (8.3%)
Wet Seal (6.0%)
The Buckle 0.6%
Zumiez 3.6%
Walgreen 1.5%
Rite Aid (1.1%)
Source: Thomson Reuters; company reports. Figures in parenthesis are losses.