Analysts Offer Guarded Outlook for May Retail Sales

Retail industry analysts are guarded about the outlook for May’s retail sales, despite better-than-expected results at Macy’s and improving consumer confidence.

Jose Luis Pelaez Inc | Blend Images | Getty Images

“We believe that May sales have had a weak start,” Richard Jaffe, an analyst at Stifel Nicolaus in the firm’s monthly retail sales preview.

Jaffe expects that sales in early May followed April's weaker trend, as unseasonably warm weather in March made consumers buy spring merchandise early.

Add that to a late Mother’s Day and there may have been some weakness at the beginning of the month. That seemed to be the message in retail earnings calls as retailers issued cautious forecasts.

"Analysts are taking a careful approach to May same-store sales given the cautious tone issued by most retailers on second-quarter earnings guidance," said Ken Perkins of Retail Metrics, in a research report previewing monthly retail sales reports.

The Thomson Reuters Same-Store Index, which tracks stores that release monthly sales reports, is expected to rise 3.6 percent in May. That's a solid gain when one considers sales were strong in the year-ago period, rising 5.4 percent from the prior year.

One factor that may help retailers is that the May retail calendar tends to include more promotional events, and that could help lure shoppers into stores.

"We estimate that later-than-usual Mother's Day likely shifted 100 basis points of sales into May from April," said Michael Binetti, a retail industry analyst at UBS who covers department store retailers.

Although fewer and fewer retailers issue monthly sales results, some investors still look at the reports as a way to gauge the health of consumer spending. Among those who are expected to issue reports are discounter Target, off-price retailer TJX Cos., high-end department stores Nordstrom and Saks , and specialty retailers such as Limited , the owner of Victoria's Secretand Bath & Body Works.

Jaffe said he thinks consumers are still concerned about the economy, although it is difficult to measure this.

Consumer confidence in May rose to its highest level since October 2007, but much of the upward push was driven by high-income consumers.

One encouraging note came from Macy's , which reported better-than-expected same-store sales results on Wednesday.

Macy's sales at stores open at least 12 months were up 4.2 percent, outpacing the four-percent gain predicted by Wall Street analysts, according to Thomson Reuters.

"The momentum in our business continued in May, and came on top of a very strong month last year," said Terry Lundgren, chairman, president and CEO of Macy's, in a press release. Lundgren said the department store saw growth in its online business and across "geographies and categories of business."

Despite the strength Macy’s saw during the month, analysts are expecting that some retailers will lag behind. Among the expected weak spots, Kohl's is expected to post its third monthly same-store sales decline in the past four months.

Ahead of the reports, most retail stocks, including Macy's, were trading lower as U.S. stocks slippedon fears about developments in the euro zone.

A table that includes some of the forecasted results follows:

May 2012 Same-Store Sales Estimates

May 2012 Estimates
May 2011 Actuals
Costco 4.3% 13.0%
Target 3.5% 2.8%
Fred's Breakeven 0.2%
Kohl's Department Store (1.2%) 0.8%
JW Nordstrom 4.7% 7.4%
Saks Department Store 2.5% 20.2%
Stage Stores 2.2% Breakeven
Macy's 4.0% 7.4%
Gap 3.1% (4.0%)
TJX 5.3% 2.0%
Limited 4.7% 6.0%
Ross Stores 5.3% 4.0%
Stein Mart 0.5% 0.7%
Wet Seal (8.3%) 2.9%
The Buckle 3.3% 8.8%
Zumiez 6.6% 7.8%
Source: Thomson Reuters; Figures in parenthesis are losses.

(Editor's Note: Estimates were updated to reflect revisions to analysts' estimates reported by Thomson Reuters late Wednesday.)

Questions? Comments? Email us at Follow Christina Cheddar Berk on Twitter @ccheddarberk.