DETROIT Retailers are expected to show a sizable increase in sales for the month of May, but erratic trends of consumer spending could grow more pronounced over a seasonally weaker period for shopping.
Retail chains from Target Corp (TGT.N) to Costco Wholesale Corp (COST.O) to teen retailer Abercrombie & Fitch Co (ANF.N) are scheduled to report sales at stores open at least a year -- an industry gauge also known as same-store sales -- on Wednesday and Thursday.
Analysts expect May same-store sales to be up 3.8 percent, compared with a decline of 4.8 percent last year, according to Thomson Reuters data. Standard & Poor's sees a 3.4 percent increase, or 2.5 percent excluding gasoline sales.
That would follow a lackluster 0.5 percent increase in April, when almost 70 percent of the 28 retailers tracked by Thomson Reuters fell short of expectations. An early Easter had prompted many consumers to shift spring shopping to March.
So far this year, U.S. consumers have shown they are willing to open their wallets again for nice-to-have goods like clothes and furniture after focusing on the basics during the recession.
But shoppers are still very selective about where and when they spend as overall consumer sentiment has remained roughly unchanged from February.
"Overall, we're still going to see improvements for all of retail, but the volatility just shows we're not out of the woods yet," said Linda Tsai, specialty retail apparel senior analyst for research and trading firm MKM Partners.
"I don't think it signals doom, but right now it's just a little bit slower," she added. "We're still seeing dips during non-peak periods."
S&P apparel retail analyst Marie Driscoll agreed consumers remain wary while the economy posts a tentative recovery.
"It looks like the economy is improving in fits and starts," Driscoll said. "A real thing that could derail consumer spending is too much volatility in the stock market. Other than that, it seems to be leveling out and increasing modestly."
The International Council of Shopping Centers cut its May sales outlook recently, citing slower traffic and less spending at discounters and apparel retailers as well as colder weather during the month. It now expects same-store sales to rise 2 percent to 2.5 percent, down from a prior forecast of 3.5 percent.
COOLER WEATHER HURT
Driving the expected sales gain in May will be discount retailers like Target and Costco, which are expected to report an increase of 6.3 percent, according to Thomson Reuters. Gains for department stores and apparel chains are forecast at 1.5 percent and 1.8 percent, respectively.
However, teen retailers, including American Eagle Outfitters Inc (AEO.N) and Hot Topic Inc HOTT.O, are expected to post a decline in same-store sales of 0.2 percent, Thomson Reuters said.
Major factors that influenced shopping in May include a Memorial Day holiday that falls on the last weekend of the month, pushing more sales into June and suggesting a low- to mid-single-digit drag on May, analysts said.
In addition, cooler weather everywhere but the Northeast, as well as heavier rain in the Northwest, hurt sales of summer apparel, analysts said.
"There's a lot of bodies in the Northeast. Is that enough to carry the rest of the nation?" said Scott Bernhardt, chief operating officer for Planalytics, which provides weather data for businesses. He said Texas also saw pretty good weather.
Regardless of what happens in May, June looks like a hit in the making with the holiday shopping and with "glorious" weather expected everywhere but the Southeast, Bernhardt said.
"June is going to be off the charts good for most of North America," he said. "It will feel like summer. People will spend like summer. It's a very good thing for the economy."
(Editing by Michele Gershberg, editing by Gerald E. McCormick)