Retailers expected to post scant May sales

By Brad Dorfman

CHICAGO (Reuters) - U.S. retailers are expected to post lackluster May sales this week, as consumers spent tax rebate checks on gas and food or used them to reduce debt, rather than buying discretionary items like clothes and jewelry.

The average analyst sales estimate calls for an increase of 1.2 percent this May, compared with a 2.9 percent increase a year earlier, according to Thomson Reuters.

Apparel retailers are expected to see sales at stores open at least a year fall 3.1 percent and department stores are expected to see same-store sales fall 4 percent, continuing a trend that has been in place much of the past year.

With consumers hammered by soaring food prices, gasoline near $4 a gallon or more and the continued slump in the U.S. housing market, weak retail sales show no sign of abating.

"It looks like it's going to be a lot of sluggishness for the rest of this year and into 2009," said Ken Perkins, president of Retail Metrics.

Consumers began receiving tax rebates in late April as part of the $152 billion economic stimulus package passed by Congress.

But it does not appear that those checks have done much so far to stimulate sales at most retailers.

"A lot of channel checks suggest that the rebate checks aren't being spent or are being used for gas or debt or food," Perkins said.

The International Council of Shopping Centers expects May same-store sales to rise between 0.5 percent and 1.5 percent.

"Even with a little less than about half of the federal tax rebate monies being distributed, there is little overall evidence of any spending lift given the increased spending drag from energy prices," ICSC chief economist Michael Niemira said in a research note.

Gasoline prices are up 27.6 percent from last year, according to Goldman Sachs.

The rebates could provide more of a boost in June and July as more consumers receive their rebates, Adrianne Shapira, retail analyst at Goldman Sachs, said in a research note.

Aside from economic factors, colder-than-normal weather also chilled sales, analysts said.

"Shorts and swimwear were on sale in nearly every store in the mall," Credit Suisse apparel retail analysts said in a research note. "For most retailers, we believe business fell off in the last week in April and remained weak throughout May, perhaps with some improvement at the end of the month."

May was the coldest since 2002 and the 10th-coldest since 1961, according to preliminary data from Planalytics.