US retailers are bracing themselves for a difficult year after sales dipped in April and first quarter revenue was hit.
Shoppers’ spending and retailers’ profits are set to drop off as the credit crunch together with rising prices shakes consumer confidence, according to retail monitoring and research companies including Retail Metrics and Mastercard’s Spending Pulse.
Consumer spending fell 0.7% last month excluding spend on cars and gasoline, compared with March. Comparable store sales at casualwear giant Gap dropped 6% for the four weeks to May 3, with first quarter sales down 11%. This was against a 16% like-for-like drop last April.
The group’s Old Navy chain and its international operations were the worst performers, with first quarter like-for-like sales down 12% and 7% respectively. Comparable store sales at the Gap chain and at Banana Republic were flat.
First quarter comparable store sales at young fashion chain American Eagle also fell 6% for the 13 weeks to May 3.
Department stores also felt the pressure. Comparable store sales at department store group JC Penney decreased 1.7% for the four weeks to May 3, 2008. This was less than the predicted mid- to high-single digits drop and the 3.4 % dip last year. The department store business is predicting a mid-single digit decline in comparable store sales for the four-week period ended May 31 2008.
Same-store sales at department store chain Nordstrom fell 3.8% for the four-week period to May 3, while first quarter same-store sales decreased by 6.5%.
Kohl’s comparable store sales rose by 3.5% for the four-week period ended May 3. However, the department store business’s comparable store sales dropped 7.7% for the combined March and April period.
First quarter profits are expected to drop by almost 15% as US retailers announce their trading figures over the coming days, according to Retail Metrics. This is despite discounting and an extra day in the accounting period compared with last year.
The performance announcements come as US retailers race to secure an extra US$150 billion (£77bn) of tax rebates returned to shoppers.
Some retailers are offering discounts to shoppers spending their rebate in the store.