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May 9, 2014

U.S. retailers bounce back as weather warms up

But job growth still slow for low-wage positions
By Phil Wahba
    
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NEW YORK (Reuters) — Spring was in full swing for some U.S. retailers, with shoppers spending again in April after the weather warmed up.

A number of large U.S. retailers, including Costco Wholesale Corp and Victoria's Secret parent L Brands Inc, reported April comparable sales above expectations, helped in part by a later Easter that pushed sales from March, and the end of a harsh winter that had kept many shoppers at home.

A group of 10 retailers — which does not include such giants as Wal-Mart Stores Inc, Target Corp and Best Buy Co — reported a 6.4 per cent increase in April comparable sales, better than the 4.1 per cent rise analysts had expected, according to Thomson Reuters' same-store sales index.

"The April performance was strong and suggested that pent-up demand helped," said Michael Niemira, chief economist at the International Council of Shopping Centers.

There were hopeful signs for retailers after months of heavy discounting that slammed sales and profit margins in winter.

L Brands, whose shares rose 4.8 per cent, raised its profit forecast and said it had been able to scale back promotions. Its comparable sales rose eight per cent.

Gap Inc also said pressure on its gross margin is abating. Gap reported a nine per cent increase, led by its low-priced Old Navy chain, and the apparel company gave a profit forecast that surpassed Wall Street expectations, sending its shares up five per cent in after-hours trading.

Costco reported a five per cent increase, better than the 3.2 per cent analysts had projected, and its shares rose 2.5 per cent.

Drugstore operators Walgreen Co and Rite Aid Corp reported better-than-expected sales, helped by gains in general merchandise.

Despite the strong numbers, the broad S&P Retail Index fell 0.17 points to 837.08 as some analysts said there was still reason for caution about consumer spending.

"You can't put too much credence into these numbers when you have a big bounce from delayed purchases," said Craig Johnson, president of consulting firm Customer Growth Partners.

Johnson warned against reading too much into the improving unemployment numbers, given the slow growth in low-wage jobs and the rise in the number of people dropping out of the workforce.

Several other retailers reported large jumps in April results, reflecting shoppers' continuing appetite for bargains.

Discount apparel retail Stein Mart Inc said comparable sales rose 8.9 per cent, while rival Cato Corp reported an 18 per cent jump and raised its profit forecast.

Youth retailers The Buckle Inc and Zumiez Inc also reported better-than-expected April sales.

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