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Published: Thursday, 5/5/2011

Retailers report strong April, helped by late Easter; worries grow over rising gas prices

BY ANNE D'INNOCENZIO
AP RETAIL WRITER

NEW YORK — Retailers reported strong April sales that were helped by a late Easter, extending strong spending momentum since late last year.

However, some stores are starting to warn that shoppers are facing increasing pressure from high gas prices.

As merchants report their results Thursday, a diverse group, including Costco Wholesale Corp., Victoria's Secret's parent company and teen retailer The Buckle posted surging revenue and beat Wall Street expectations.

"The Easter bunny delivered the goods. It showed that the consumer was resilient and sales were better than expected despite some growing headwinds," said Ken Perkins, president of RetailMetrics LLC, a research firm. But he added, "We are beginning to see the leading edge of consumers starting to pull back."

Target Corp. reported a gain below internal expectations and said its shoppers face increasing pressure on their household budgets.

Stage Stores Inc., a moderate-price department store chain, reported solid gains but President and CEO Andy Hall noted that "rising gas prices made for a more cautious consumer."

The figures are based on revenue at stores open at least a year. That is considered a key indicator of a retailer's health because it excludes results from stores opened or closed during the year

Last week, Mike Duke, CEO of Wal-Mart Stores Inc., said it's already seeing higher gas prices having an impact on shoppers, who are cutting back on discretionary items as its spending power is eroded. It said it's seeing its customers consolidate shopping trips, though they're spending more on each excursion. The world's largest retailer no longer reports the key revenue measure on a monthly basis.

Retailers were expected to report surging gains as a late Easter, which fell on April 24, three weeks later than last year, helped last month's sales while hurting March sales.

Analysts study the two months combined to give an accurate reading of consumer spending for what retailers call the spring season. In May, merchants start shipping summer goods to stores.

Gasoline has increased for 43 days straight, hitting a national average of $3.982 per gallon on Wednesday, according to AAA, Wright Express and Oil Price Information Service. Pump prices have risen 91 cents per gallon since the beginning of the year. A gallon of regular now costs more than $4 in 13 states and Washington, D.C.

Shoppers are also seeing prices of food like dairy and meat rise. Clothing stores are expected to pass on higher prices to shoppers starting this summer, though cotton shirts and underwear are already more expensive.

Rising unemployment applications and other weak economic data this week have prompted some analysts to fear that higher fuel prices may be causing employers to slow hiring.

And a troubling sign for consumers and the overall economy came from a government report Thursday that showed the number of people applying for unemployment benefits surged last week to the highest level in eight months.

The Labor Department said Thursday that applications rose 43,000 to 474,000 in the week ended April 30. Weekly applications peaked during the recession at 659,0000. The government is set to report its April jobs report on Friday.

In recent weeks, Kohl's and other major department store have cut their orders for fall as they worry they may face price resistance from shoppers.

Costco's revenue at stores open at least a year climbed 12 percent in April. Analysts surveyed by Thomson Reuters predicted an 8.9 percent increase. Removing the impact of higher gas prices and strengthening foreign currencies, revenue at stores open at least a year gained 7 percent in April. The U.S. recorded a 6 percent gain while international results climbed 10 percent

Target, which sells mostly discretionary items like stylish home furnishings and clothing, reported a 13.1 percent increase in revenue at stores opened at least a year. Analysts had expected a 13.2 percent. The gain, however, was below the discounter's own internal target which called for an increase in the mid-teens.

Gregg Steinhafel, chairman, president and CEO of Target, said low prices are becoming more important as shoppers face "increasing pressure on their household budgets due to higher energy costs and increasing prices of food, apparel and home merchandise."

Limited Brands Inc., which operates Victoria's Secret and Bath&Body Works, raised its earnings outlook Thursday and said revenue grew 20 percent in April at stores open at least a year. The figure was much better than the 12 percent increase analysts had predicted.



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