Rising prices fail to curb US consumer spending

Los Angeles: Rising gas and food prices didn't stop shoppers from storming the malls last month, leading to a surge in sales and continuing the recent momentum in consumer spending although industry experts doubted the pace will hold up as summer approaches.

Major retail chains reported an 8.9 per cent year-over-year gain in April, led by strong sales at discounters and apparel sellers, particularly those catering to teens, according to Thomson Reuters' tally of 25 retailers.

"Consumers showed resilience in April," said Ken Perkins, president of research firm Retail Metrics Inc. "Easter sales were robust, providing a nice upside boost to the month."

At the Westfield Century City shopping centre in Los Angeles, many shoppers said they had loosened their purse strings, spending freely on presents for Mother's Day and on themselves.

"If I need something I'll get it. I'm not necessarily worried where the money is going to come from," said Holly Baird, 31, a publicist who had just bought two pairs of shoes and was on her way to look for jewellery.

"Over the last few months at Bloomingdale's, I've spent the better part of $6,000 (Dh22,000)."

Among luxury chains, Neiman Marcus reported an 8.3 per cent gain in April and Nordstrom Inc. saw sales rise 7.6 per cent. The high-end sector, which had a robust first quarter and a turnaround year in 2010, has performed well for months.

Performance

Global luxury sales are expected to rise 8 per cent in 2011, thanks to high demand in the US, Europe and China, according to a report released this week by consulting firm Bain & Co April's strongest performers included Limited Brands, parent company of Victoria's Secret and Bath & Body Works, which posted a 20 per cent sales increase; teen chain Zumiez Inc., with a 17.5 per cent gain; and Costco Wholesale Corp, up 12 per cent.

Results are based on stores open at least a year, known as same-store sales and considered an important measure of a retailer's health because it excludes the effect of store openings and closings. Despite the robust showing last month, retail analysts cautioned that the results were inflated because of a later Easter date this year - April 24 versus April 4 in 2010 — which pushed a significant amount of sales out of March and into April.

And the results included gasoline sales at some wholesale clubs including Costco, which boosted the overall figure. Still, when the two months are combined, retailers came out ahead with a solid 5.3 per cent increase, Thomson Reuters said.

Retail watchers noted that consumers could backtrack in the months ahead if prices continue to rise, especially as merchants struggle with higher prices for cotton. And the nation's high unemployment rate is still putting a damper on many Americans' spending.

The Labour Department said the number of Americans applying for unemployment benefits climbed to the highest level in eight months.

Although the retail numbers were strong, "the worry is there as we start to look ahead," said Michael Niemira, chief economist at the International Council of Shopping Centres.

"We do think the pace of spending will start to moderate from this almost 5 per cent trend we've been seeing from January to April; we think it will probably start to move lower in the 3 to 4 per cent range."

Retailers are cautious, too. Despite a 13.1 per cent April sales increase at Target Corp, chief executive Gregg Steinhafel said the company's results "were somewhat below our expectations" and added that the discount giant would continue to focus on offering values in the coming months.

"This is more important than ever for our guests as they face increasing pressure on their household budgets," Steinhafel said.

But for many shoppers, things appear to be picking up.