|Consumers are spending less on discretionary items like TVs. (Danny Johnston/Associated Press)|
Pinched by fuel, shoppers pull back elsewhere
Retailers report only modest gains, hinting at a soft patch in recovery
NEW YORK — Shoppers are showing signs of pulling back on spending on discretionary items like clothing and home goods as gasoline and groceries eat up more of their paychecks.
Those pressures led many retailers yesterday to report only modest revenue increases in May, the latest sign of the economy hitting a soft patch.
Retailers that cater to wealthy shoppers and warehouse clubs like Costco that also sell gas reported the biggest gains.
Most of the spring, consumers seemed to shrug off rising prices. Now, gasoline that is at least $1 per gallon more than last year and higher grocery bills are “finally taking a bite and affecting sales,’’ said Ken Perkins, president of research firm Retail Metrics. “It definitely raises the caution flag going into the summer.’’
Revenue rose 5.4 percent overall at stores open at least a year among 27 retailers, according to the International Council of Shopping Centers. Excluding gasoline, the figure rose 3.7 percent.
That was within the 3 percent to 4 percent range expected, said Mike Niemira, ICSC chief economist and director of research.
“On the surface, the numbers look pretty good,’’ Niemira said. “But it is being driven by a very narrow set of retailers.’’
The figures are based on revenue from stores open at least one year, a key indicator of a retailer’s health because it excludes results from stores opened or closed during the year.
Niemira expects the June revenue figure to rise 3 percent to 4 percent, excluding fuel.
The May results follow disappointing economic reports on unemployment, housing and consumer confidence that investors worry indicate a softening of the economy. The Dow Jones industrial average skidded 280 points Wednesday, losing more than a quarter of the year’s gains, on rising economic fears, and fell again yesterday.
Consumer spending is closely watched because it accounts for about 70 percent of US economic activity and is critical for a strong economy.
TJX Cos. of Framingham Mass., said revenue at stores open at least a year rose 2 percent for the period, and BJ’s Wholesale Club Inc. of Natick reported yesterday that May same-store sales rose 7.4 percent, driven by strong gasoline sales.
Target’s revenue at stores open at least a year rose 2.8 percent, below the 3.5 percent analysts expected, according to FactSet.
“Our guests continue to shop cautiously in light of higher energy costs and inflationary pressures on their household budgets,’’ Target Corp. chief executive Gregg Steinhafel said.
Julie Hart, 35, is feeling the pain. She said she won’t be able to send her 11-year-old son to summer camp this year because of higher prices. The retail worker in Garland, Texas, added that her son’s grandmother, who once lavished gifts on her son, cannot anymore.
“Food and gas are the priority . . . and there’s nothing else left,’’ she said.