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The Honolulu Advertiser
Posted on: Friday, May 11, 2007

For U.S. retailers, it was a very bad month

By Anne D'Innocenzio
Associated Press

A shopper leaves the Gap in Beverly Hills, Calif., her bags full. But it was a different story for retailers across the nation, whose sales were hurt by rising gasoline prices and the weak housing market.

KEVORK DJANSEZIAN | Associated Press

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NEW YORK — What was once a dull pain behind the eyes is threatening to become a full blown migraine for the nation's retailers. Yesterday, they reported one of their worst monthly sales performances ever, raising concerns that higher gas prices and a weakening housing market are eating away at consumer spending.

Given projections for more housing problems and higher fuel demand during the summer, prospects for retailers seem even dimmer.

"Consumers are not feeling quite as healthy from an economic standpoint as they did last year at this time," said John Morris, managing director at Wachovia Securities.

As retailers released their April sales figures, Wal-Mart Stores Inc. recorded a rare drop — the weakest performance since the world's largest retailer began publishing monthly sales in 1980, according to John Simley, a company spokesman.

Analysts had already expected last month to be weak after an early Easter motivated many to do their holiday shopping in March, siphoning away part of April's business. But sales were much softer than expected, raising concerns that retailers will also see disappointing results in the months ahead.

The UBS-International Council of Shopping Centers sales tally of 53 stores posted a decline of 2.4 percent, the biggest drop since the index started tracking the data back in 1970. The tally is based on same-store sales or sales at stores open at least a year, which are considered a key indicator of retailers' health. Michael P. Niemira, chief economist at the ICSC, called the drop in same-store sales a rarity, noting it marked the third time since 1970 that the overall index declined.

For the combined March and April period — which provides the best read on the spring selling season — the tally was up only 1.8 percent, below the 2.8 percent forecast.

"The slowdown is at hand," said Niemira. He noted that over the past three-month period, same-store sales have averaged a 2 percent growth, half the pace the industry experienced in the same year-ago period.

The housing market slump, which had already hurt sales of home-related goods over the past year, seems to be having a greater impact on retail sales. For years, shoppers had tapped into home equity as a source for cash, but rising interest rates have curbed that practice, and rising mortgage defaults may be spooking consumers.