The reads from major retailers on the spending habits of U.S. consumers varies widely with Wal-Mart and Family Dollar warning on the low-end, while pockets of strength have been seen at department stores, some specialty retailers, and out-performers such as Costco, Kroger, and Starbucks.
The high level of spending on automobiles and big-ticket items has squeezed out some discretionary spending, say analysts
If there's one development that nearly all retailers agree on, it's that store traffic is lower as online and mobile take market share and consumers pivot toward a paradigm of efficient shopping trips from mall browsing.
Ikea says it plans to increase the minimum wage for its U.S. retail workers by an average 17% starting next year, a decision that may add to pressure on retailers and fast-food companies that have not raised wages, particularly the largest holdouts, such as McDonald’s (MCD -0.1%) and Wal-Mart (WMT -0.7%).
Business opponents say raising the minimum wage would add as much as hundreds of millions of dollars to costs; Ikea is presenting the move as good for employee well-being, and says it will not raise prices to offset the new costs.
Earlier this year, Gap said it would raise its minimum hourly rate for U.S. employees to $9 in 2014 and $10 in 2015.
Channel checks from Deutsche Bank indicate the promotional cadence in the retail sector has been dialed back a notch from the level seen in Q1.
The investment firm sees less promotional activity from retail beasts Wal-Mart (WMT +0.3%) and Target (TGT +0.2%) - while department store chains such as Kohl's (KSS +0.7%), Nordstrom (JWN +0.6%), and Dillard's (DDS -0.1%) have also shown some improvement.
J.C. Pennney (JCP +1%) is a tougher nut to crack for DB with its radical changes in pricing strategy making the year-over-year comparison less informative.
Retail analysts are looking at underlying factors influencing consumer demand after two of the most resilient companies in the sector missed with their latest earnings report and guided full-year EPS down.
Setting aside the weather, promotions, data breaches, and F/X swings which influenced some of the retail heavyweights - TJX Companies (consumer trade-down) and PetSmart (consumer loyalty) were the U.S. bellwethers which turned in the wrong direction.
There's nothing concrete on the table, but some analysts think the company has been stealing some market share from major retailers in Q1 and Q2 as consumers continue to evolve their shopping habits. Staples (SPLS -10%) and Office Depot (ODP -1.5%) come to mind.
Starbucks (SBUX -1.3%) CEO Howard Schultz seems to have called the retail slide with his perception that a "seismic shift" toward online and mobile is beyond the tipping point (FBN interview, SBUX conference call).
Major retailers TJX Companies, Urban Outfitters, Home Depot, and Dick's Sporting Goods are all in with quarterly reports that missed expectations.
Retail analysts note the sector is having a tough time shrugging off the slow traffic patterns and heightened promotional stance that afflicted store chains during the winter. Underneath one-time factors such as F/X and weather, there are still signs of a cautious and thrifty consumer.
More companies have lowered Q2 and full-year guidance than raised over the last two weeks.
A disappoint read on retail sales from April's report could reset some expectations in the sector after analysts overestimated consumer demand.
The electronics and appliance store category (RSH, BBY, CONN, WHR) saw sales fall 2.3% M/M and 1.5% Y/Y.
Clothing and clothing accessory stores (AEO, GPS, BKE, TLYS, ANF, ANN, LB, ARO, GES, CATO) registered a 1.2% M/M and 1.1% Y/Y gain in sales which didn't show the snap-back from soft winter traffic patterns forecast by some.
ICSC expects monthly retail comparable-store sales to increase 3.5% to 4.0% in April compared to last year.
The forecast accounts for a slow start to the period of warmer weather and the late Easter this year which is a boost for April sales.
What to watch: Reports on retail sales for April indicate some pent-up demand from a slow Q1 has been unleashed. Analysts think the readings on the first few weeks in May could be the most critical of the year in determining if U.S. consumers are willing to come back out in force.
Retail sales showed some vibrancy in March led by solid gains from building material and garden equipment sellers (HD, LOW) and general merchandise chains (COST, WMT, CASY, TGT). A revision to February's retail sales mark also bodes well for the retail sector.
Sales at electronics and appliciane stores (BBY, CONN, HGG) moved in the wrong direction during the month, falling 1.6% M/M and 0.7% Y/Y.