Bloomberg News

Limited, Gap’s May Sales Miss Estimates as Shoppers Retreat

June 02, 2011

(Updates share prices in sixth paragraph.)

June 2 (Bloomberg) -- Limited Brands Inc., Gap Inc. and other U.S. retailers reported May sales that trailed analysts’ projections as increasing prices and surging gasoline costs deterred budget-conscious shoppers.

Limited, operator of the Victoria’s Secret chain, posted a gain of 6 percent in same-store sales, missing the 7.4 percent average of analysts’ estimates compiled by Retail Metrics Inc. Sales at Gap, the largest U.S. apparel chain, fell 4 percent, more than five times the rate analysts projected.

Surging costs for cotton, oil and labor in Asia have forced some apparel chains to pass costs on to consumers, with several saying hikes will accelerate this year. Some shoppers are scrimping on trips to stores because they can’t keep up with the price of fuel.

“The consumer is really pulling back,” said Edward Yruma, a New York-based retail analyst for Keybanc Capital Markets. “Anywhere you have a pressured consumer from gas prices or unemployment, you saw it in the results.”

Employment increased by 38,000 last month, according to figures released yesterday from ADP Employer Services. The median estimate in a Bloomberg News survey called for a gain of 175,000. Consumers’ confidence has withered as a result, with the Conference Board index falling to 60.8 in May from 66 in April, the research group said this week.

Limited dropped 2.2 percent to $37.87 at 4:02 p.m. in New York Stock Exchange composite trading, while Gap fell 4 percent to $18.12. The Standard & Poor’s 500 Retailing Index declined 3.65 points, or 0.7 percent, to 517.97.

Average Gain

Overall, the 25 chains tracked by Retail Metrics, based in Swampscott, Massachusetts, posted a gain of 3.8 percent, excluding gasoline and currency fluctuations at Costco Wholesale Corp. Analysts on average projected 3.9 percent on that basis. At least 15 companies’ sales fell short of estimates.

Most chains count locations open at least a year to tabulate same-store sales. This revenue is a key indicator of a retailer’s growth because new and closed sites are excluded.

Limited, based in Columbus, Ohio, had surpassed expectations each month since at least the beginning of 2010, according to Bloomberg data. At Gap, located in San Francisco, sales fell for the third time in four months as revenue at its Banana Republic chain in North America plunged 6 percent.

Hot Topic Inc., the California teen retailer that began as a band t-shirt purveyor, also missed estimates, with same-store sales dropping 0.9 percent at the shops that bear its name. The chain also sells accessories, music and posters.

Luxury retailers beat projections, with Saks Inc. posting a gain of 20 percent and sales at Nordstrom Inc. rising 7.4 percent.

--With assistance from Sho Chandra and Timothy Homan in Washington and Courtney Dentch in New York. Editors: Julie Alnwick, Robin Ajello

To contact the reporter on this story: Matthew Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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