April sales brings May fairytales

The April retail sales figures were among the most highly anticipated economic figures released this week in the U.S. It was reported by Retail Metrics Inc., that April was the best month for retailers since last November. Their index showed an increase of 3.3% year-over year. However, since we saw the earliest Easter in 95 years, thus falling in March this year, it probably makes sense to average the last two months together. Total sales are generally lower in the month during which the holiday falls so some of last month’s sales were probably deferred and pushed into April. March sales results, you might remember, was an abomination. So on the two-month average basis, same-store sales would have increased just 1.1%. Also, the reportedly surprising and robust 3.3% year-over-year gains in April also masks the fact April same store sales included an extra day this year versus the 2007 numbers. This extra day, versus last year, essentially gave retailers an extra 3.3% of "sales time". Therefore, sales were actually flat on a “per-day” basis versus last year's data. When you again take into account that inflation is now clipping along at a pretty rapid pace (just don’t tell the U.S. government), real sales adjusted for inflation, are clearly running negative. Also, remember that sales at gas stations is included as retail sales. My hunch is that more money is being spent on gas and less on designer jeans. Given the rising costs of operating a business on a daily basis, this report, regardless of the rejoicing it elicited among the bulls, cannot be good for margins and earnings. I did not find anything in the retail sale figures, even among those companies that reported "good" results, that instilled a lot of confidence that suggests anything positive for the health of the U.S. economy.

There was much adieu surrounding Wal-Mart's (WMT) better than expected same-store-sales number. But again, this is Wal-Mart, a palce where people that used to shop at Macy's (M) might find themselves if they've since fallen on hard times. So I don't believe we want to root for good numbers out of Wal-Mart. Besides, did anyone notice the ominous quote from its CEO immediately following the release of its same-store sales number? Eduardo Castro-Wright, CEO of the world’s largest retailer, Wal-Mart Stores (WMT), said, "The economy continues to get tougher and the 'paycheck cycle' is more pronounced for customers than in past months. As money gets tighter for them toward the end of the month, sales drop more than we have seen in the past." With April sales, brings May fairytales.