Retail sales drop in April as consumer retreat continues

The era of the frugal consumer continues. Consumers reined in spending again in April, as retail sale fell a seasonally-adjusted 0.4 percent, the U.S. Commerce Department announced Wednesday (pdf).

It was the eighth decline in retail sales in the last 10 months. Retail sales have now fallen 10.8 percent in the past year, with about one-third of that decline stemming from lower gasoline prices. Excluding autos, retail sales fell 0.5 percent in April.

Economists surveyed by Bloomberg News had expected April retail sales to rise 0.1 percent and rise 0.3 percent excluding autos. Retail sales fell a revised 1.3 percent in March.

Challenging landscape for retailers

Further, one of the retail sector's most respected analysts says the landscape for retail remains challenging at best.

"This is a new retail world, it's a cyclical downturn for the consumer, structural for retailers. It's sell more units at lower prices, given they won't have as high margins and prices," Dana Telsey, CEO and Chief Research Officer of Telsey Advisor Group, told Bloomberg Radio Wednesday. "As long as retailers discount, then consumer will come, but it's all about value. The lack of demand is the issue. ... Even high-end retails are showing opening prices that are lower than they have been in the past, to attract consumers. It's now 'need-based' shopping as opposed to 'want-based' shopping."

Unemployment rate weighs on confidence

Telsey added that rising unemployment and a volatile stock market are continuing to wreak havoc with consumer confidence, and so long as consumer confidence is low, retail sales will suffer, Bloomberg Radio reported.

The earliest time retail sales could rebound? Telsey said excluding the holiday sales period in the late fall 2009 -- due to easy comparisons from weak holiday sales in 2008 -- the earliest time for a retail sales pick-up would be the spring 2010.

In April, clothing sales declined 0.5 percent, general merchandise dropped 0.1 percent, department store sales fell 0.2 percent, electronics and appliance sales declined 2.8 percent, furniture sales fell 0.5 percent, and children store sales dropped 0.5 percent; meanwhile, health and personal care sales rose 0.4 percent and building supply store sales increased 0.3 percent.

Economic Analysis: More of the same on the retail sales front. Demand is slack, as consumers continue to eliminate discretionary/needless purchases. Analyst Telsey added that she expects May and June to be challenging for retailers, as well. A steady decline in monthly job layoffs, combined with stock market stability, would go a long way toward bolstering consumer confidence, and you know retailers certainly hope those trends appear soon.

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