Skip to main content

The National Retail Federation raised its full-year retail sales outlook Tuesday, saying sales gains in the first five months of the year were stronger than expected.

The industry trade group now expects 2004 retail sales to rise 6% above 2003's total of $943.3 billion, which is up from original expectations for a 5% gain.

In comparison, sales in 2003 rose 3.9%. (The NRF tracks sales at general merchandise stores, apparel stores, furniture and home furnishings stores, electronics and appliances stores, and sporting goods, hobby, book and music stores.)

The NRF based its revised 2004 expectations on this year's 9% growth rate for sales from January to May vs. a 5% increase in the same period of 2003. Similarly, the government said in its May retail sales report that sales from January through May rose 8.4% to $1.6 trillion.

Sales rose 9.9% in the first quarter, and second-quarter sales are projected to increase 7%, the NRF said, citing strong sales of electronics, appliances and apparel.

"Rising employment is lifting wage and salary income, which will, in turn, increase total consumer income," said NRF Chief Economist Rosalind Wells. "Strengthening income is helping to keep consumers whole and is negating some effects of higher gasoline and food prices."

While the NRF said concerns about inflation and interest rates have replaced what the previously lackluster employment data held over the market, it added that "rising interest rates and moderate inflation are the logical consequence of a rapidly growing economy and, at this point in time, are not alarming nor will they impinge on sustainable growth," Wells said.

However, NRF noted that year-over-year sales comparisons will become challenging as 2004 continues, making sales gains more difficult to accomplish. As a result, it forecast third- and fourth-quarter gains of 4% to 4.5%.

According to the International Council of Shopping Centers, which tracks same-store sales at 77 retail chain stores, the aggregate monthly percentage increase in same-store sales from January to May was 6%.

But retail sales momentum hit the breaks in the latest round of same-store sales reports released last Thursday. June results came in with an aggregate 2.9% increase, the ICSC said, fostering analysts' previous worries that the second half of the year will be challenging. June's was the lowest total increase in a year.

TheStreet Recommends



(WMT) - Get Walmart Inc. Report

said June same-store sales came in at the bottom of its previously lowered forecast, rising 2.2% vs. the Thomson First Call consensus estimate for a 3.5% increase. And


(GPS) - Get Gap, Inc. (GPS) Report

said same-store sales dropped 2% in June, missing the consensus for a 4.1% increase.

Because much of the blame was placed on cooler weather, ICSC research director Michael Niemira speculated that the month's results could be a temporary decline, or were at least merely "amplified" by the weather.

"The question that these sales data raise is: Are sales slowing down for temporary or fundamental reasons? Obviously, if it is temporary, that is less of a worry than a fundamental slowdown tied to a broader-based economic 'pause' or moderation," Niemira wrote in a post-same-store-sales report.

Niemira forecast a 3% to 4% increase in July same-store sales and sees the pace of monthly same-store sales at around 4% to 4.5% for the rest of the year.

Retail sales for June are expected to be released by the Census Bureau Wednesday morning, with economists expecting a 0.7% decrease vs. a 1.2% gain in May. Sales excluding automobiles are seen up 0.2%, compared to a 0.7% rise in the prior month.