Retail sales fall again in April, denting recovery hopes

Retail sales fell for a second straight month in April, a disappointing performance that raised doubts about whether consumers were regaining their desire to shop. A rebound in consumer demand is a necessary ingredient for ending the recession.

The Commerce Department said Wednesday that retail sales fell 0.4% last month, much worse than the flat reading economists expected. The April weakness followed a 1.3% drop in March that was worse than first estimated.

Retail sales had posted gains in January and February after falling for six straight months, raising hopes that the all-important consumer sector of the economy might be stabilizing. But the setbacks in March and April could darken some forecasts because consumer spending accounts for about 70% of economic activity.

The hope had been that consumers were starting to feel better about spending, helped by the start of tax breaks included in the $787 billion stimulus bill. Households had spent the fall hunkered down in the face of thousands of job layoffs and the worst financial crisis since the 1930s.

The worse-than-expected April retail sales reading came despite a 0.2% increase in auto sales, which fell 2% in March. Excluding autos, the drop in retail sales would have been 0.5%, much worse than the 0.2% gain economists expected.

Sales outside of autos showed widespread weakness. Demand at department stores and general merchandise stores fell 0.1% and sales at specialty clothing stores dropped 0.5%.

Sales also fell at furniture stores, electronic and appliance stores, food and beverage stores and gasoline stations.

The performance at department stores and specialty clothing stores came as a surprise because the nation's big chain stores had reported better-than-expected results for April. Same-store sales, rose 0.7% last month compared with April 2008. It was the first overall increase in six months, according to the tally by Goldman Sachs and the International Council of Shopping Centers.

For April, some mall-based clothing stores saw their declines level off and Wal-Mart Stores, the world's largest retailer, had reported its same-store sales rose 5%, excluding fuel, which beat expectations. Same-store sales, or sales in stores open at least one year, is considered a key metric of a retailer's financial health.

The chain store sales report last week showed that Gap, American Eagle and Wet Seal posted smaller sales declines at their established locations than analysts had forecast.

The Children's Place, T.J. Maxx owner TJX and teen retailer The Buckle saw bigger gains than expected. But luxury stores again were hard hit as their higher-end wares find fewer takers.

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