NATION'S largest retailers report disappointing sales for May

<br>NEW YORK (AP)_ After a brief recovery in April, most of the nation's largest retailers fell back into a sales slump in May, stalled by the choppy economy and rising energy prices. <br><br>Even

Thursday, June 7th 2001, 12:00 am

By: News On 6

NEW YORK (AP)_ After a brief recovery in April, most of the nation's largest retailers fell back into a sales slump in May, stalled by the choppy economy and rising energy prices.

Even discount stores suffered, with chains such as Target and Kohl's releasing results Thursday that fell below expectations. Clothing stores, particularly the Gap and Ann Taylor, and the big department store chains fared the worst.

Cool weather in the Northeast and Midwest hurt sales of seasonal merchandise, particularly clothes and outdoor products such as grills and pool accessories. But, more important, retailers and analysts said the results clearly show that consumers, who have been spending cautiously for the past year, continue to pull back.

The disappointing results prompted several retailers to reduce sales and earnings projections.

Wal-Mart Stores, which reported May sales rose 3.8 percent, actually beat Wall Street's forecast of 3.6. However, the world's largest retailer said the unusually cool weather could hurt second-quarter profits.

Federated Department Stores, whose May sales were below expectations, warned that its second-quarter earnings might fall below Wall Street projections.

``It's disappointing across the board,'' said Michael P. Niemira, vice president of the Bank of Tokyo-Mitsubishi. His company's index of sales for 78 chains was up only 1.6 percent last month from May 2000, when the index gained 5 percent.

The bleak results were released the same day that the Labor Department reported new claims for state unemployment insurance shot up last week to the highest level in nearly nine years.

Store executives are hoping the tax cuts and rebates signed into law Thursday by President Bush will encourage consumers to spend more in the coming months.

However, Niemira said he is unsure whether that will happen. He is projecting no growth in retail sales for the second half.

``It is not clear-cut whether the consumer will view this as permanent income, as President Bush tried to make it, or if it is viewed as transitory income,'' he said. ``If it is viewed as transitory, only one-third will be spent, as a typical rule.''