Retailers Report Strong March Sales As Consumers Spend Again
April 08 2010 - 7:52AM
Dow Jones News
Retailers Thursday reported strong year-over-year gains in sales
at stores opened more than a year as indications continue to grow
that consumers are spending again.
In addition to improved consumer confidence, retailers also
benefited from easy year-ago comparisons, increased Easter shopping
and warmer weather.
"Retailers are smashing expectations," Thomson Reuters analyst
Jharonne Martis said.
With just under half having reported, all but one have beat Wall
Street projections, with Costco Wholesale Corp. (COST), Limited
Inc. (LTD), Hot Topic (HOTT) and Cato Corp. (CATO) reporting
better-than-expected results.
The only disappointment so far is apparel retailer Abercrombie
& Fitch Co. (ANF), which posted a 5% increase in same-store
sales when Wall Street expected 6.6% growth. Abercrombie shares
slipped 3.2% premarket to $46.
Same-store sales, a key retail metric, count only sales at
stores open at least a year. Wal-Mart Stores Inc. (WMT) doesn't
disclose monthly sales figures.
The strong sales growth--in a month in which many retailers
unveil spring merchandise at full price--suggests consumers are
feeling more confident about paying a higher price, a potential
boost to retailers' first-quarter margins.
"Consumers have been in a restrained spending mode for several
months, but improved consumer confidence is prompting shoppers to
loosen the purse strings after two years," Martis has said.
All of which could lead to a strong beginning to 2010 for
retailers.
"Underlying sales trends look strong, and we believe retailers
are setting up for a very good first quarter," said Daniel Binder,
retail analyst at Jefferies.
Teen apparel, always a good indicator of discretionary spending,
showed particular strength in March as Zumiez Inc. (ZUMZ) and Hot
Topic reported better-than-expected results.
Ironically, Hot Topic so far has reported the worst same-store
sales result, down 7.5%, but its shares are rising the most, up 18%
premarket to $8.32, because the decline was narrower than the
expected 11.2% drop and the company announced a special one-time
cash dividend of $1.
Women's apparel and accessories retailer Cato raised
first-quarter earnings guidance, the first in what may be a number
of retailers to do so as more reports come in.
Retailers were setting up for something big, with several
indicators suggesting improvement after the industry struggled last
year under the weight of the economic downturn.
The retail industry added 14,900 jobs in March, its third
straight month of expansion after shedding over one million
positions since the recession began in December 2007.
Import cargo volume at the nation's major retail container ports
is expected to rise 8% in April compared with a year ago, and solid
increases are expected to continue through the summer as the US
economy improves, the National Retail Federation said.
"Retail sales are starting to improve, and retailers are
importing merchandise in the quantities they need to meet that
demand," said NRF spokesman Jonathan Gold.
Even the highest end is seeing encouraging signs. Predictions
"of the demise of luxury and full priced spending were
exaggerated," Tiffany & Co (TIF) Chief Executive Michael
Kowalski said when the company posted improved fourth-quarter
results in late March. "Many customers were simply waiting for some
improvements in their personal incomes and balance sheets prior to
resuming spending."
It is not likely to be a completely smooth path for retailers
because consumers are still watchful of their wallets. The latest
indication came Wednesday with word that Americans put their credit
cards back into the drawer in February, an indication they aren't
ready to spend briskly despite the economy's improvement. Consumer
credit fell $11.5 billion in February, the Federal Reserve
said.
Retail stocks have been ahead of the industry's improved sales
figures, with many shares trading at multi-year highs coming into
this week after the group bottomed in March 2009. Big advances from
here may be more hard fought because of the extended run-up and the
stocks now pricing in improving conditions, analysts say.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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