UPDATE: March US Retail Sales Showing Unexpected Strength
April 07 2011 - 9:07AM
Dow Jones News
U.S. consumers spent March on the move, allowing many retailers
to deliver solid sales numbers that suggest resilience in the face
of challenges from a later Easter, poor weather and higher gasoline
prices.
The vast majority of retailers reported decent gains for the
month at stores open a year or more, including Costco Wholesale
Corp. (COST), Macy's Inc. (M) and Limited Brands Inc. (LTD).
Others, including Target Corp. (TGT), J.C. Penney Co. (JCP) and
Kohl's Corp. (KSS) posted drops in same-store sales from a year
earlier, but the declines were less than analysts projected.
And upper-end shoppers continued to show particular strength,
with Saks Inc. (SKS) and Nordstrom Inc. (JWN) delivering strong
results.
"I was worried about the fragile progress we have seen so far on
the part of retailers, which is really a reflection of consumers,"
said Barbara Kahn, director of the Jay Baker Retailing Center at
the University of Pennsylvania's Wharton School "But March, even
though a complicated month, does suggest more progress on the road
to recovery."
The month saw tax returns coming in, which gave consumers some
extra discretionary income. The government also reported strong
growth in employment, with non-farm payrolls showing the addition
of 216,000 positions, spurring hopes for a sustained jobs recovery.
Higher-end consumers especially were feeling good as the stock
market continued marking gains.
The 25 retailers tracked by Thomson Reuters reported a 1.7% rise
in same-store sales for last month, when a 0.7% decline was
expected. The strong showing followed considerable reservations
about consumer demand because of Easter being its latest since
1943. The calendar shift--to April 24 from April 4 last year--was
seen as pushing a lot of spring buying into April. Easter is the
third largest selling season behind the Christmas season and
Valentines Day, according to the National Retail Federation.
Macy's sounded a tone of confidence for the current month by
bumping its April and March sales expectations to a 4% to 4.5% rise
from a previous expectation for a 3% rise for the two-month period
after reporting same-store sales for last month rose 0.9% when
analysts expected a 2% drop.
Victoria's Secret operator Limited Brands Inc. (LTD) was another
of the month's standouts, posting a 14% rise in comparable-store
sales, well ahead of expectations for a 1.5% advance.
Gap Inc. (GPS) became what appears to be the first U.S. retailer
to lower guidance because of events in Japan, where it operates
over 150 stores. The retailer said last month's earthquakes and
tsunami will cut earnings per share for the current quarter by
about four cents a share. GPS was among the very few retailers to
serve up a disappointment in March same-store sales--showing a 10%
drop when 7% decline was expected. GPS's U.S. operations have also
been having a bit of a rough time of late.
"I wouldn't necessarily say the performances we saw for March
was remarkable, because expectations were so low," said John Long,
retail strategist at Kurt Salmon. "It will take April and the
Easter holiday to really gauge what's going on, especially on the
apparel side."
Susan McGalla, chief executive of young women's retailer Wet
Seal Inc. (WTSLA), echoed a number of retailers by saying April
sales will benefit as a result of the calendar shift for Easter.
Wet Seal reported a 4.7% gain in same-store sales compared with
expectations for a 1.7% drop and McGalla said the company would
likely have seen a high single-digit percentage increase without
the effect.
Consumers are definitely expected to be out in force in
conjunction with the upcoming holiday. U.S. retail spending on
Easter related merchandise, for everything from cookware to
clothing, is expected to average $131.04 a person this year, up 11%
from a year ago, the National Retail Federation said. The figure is
based on a poll of consumers. The increase suggests momentum and is
"a good sign leading into the much busier and important months to
come," said Matthew Shay, the trade group's president.
Retailers in coming months will look to back-to-school and
Christmas holiday buying to the lion's share of their annual sales.
They are also facing increasing cost pressures from rising cotton
and labor prices and will have to see what kind of price increases
shoppers will absorb.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
Ian Thomson contributed to this story
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