Retailers posted soft March sales gains Thursday as abnormally
cold weather and an early Easter dampened spending, leaving
shelves bulging with spring merchandise.
March sales at stores open at least a year rose 1.4% vs. a
year ago, says Ken Perkins, president of Retail Metrics. The
results were roughly in line with analysts' already lowered
expectations. Only 43% of retailers beat views, while 57%
"But the numbers could have been worse, given the head winds
some of the retailers were facing," Perkins said.
Easter holiday store closures on March 31 hurt many retailers,
especially apparel chains, as they lost a weekend day of sales
vs. March of last year, he says.
Retailers faced difficult weather comparisons with March 2012,
when above-normal temperatures led to strong spring apparel
sales. This March, abnormally cold weather and above-normal
snowfalls in parts of the U.S. hurt spring clothing sales and
chilled sales of lawn products and outdoor furniture.
But the month saw some winners. Shares ofZumiez (
) rocketed 15.66% in midday trading as the action sports retailer
posted the biggest upside surprise of the group, with a 2.1% gain
in March comps vs. a year ago, ahead of forecasts for an 8%
Other chains -- including Victoria's Secret's parent LBrands (
) and off-price retail operatorRoss Stores (
) -- also saw strong stock-price gains after reporting same-store
sales ahead of views. Shares of warehouse club giantCostco
) and off-price retail operatorTJX Cos. (
)also saw a nice uptick.
But overall the showing was a mixed bag.
Costco led the pack in March with a 4% rise in same-store
sales, below forecasts for a 5.6% rise, as it got stung by lower
fuel prices and a strong dollar. But when you look at its core
business, excluding the impact of gas and international weakness
on its sales, comps were roughly in line with views, Perkins
L Brands was among the handful of chains that beat views. It
posted a 3% rise in same-store sales vs. a year ago, compared
with forecasts for roughly flat sales.
Ross saw a 2% increase in March comps vs. a year earlier,
besting forecasts for a 1.3% decline. CEO Michael Balmuth expects
a 5% to 6% rise in April comps.
After Thursday's bell, apparel giantGap (GPS)saw comps slip 1%
from a year earlier, slightly ahead of forecasts for a 1.9%
TJX saw same-store sales slip 2% in March, below forecasts for
a 1.4% decline. But April is looking better. "April is off to a
good start, our inventories are in great shape, and we are seeing
an enormous amount of desirable product in the marketplace," said
TJX CEO Carol Meyrowitz in a statement.
The specialty apparel group was the month's weakest performer,
with a 0.2% decline in same-store sales.
In addition to the weather drag, retailers faced other head
winds in March. Macroeconomic data softened during the month as
both weekly jobless claims and non-farm payrolls weakened.
Still, Perkins isn't putting too much weight on the March
"The hope is it doesn't say much about consumer spending," he
said. "There were some one-time mitigating circumstances taking
place in March."
He says you have to look at same-store sales for March and
April in tandem to determine any kind of a spending trend.
Perkins expects a sequential improvement in April from
sluggish March results as consumers continue to benefit from
delayed tax refunds playing catch-up, falling gas prices and an
extra selling day relative to last year due to the Easter holiday
L Brands, Ross Stores and TJX are among those retailers
expected to see April comps up in the mid-single-digit range,
"Hopefully, the rise in the stock market and continued uptick
in home prices will lead to consumers feeling better about their
net worth and spending," Perkins said.
Michael Niemira, chief economist at the International Council
of Shopping Centers, also calculates that March same-store sales
rose 1.4% vs. a year ago.
The cold weather blast was a drag on retailers' comps in
February and March, he says. But that means some pent-up demand
has been built up that could be helpful to sales of items like
apparel in April.
"I am optimistic that April's numbers will have a more
positive outlook, as warmer temperatures should drive demand for
seasonal apparel," Niemira said.
Niemira expects April same-store sales to increase in the
range of 2% to 3% vs. a year ago.
Given how slow sales have been, retail inventories should be
in relatively good shape, adds Perkins. But retailers will still
have to discount to clear out spring merchandise this month,
which "certainly" will erode margins a bit, he says.
Overall, the environment for retailers is lukewarm.
"The hourglass/barbell situation continues onward," said
High-end retailers -- such as Michael Kors (KORS),Nordstrom
(JWN),Tiffany (TIF)andCoach (COH) -- should fare better than the
rest of the group, Perkins says. He expects the lower end of the
barbell -- including discount chains like Costco, dollar stores
and off-price retailers like TJX and Ross -- to also fare better
than other segments of retail.
But he sees the midtier department stores and specialty
apparel chains having a little tougher time in this retail
Retailers continue to face head winds. A low savings rate and
slow employment growth are among them, Niemira says. And he sees
a relatively "sluggish" rate of economic growth in the second,
third and fourth quarters.
"As long as we're in a sluggish economic growth pattern, we
can't expect a lot of growth from the retail sector," Niemira