Retailers surprise with March sales strength

CHICAGO Thu Apr 7, 2011 2:11pm EDT

A shopper loads his cart at a Costco Wholesale store in Arlington, Virginia August 6, 2009. REUTERS/Richard Clement

A shopper loads his cart at a Costco Wholesale store in Arlington, Virginia August 6, 2009.

Credit: Reuters/Richard Clement

CHICAGO (Reuters) - Shoppers scooped up bright spring clothing in March, painting a more upbeat picture of consumer spending as the job market improves.

Retailers from lingerie chain Victoria's Secret to upscale department store Saks Inc reported much stronger-than-anticipated sales on Thursday, while Gap Inc was one of just four chains to miss expectations.

The improving job and stock markets have given shoppers more spending power, although some of the extra dollars in their pockets must pay for pricier food and gas.

"The stock market doing as well as it has been doing kind of fuels the fire to generate the additional sales for not only the high-end stores, but the moderate-priced stores also," said Al Ferrara, national director of the retail and consumer product practice at accounting and consulting company BDO USA.

U.S. retailers overall had been expected to show their first same-store sales decline since August 2009, in part because Easter falls three weeks later than last year, which delays some spring purchases.

However, sales at stores open at least a year rose 1.7 percent in a tally of 25 retailers, topping expectations of a 0.7 percent decline, according to Thomson Reuters.

Victoria's Secret owner Limited Brands Inc said its total same-store sales rose 14 percent, as college students picked up new Pink merchandise for March spring breaks. Analysts were expecting just a 1.5 percent increase.

"The retailers that have the right assortment are still doing well," said Tom Clarke, director of AlixPartners' global retail practice.

Gap was a notable outlier. Its same-store sales fell 10 percent, or 3 percentage points more than expected.

The clothing retailer blamed some of the weakness on the March earthquake in Japan, where it has more than 150 stores.

Gap expects problems in Japan to cut first-quarter earnings by about 4 cents per share, bringing them below the analysts' average estimate of 44 cents. It gave that forecast before a major aftershock hit northeast Japan.

Gap's shares fell 1.4 percent.

The Standard & Poor's retail index was nearly unchanged, while the broader S&P 500, which at Wednesday's close was up 6.2 percent since the start of the year, fell 0.4 percent.

LATEST EASTER IN DECADES

Consumer spending -- which accounts for about 70 percent of U.S. economic activity -- got off to slow start in the first two months of 2011, held back by bad weather.

While the unemployment rate is still high, the government reported a decline in new claims on Thursday, and more than a half-million new jobs have been created in the past four months.

As a result, some people feel like they have more wiggle room to shop.

"This March I spent more than last March because I was searching for a job last March," said Jane Marcinkiewicz. A 37-year-old mother of two from New York's Harlem neighborhood, she works part-time at a department store.

Costco Wholesale Corp and BJ's Wholesale Club Inc each rang up bigger-than-expected gains, in part because the gasoline they sold was more expensive.

Still, analysts do not expect most of the impact of higher prices to show up in consumer spending until later this year.

Chains focused on clothing were pleased that shoppers decided not to wait to buy their spring gear.

TJX Cos Inc said it was "very comfortable" with its quarterly earnings outlook, while Macy's Inc said its sales in March and April should come in stronger than it had anticipated. TJX shares were down about 1 percent after an early rise, while Macy's edged up 0.5 percent.

Still, the retailers' reports did not clearly show whether higher sales were mostly due to inflation or if they could help profits.

"Now we're entering the period when retailers have to decide whether to increase prices or reduce gross margins," AlixPartners' Clarke said. "That risk is now here."

March sales reports do not paint the full picture of the consumer economy as the retailers that still issue monthly figures account for only 10 percent of total U.S. retail sales, according to Customer Growth Partners President Craig Johnson.

Wal-Mart Stores Inc, Home Depot Inc, Best Buy Co Inc and others do not give monthly tallies.

(Reporting by Jessica Wohl and Brad Dorfman in Chicago; Lucia Mutikani, Dhanya Skariachan, Phil Wahba in New York; and Nivedita Bhattacharjee in Bangalore; Editing by Phil Berlowitz and Lisa Von Ahn)

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Comments (9)
varela wrote:
How come no republican comments about how this is somehow the liberal media or unions controlling the numbers on retailers? Maybe, just maybe President Obama started some policies that actually helped the economy.

Apr 07, 2011 11:20am EDT  --  Report as abuse
jrj90620 wrote:
Some retailers doing better than others but,overall sales not rising as fast as prices,so there is a real decline,when adjusted for real inflation.So,the Fed’s devaluing of our dishonest fiat currency can save a few jobs,but like everything govt does,the final result is just a continued lower standard of living for the majority.More govt actions just means more wealth wasted.

Apr 07, 2011 12:26pm EDT  --  Report as abuse
varela wrote:
@jrj90620 – I understand that this is an average; so some company’s do better then others. But I see an average increase better then an average decrease as we had in 2010… But then again I see the glass as half full.

Apr 07, 2011 12:53pm EDT  --  Report as abuse
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