Retailers have ho-hum start to spring, see better April

Thu Apr 11, 2013 8:17pm EDT

A customer enters a Costco store in Shoreline, Washington in this file photo taken November 3, 2011. REUTERS/Anthony Bolante/Files

A customer enters a Costco store in Shoreline, Washington in this file photo taken November 3, 2011.

Credit: Reuters/Anthony Bolante/Files

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(Reuters) - Cold weather and lingering concerns about the job market dampened U.S. shoppers' enthusiasm and hurt early spring selling at several retailers in March, but some executives and analysts said they expected business to improve slightly in April.

Several top retailers, including Costco Wholesale Corp (COST.O) and TJX Cos Inc (TJX.N), the parent of T.J. Maxx, reported weaker-than-expected March sales.

The labor market recovery showed signs of losing momentum in March as employers hired at the weakest pace in nine months, raising concerns that consumer spending will be hurt.

"Anyone who thinks the consumer will come swinging out of the gate is fooling themselves," said Alison Jatlow Levy, retail strategist at consulting firm Kurt Salmon.

Many parts of the country also experienced the worst of winter in February and March, later than normal, causing shoppers to hold off on purchases of spring merchandise.

Costco's sales at stores open at least a year were up 4 percent, less than the 5.2 percent jump analysts had expected for the warehouse club discount retailer.

TJX, the owner of the low-price Marshalls chain as well as T.J. Maxx, reported a 2 percent decline in March same-store sales, deeper than the 1 percent drop analysts had projected. But the company said business improved as the weather warmed up, and Chief Executive Carol Meyrowitz said April "was off to a good start."

Michael Niemira, chief economist for the International Council of Shopping Centers, and others also expect things to improve for retailers in April as shoppers release some pent-up demand and lower gasoline prices boost their discretionary spending power.

The ICSC forecasts a 2 to 3 percent increase in April same-store sales, and a 3 to 4 percent gain excluding drugstores.

The arrival of delayed tax refunds for some customers should also help boost April sales, said Ken Perkins, president of consulting firm Retail Metrics.

The Standard & Poor's 500 Retail Index .SPXRT, which fell earlier on Thursday, rose as much as 1.8 percent to touch a more than one-year high, outpacing the broad S&P 500's .SPX 0.6 percent gain. The retail index finished the day up 1.22 percent.

POCKETS OF STRENGTH

The top 13 top U.S. retailers, including TJX Cos and Gap Inc (GPS.N), reported a combined 1.5 percent rise in same-store sales for March, just missing the 1.8 percent increase expected by analysts polled by Thomson Reuters. In March 2012 those retailers reported a same-store sales gain of 2.9 percent.

Excluding drugstore chains Walgreen Co (WAG.N) and Rite Aid Corp (RAD.N), whose results are heavily skewed by prescriptions sales, same-store sales were up 1.9 percent in March. That gain was smaller than the 2.2 percent rise expected by Wall Street and the 7.1 percent jump reported a year earlier.

There were some bright spots in the month, despite the slow job market and cold weather.

Victoria's Secret parent L Brands Inc LTD.N reported higher-than-expected sales at all of its chains. Companywide, same-store sales rose 3 percent, while Wall Street expected them to be flat according to Thomson Reuters data. The retailer's shares rose more than 5 percent.

Low-priced retailer Ross Stores Inc (ROST.O), which has less exposure to the colder regions of North American than larger rival TJX, posted an unexpected gain in same-store sales. It said it now expected its quarterly profit to come in slightly above its earlier forecast of $1.00 to $1.04 per share. Its stock rose 7.5 percent.

Zumiez Inc (ZUMZ.O) and Buckle Inc (BKE.N), whose target market of younger shoppers is particularly exposed to economic vagaries, both reported stronger-than-expected numbers. American Apparel Inc (APP.A) said its March same-store sales were up 8 percent.

In the case of Gap, the news was not as bad than expected. March same-store sales were down 1 percent, less than the 2.1 percent drop analysts expected.

PAIN OF COLD WEATHER

Many retailers were hampered by the cold start to March, prompting many shoppers to put off buying warmer-weather clothing.

Also, Easter fell on March 31 this year, compared with April 8 last year. With the wintry weather leading up to the holiday, shoppers may have held off on buying clothes for spring.

Low-priced specialty clothing chain Cato Corp (CATO.N), regional department store operator Stein Mart Inc (SMRT.O) and discount general merchandise retailer Fred's Inc (FRED.O) all blamed weather and Easter's timing for steeper-than-expected drops in March same-store sales.

Last week, Rite Aid said its same-store sales fell 2 percent, but sales of general merchandise, a closer proxy to consumer discretionary spending, rose 3.8 percent.

Larger rival Walgreen reported a modest 0.7 percent same-store sales gain, with a better showing for general merchandise, which beat expectations.

(Additional reporting by Jessica Wohl in Chicago and Lisa Baertlein in Los Angeles; Editing by Jeffrey Benkoe, Lisa Von Ahn, Leslie Adler and Richard Chang)

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