| NEW YORK
NEW YORK An early Easter holiday, a cold, damp month and a budget-conscious consumer combined to ring up the weakest March monthly sales results for U.S. retailers in 13 years.
The tough conditions took a toll on retailers ranging from discount behemoth Wal-Mart Stores Inc (WMT.N) to department store operator Kohl's Corp (KSS.N) to apparel retailer Gap Inc (GPS.N), which all reported monthly sales figures below Wall Street estimates.
March sales at chain stores open at least a year, or same-store sales, fell 0.5 percent, based on a preliminary tally of 37 retailers by the International Council of Shopping Centers. It was the weakest March performance since 1995.
"With consumers' wallets firmly closed and an earlier Easter, colder weather and the most difficult comparisons of the quarter for most players in place, March had all the ingredients for the weakest results in the last few years ... and it did not disappoint," Brean Murray, Carret & Co analyst Eric Beder wrote in a research note.
Despite the poor results, investors snapped up retail stocks, sending the Standard & Poor's retail index .RLX up 2.2 percent in afternoon trading after five sessions of declines.
Patricia Edwards, managing director at investment firm Wentworth, Hauser and Violich, attributed some of the gains to short covering, or traders who had been betting on declines moving to cover their positions. She also said investors were taking a bet that conditions should improve for retailers.
"They're looking through the valley of the recession to the other side," she said.
Wal-Mart's March sales at U.S. stores open at least a year rose 0.7 percent, below analysts' estimate of a gain of 0.9 percent. But the retailer raised its first-quarter earnings forecast, citing expense controls and fewer markdowns.
Costco Wholesale Corp (COST.O) and BJ's Wholesale Club Inc BJ.N were also bright spots. Their sales were stronger than expected as shoppers headed to warehouse locations to fill their tanks at the clubs' less-expensive gas stations.
CONSUMERS CAN'T KEEP CONSUMING
The ability of U.S. consumers to keep spending is being tested by rising food costs, high gasoline prices, falling home values, a credit market crunch and a weakening job market.
That has consumers passing over purchases of nonessential items, like furniture, clothes or jewelry, in favor of basics, like detergent and pasta sauce. For instance, Wal-Mart said sales of food, consumables and dry grocery items at its discount stores were strong.
Meanwhile, under other circumstances, Easter shopping could have boosted March sales results, spurring early consumer demand for spring merchandise.
But the holiday was March 23 this year, the earliest Easter in 95 years, and it came during a cold, wet month when many consumers were still wearing coats, sweaters and boots.
That gave cash-strapped shoppers an easy excuse to pass on purchases of spring clothing. Apparel retailers Abercrombie & Fitch (ANF.N), Chico's FAS (CHS.N), and American Eagle Outfitters Inc (AEO.N) posted sales declines that were bigger than Wall Street expected.
Gap's sales at stores open at least a year plunged 18 percent, hurt by weak sales in its Old Navy women's clothes and lower promotions at its namesake brand.
Department store operators Kohl's, Dillard's Inc (DDS.N), Nordstrom Inc (JWN.N) and Saks Inc SKS.N all reported steeper-than-estimated drops in sales.
J.C. Penney Co Inc's (JCP.N) same-store sales fell 12.3 percent. Its Chief Executive Myron "Mike" Ullman told reporters at the World Retail Congress in Barcelona that he did not see conditions improving before the end of the year.
"I don't think we're very optimistic about it ending any time soon," he said.
EASTER SHIFT CLOUDS RESULTS
Analysts cautioned March sales could look especially weak because retailers face tough comparisons to a year ago.
Last year same-store sales rose 6 percent, according to Retail Metrics, when Easter fell on April 8, which was late enough in the monthly reporting period to generate strong sales of spring merchandise.
With the Easter calendar shift affecting March and April sales every year, analysts say that investors need to look at March and April sales results combined to get a better picture on the strength of retail sales.
Many retailers forecast stronger sales for April. Wal-Mart said it expects April U.S. same-store sales to rise between 1 and 3 percent. Target forecast April same-store sales to increase in the mid-single-digit percentage range.
Target's March same-store sales fell a bigger-than-expected 4.4 percent.
While looking at March alone could paint too bleak a picture, analysts also cautioned that looking at April alone may paint too rosy a picture.
"April comps (comparable-store sales) are likely to improve due to the shift, but this will only mask the underlying weakness in consumer spending," Todd Slater, retail analyst at Lazard Capital Markets, wrote in a research note.
But Bernard Sosnick, analyst with Gilford Securities, said investors are already betting that the business environment can only get easier for retailers.
"That doesn't mean it's going to be a good retail environment," he said. "But once investors think they've seen the worst, then stocks begin to respond positively."
(Additional reporting by Sonya Dowsett in Barcelona)
(Reporting by Nicole Maestri; Editing by Steve Orlofsky and Dave Zimmerman)