NEW YORK — Forget March. This spring, comps are all about April.
The International Council of Shopping Centers said Thursday that March same-store sales rose at the softest rate since November 2004 for a weaker-than-expected 1.9 percent gain. Michael Niemira, chief economist at ICSC, described March results as “calendar-depressed” due to the Easter holiday falling on April 16, three weeks later than last year. The economist estimated that the shift shaved 1 to 1.5 percentage points from the month’s comps and that April would benefit. April comps are expected to grow 5 percent in aggregate, the ICSC said.
Following the weak March results, all eyes have turned to April. And luckily for retailers, market watchers have a hefty amount of guarded optimism.
“The American consumer has shown a lot of resilience. Employment is going up. Fuel prices are rising, but we’ve managed. Interest rates are going up, but have been for a while. Part of you starts to think that, at some point, things are going to slow down. It hasn’t happened yet,” said Chris Donnelly, a partner in the retail practice at consultancy Accenture Ltd.
“Maybe everyone is just taking a breather … [Historically,] these are just not big consumer spending months,” Donnelly explained, referring to February and March.
It’s also possible, said Brady Lemos of investment research firm Morningstar, that the industry could be putting too much stock in the average consumer’s view of the U.S. economy. “Maybe the consumer is not really paying attention. The macroeconomic environment doesn’t really concern them that much,” said Lemos, who noted the big home heating bills analysts had feared would affect disposable spending were somewhat of a problem this winter, but didn’t have a huge impact on holiday shopping.
Luxury department stores remained hot in March, but specialty retailers, especially those focused on teens, had a weak month, as did the moderate department store space — with the exception of Kohl’s Corp. Nordstrom Inc. delivered a higher-than-expected 4.3 percent comp increase and Neiman Marcus Group had a 7.4 percent jump. But at Aéropostale Inc., comps declined 9.3 percent; projections had been for a 2.8 percent decrease.
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“We really did see a delay in when retailers were putting up those spring/Easter displays, and you really saw a lot of discounting from the retailers on their first round of merchandise,” Donnelly said. Consequently, first-quarter gross margins could be affected.
Among the 50 retailers tracked by WWD, 25 posted positive comps and 21 had negative results. Three companies, Dillard’s Inc., Federated Department Stores Inc. and Abercrombie & Fitch Co., had flat comps. Results for Retail Ventures Inc. were not available.
March consolidated comps by sector showed the mass merchants with the highest monthly gain, 1.6 percent, benefitting from a robust 4 percent comp gain from Ross Stores Inc. The department store group beat the specialty store sector with a respective 0.3 percent average advance and a 0.6 percent average decline in March comps.
“It wasn’t a great couple of months for most retailers across the board,” said Donnelly. “Even those that posted positive numbers — again, with the exception of luxury, which seems undaunted — they weren’t good numbers.”
A post-Christmas lull of this nature is normal, added Donnelly, and Easter benefits seesaw between April and March.
Claire’s Stores Inc.’s 3 percent decline in March comps was due to the holiday timing. Marla Schaefer, co-chairman and co-chief executive officer, said, “Our consolidated March results seem to be a mirror of last April, when we reported negative comparable-store sales as a result of the Easter shift. Our expectation is that our April comparable-store sales will return to positive territory.”
Most retailers, and most analysts who cover the sector, plan to look at March and April comp results combined to get a better sense of the strength of consumer spending.
Having reported flat March comps, Federated said it expected April same-store sales to be down 2.5 to 3.5 percent. Meanwhile, discounter Wal-Mart — with a 0.8 percent March increase from its Wal-Mart stores and a weaker-than-expected 1.4 percent combined Wal-Mart-Sam’s Club increase — forecast April comps to increase 4 to 6 percent.
Elsewhere during March, Gap Inc. had continued weakness in customer traffic, delivering respective March comp declines of 13 percent, 7 percent and 15 percent from its Gap, Banana Republic and Old Navy brands, respectively. Only Banana Republic’s results beat analysts’ estimates, while the Old Navy and Gap divisions came in significantly weaker than expected.
Richard Jaffe, an analyst with Stiffel Nicolaus, noted in a report that Gap’s “merchandise continues to struggle; however, we are encouraged by improved customer acceptance of merchandise at Banana Republic and, to a lesser degree, Old Navy.”
Kohl’s was a standout performer in the moderate department store arena with a 3.7 percent March comp gain. The company said on a recorded call that sales in its home store were strong in the month and it expects the apparel business “will lead the company comp in April as a result of the Easter shift and changes to our marketing calendar.”
Said Donnelly: “Kohl’s is very consistent with their sales. They’re not like other retailers that have a bunch of markdowns [because] they overstock … They don’t have a blowout [sale]; that’s how Kohl’s manages their sales.”
The teen space was hit hard by later spring breaks, which tend to coincide with the Easter holiday each year. Aside from Aéropostale’s decline, habitual comp-store sales leaders American Eagle Outfitters Inc. and Abercrombie & Fitch Co. posted positive 3 percent and flat March comps, respectively. At A&F, jeans were weak performers in the month for girls at adult Abercrombie and Hollister stores, the company said on a recorded call.
Despite its weak comps, Aéropostale shares rose 6.4 percent Thursday, closing New York Stock Exchange trading at $30.70. Morningstar’s Lemos thinks the stock rose because investors already had expected weak comps due to the retailer’s shift in strategy to offer more fashion merchandise and less markdowns.
Another strong stock performer was Bebe Stores Inc., which rose 13.3 percent to end on Thursday at $19.22, following the company’s strong 4.1 percent increase in March comps.
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