Mother Nature proved a more formidable foe to retailers in February than did cautious consumers.
Despite easier comparisons and improving general economic trends, retailers preparing to report monthly comparable-store sales results Thursday saw many of their hopes for a strong reaction to new spring merchandise last month frustrated by heavy snowstorms not only in the Northeast and Midwest, but also in usually less frigid Middle Atlantic and Southeastern locales as well. Analysts said the difficult winter weather kept many customers indoors, or more focused on remaining cold-weather apparel, and will weigh heavily on February comp trends.
Not all the trends were as discouraging as the weather. Barclays Capital retail analyst Jeff Black said spending appeared to continue to thaw in other regions of the country in February. This month, comps should benefit from not only more moderate weather but also the benefits of an early Easter shift.
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“Weather restrained sales in many parts of the country, but commentary from retailers that have reported fourth-quarter results suggests February showed some decent strength despite the snow,” he said. “We continue to believe that a healthier picture for comps is emerging as transactions improve against easy value comparisons.”
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Michael Niemira, the International Council of Shopping Centers’ director of research and chief economist, commented, “The month finished [slightly off] as a result of another storm in the Northeast, which pared the consumer’s ability to shop. However, the impacts from nature and the light volume of February sales make it difficult to read too much into this month’s performance. ICSC Research continues to anticipate that February will post positive sales results and may be up about 2.0 percent.”
According to sequential figures compiled by the ICSC and Goldman Sachs, sales fell 0.8 percent during the month’s final week after a 2.3 percent gain in the third week. The first and second weeks of the month saw a gain of 1.4 percent and a decline of 1.6 percent, respectively. On a year-over-year basis, sales rose 1.8 percent in week one, fell 0.7 percent in week two and rose 0.9 percent and 0.7 percent in weeks three and four, respectively.
According to Brean Murray, Carret & Co. retail analyst Eric Beder, the “start of spring selling was somewhat delayed, or at best ran in fits and spurts through February,” with the exception of Presidents’ Day and Valentine’s Day weekend.
“As such, we believe results will be weaker than expected, even with very easy comparisons. The only saving grace is the relative unimportance of this month,” Beder said, dubbing February “back to blah.”
Brian Tunick, a retail analyst at J.P. Morgan, was more bullish. “Despite pretty terrible weather this month and a decent Valentine’s Day and Presidents’ Day combo last year, it appears the consumer is rebuilding their appetite for consumption — or at least willing to pay full price again,” he said. “While mall traffic is projected to be flat for the month, it does sound like increased conversion and lower markdowns were key to the comp gains.”
MKM Partners specialty retail analyst Linda Tsai agreed, adding she believes “underlying consumer spending trends continued to improve modestly in February, which could be seen in a spike of traffic and sales over Presidents’ Day weekend.
“Don’t let the snowstorms blind you to improving trends,” she said, pointing to recently released earnings reports from retailers, which suggested “pretty good” sales.
“This better-than-expected trend could ultimately offset the negative effect of the storms for many retailers,” she said.
Beyond February, analysts pointed to product improvements, better weather and positive calendar shifts into March.
“Looking ahead, we believe controlled inventories will help protect margins, and those with the right product and the ability to drive top-line improvements should continue to outperform,” said FBR Capital Markets retail analyst Adrienne Tennant.
Tennant also reminded investors that “with Easter shifted earlier by one week this year, we should see a positive impact to March sales as many noncollege spring breaks move from April week one last year to March week five this year.”