A moderating economy and cooler weather gave consumers little incentive to shop in March and left retailers with tepid sales for the second month in a row. The later arrival of Easter this year also hurt business, but should help boost results in April.
As the nation’s merchants reported their monthly results Thursday, Wal-Mart Stores Inc., J.C. Penney Co., Gap Inc., Abercrombie & Fitch Co. and Sharper Image Corp. were among the disappointments. Bright spots were wholesale club operator Costco Wholesale Corp. and Nordstrom Inc., both of which beat Wall Street expectations.
“We are seeing the economy slowing down, and that is affecting same-store sales,” said Jharonne Martis, an analyst at Thomson Financial.
Martis noted that the downbeat results from teen retailers — their second straight disappointing month — show that even younger shoppers, who had been splurging on pricey jeans and other fashions, are not spending as much of their discretionary income.
The International Council of Shopping Centers-UBS sales tally of 60 retailers rose a slim 1.9 percent in March, less than the 3.0 percent gain originally expected for the month. It marked the weakest sales growth since November 2004, when the tally rose 1.8 percent.
The tally is based on same-store sales, or sales at stores opened at least a year. Same-store sales are considered the best indicator of a retailer’s performance.
The tempered sales reports followed a disappointing February, when the ICSC tally posted a 3.2 percent gain. January was a robust month as consumers, armed with holiday gift cards, shopped enthusiastically, resulting in a 5.0 percent increase.
While temporary factors like the lateness of Easter and cool weather helped limit spending, analysts also said consumers are contending with higher interest rates, which makes financing debt more expensive, and higher gasoline prices. A cooling housing market has also slowed the trend of people taking cash out of their appreciated homes through refinancings and home-equity loans.
One positive factor has been solid gains in the job market, which helped consumer confidence rebound in March to a near four-year high.
A report from The Labor Department released Thursday provided further evidence of the market’s strength. The number of Americans filing claims for unemployment benefits fell for a third straight week. The government said that 299,000 laid-off workers applied for jobless benefits last week, down 5,000 from the previous week after declines of 8,000 and 7,000 in the two previous weeks.
Still, analysts say retailers were partly to blame for what is winding up to be a lackluster spring selling season. Stores are showing a great deal of beige and white clothing, a big difference from the bright colors dominating the selling floors a year ago. Teen retailers are doing well with cargo capris, but there isn’t one fashion item that is exciting older consumers.
“There’s not a lot of compelling fashion,” said John Morris, retail analyst at Harris Nesbitt.
Wal-Mart posted a slim 1.4 percent gain in same-store sales, in line with the 1.2 percent estimate from analysts surveyed by Thomson Financial.
Wal-Mart blamed a late Easter, which falls on April 16 and is three weeks later than last year, for depressing results. The retailer said it expects same-store sales gains to improve to 4 percent to 6 percent in April.
Because of the calendar shift, retailers and analysts look at March and April results combined to assess sales trends.
Analysts estimate that the change in Easter depressed sales anywhere from 1 percent to 1.5 percent in March, while April results should be boosted by that amount.
Rival Target Corp. had a 2.2 percent gain in same-store sales, in line with the 2.1 percent increase analysts expected.
Costco Wholesale Corp.’s same-store sales rose 7 percent, beating the 5.9 percent estimate.
Upscale Nordstrom posted a solid 4.3 percent gain in same-store sales, better than the 3.4 percent forecast. Saks Inc., which operates Saks Fifth Avenue, had a 0.6 percent decline; analysts had expected a 1.7 percent gain.
Moderate-priced department stores had modest gains. Federated Department Stores, which acquired May Department Stores Co. last year, saw its same-store sales unchanged from a year ago. Analysts had expected a 0.6 percent increase. Same-store sales include only Macy’s and Bloomingdale’s locations. It also forecast a same-store sales decline of 2.5 percent to 3.5 percent in April, reflecting a late Mother’s Day.
J.C. Penney, whose results typically please Wall Street, had a disappointing 1.0 percent decline in same-store sales in its department store business. Analysts expected a 2 percent gain.
Limited Brands Inc. had a modest 2 percent gain in same-store sales, below Wall Street’s 2.7 percent estimate.
Gap, which continues to struggle to find the right merchandising formula, suffered a 13 percent drop in same-store sales last month, worse than the 7.3 percent decline Wall Street expected.
“Our March performance reflects the challenges we face to increase the frequency of customer visits to our stores,” said Sabrina Simmons, senior vice president, treasury and investor relations, in a statement.
Gap also said it expects same-store sales to remain negative in the first half of the year.
Sharper Image — which has lost its edge to other rivals in offering the latest high-tech gadgets — posted a 29 percent drop in same-store sales, worse than the 20.2 percent decline analysts expected.
Teen retailers, which have been on a winning streak, also saw business slow last month. Abercrombie & Fitch said same-stores sales were unchanged in March from a year ago. Analysts had expected a 3.6 percent increase.
On Wednesday, American Eagle Outfitters Inc. said same-store sales rose 3 percent, less than the 3.8 percent forecast.