Retailers Thursday reported record year-over-year gains in sales
at stores opened more than a year as indications continue to grow
that consumers are spending again.
Same-store sales rose 9.1% last month, according to Thomson
Reuters, the best monthly showing since the firm began tracking the
figures a decade ago. Retailers benefited not only from improved
consumer confidence but also from easy year-ago comparisons,
increased Easter shopping and warmer weather.
From discounters to luxury apparel stores, retailers surpassed
bullish analyst expectations and pointed to broad product demand
for merchandise that did not carry the kinds of markdowns that were
so common just months ago.
Despite the good news, though, many retail stocks slid in early
trading Thursday, following the broader market lower on
disappointing jobless claims figures. Retail stocks have outpaced
the market this year, with many near multiyear highs. Also, there
are concerns April sales are likely to be weaker, reflecting in
part the shift in Easter, and that consumers are slowing down their
spending with credit cards.
"We're on a path back here, but that does not mean we might not
slip in the months during the remaining part of this year," said
Madison Riley, managing director of North America retail for Kurt
Salmon Associates.
Employment, a key catalyst for spending, is still high and
"consumers are nervous because there are still questions about when
we will be on solid footing, Riley said.
Nonetheless, the increase in March same-store sales was
impressive. Same-store sales, a key retail metric, count only sales
at stores open at least a year. Wal-Mart Stores Inc. (WMT) doesn't
disclose monthly sales figures.
The strong growth, in a month in which many retailers unveil
spring merchandise at full price, suggests consumers are feeling
more confident about paying a higher price, a potential boost to
retailers' first-quarter margins. Thursday, a number of
retailers--including Target Corp. (TGT), J.C. Penney Co. (JCP), TJX
Cos. (TJX) and Kohl's Corp. (KSS)--raised their first quarter
expectations.
"Underlying sales trends look strong, and we believe retailers
are setting up for a very good first quarter," said Daniel Binder,
retail analyst at Jefferies.
Retailers cited the ability to sell items at fuller prices. For
example, Limited Brands Inc. (LTD) said its merchandise margin rose
because of an increase in full-price selling and not repeating a
spring sale it held last year.
Target Corp. (TGT) cited "particular strength" in apparel, a
discretionary category that has been vexing for retailers and
expressed confidence by saying first-quarter earnings per share
should be at least 10 cents above Wall Street's view of 74
cents.
Macy's Inc. (M) said its namesake stores as well as its
upper-end Bloomingdale's stores performed above expectations pretty
much across all categories in March and online sales were also
strong, rising by 40%. Macy's overall same-store sales for the
month rose 10.8%, when a 7.9% gain was expected.
Saks Inc. (SKS), whose same-store sales rose 12.7% in March,
ahead of analysts' projections for a 5% gain, also pointed to
strength in its regular stores and lower-priced outlets.
The two notable disappointments were apparel retailer
Abercrombie & Fitch Co. (ANF) and department store J.C. Penney.
Abercrombie posted a 5% increase in same-store sales when Wall
Street expected 6.6% growth, and J.C. Penney's same-store sales
rose 5.4%, below the 5.7% analysts expected. J.C. Penney did
increase its first-quarter earnings estimate, but not enough to
keep its stock from sliding 3.9% Thursday.
Teen apparel, always a good indicator of discretionary spending,
showed particular strength in March as Zumiez Inc. (ZUMZ) and Hot
Topic Inc. (HOTT) reported better-than-expected results.
Ironically, Hot Topic reported the worst same-store sales
result, down 7.5%, but its shares are rising the most, up 15%,
because the decline was narrower than the expected 11.2% drop and
the company announced a special one-time cash dividend of $1.
Retailers were setting up for a big March, with several
indicators suggesting improvement after the industry struggled last
year under the weight of the economic downturn.
The retail industry added 14,900 jobs in March, its third
straight month of expansion after shedding over 1 million positions
since the recession began in December 2007.
Import cargo volume at the nation's major retail container ports
is expected to rise 8% in April compared with a year ago, and solid
increases are expected to continue through the summer as the US
economy improves, the National Retail Federation said.
"Retail sales are starting to improve, and retailers are
importing merchandise in the quantities they need to meet that
demand," said NRF spokesman Jonathan Gold.
It is not likely to be a completely smooth path for retailers
because consumers are still watchful of their wallets. The latest
indication came Wednesday with word that Americans put their credit
cards back into the drawer in February, an indication they aren't
ready to spend briskly despite the economy's improvement. Consumer
credit fell $11.5 billion in February, the Federal Reserve
said.
Retail stocks have been ahead of the industry's improved sales
figures, with many shares trading at multi-year highs coming into
this week after the group bottomed in March 2009. Big advances from
here may be more hard fought because of the extended run-up and the
stocks now pricing in improving conditions, analysts say.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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