Retail Sales Disappoint in March

L.A. Times Archives

April 7, 2006 12 AM PT

From the Associated Press

NEW YORK —

A moderating economy and cooler weather gave shoppers little incentive to spend 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 major merchants reported their monthly results Thursday, Gap Inc. and Sharper Image Corp. were among the disappointments. Bright spots were 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 -- showed that even younger shoppers, who had been splurging on jeans and other fashions, were not spending as much of their discretionary income.

The International Council of Shopping Centers’ sales tally of 60 retailers rose a slim 1.9% in March from a year earlier, less than the 3% gain originally expected for the month. That marked the weakest sales growth since November 2004, when the tally rose 1.8%.

The survey tabulates same-store sales, or results from stores open at least a year, considered the best indicator of a retailer’s performance.

March’s tempered sales reports followed a disappointing February, when the council’s tally showed a 3.2% gain. January was a robust month as shoppers, armed with holiday gift cards, spent enthusiastically, resulting in a 5% increase.

Analysts estimate that the change in Easter -- which falls on April 16 and is three weeks later than last year -- depressed March sales by 1 to 1.5 percentage points; they expect April results to be boosted by that amount.

Although temporary factors such as the lateness of Easter and cool weather helped limit spending, analysts also said consumers continued to contend with other factors.

Chief among these are higher interest rates, which make financing debt more expensive, and higher gasoline prices. A cooling housing market also has limited some shoppers’ ability to take 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 nearly four-year high.

A report from the Labor Department on Thursday provided further evidence of the market’s strength. The number of Americans filing claims for unemployment benefits fell for a third straight week.

Still, analysts say retailers are partly to blame for what is winding up to be a lackluster spring season.

Stores are showing a great deal of beige and white clothing, a big difference from the bright colors dominating selling floors a year ago. Teen retailers are doing well with cargo capris, but no single item is exciting older shoppers.

“There’s not a lot of compelling fashion,” said John Morris, retail analyst at Harris Nesbitt.

Wal-Mart Stores Inc. posted a 1.4% gain in same-store sales, in line with the 1.2% estimate from analysts surveyed by Thomson Financial but the smallest gain in almost a year. Sales at Target Corp. rose 2.2%.

Costco’s same-store sales rose 7%, beating the 5.9% estimate. Upscale Nordstrom posted a solid 4.3% gain, better than the 3.4% forecast.

Gap, which continues to struggle to find the right merchandising formula, suffered a 13% drop in same-store sales last month, worse than the 7.3% decline Wall Street expected.

Sharper Image, which has lost its edge to rivals in offering the latest high-tech gadgets, posted a 29% drop.

Teen retailer Abercrombie & Fitch Co. said same-store sales were unchanged in March from a year earlier. Analysts had expected a 3.6% increase.

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Spring ahead

Year-over-year percentage change in March sales at stores open at least a year

Company (% change)

Wet Seal (+16%)

Guess (+8.1%)

Gymboree (+5.0%)

Nordstrom (+4.3%)

Bebe (+4.1%)

Ross (+4.0%)