Retailers report smaller sales declines in April
Despite smaller sales declines in April, the nation’s merchants still face daunting economic conditions that are expected to hamper consumer spending for much of the year.
At the outset, sales figures reported by major chain stores Thursday appeared stronger than in recent months, with fewer double-digit declines and a handful of surprisingly strong performances, including Ross Stores Inc. and TJX Cos., which operates T.J. Maxx and other off-price chains. Nearly two-thirds of the retailers surveyed by Thomson Reuters beat expectations.
But analysts cautioned against interpreting the data as a sign that spending was improving and that the economy was poised for a quick recovery.
A later Easter date that pushed the holiday from March into April this year helped boost sales and masked the underlying problems that remain in the retail industry, said Michael Niemira, chief economist of the International Council of Shopping Centers.
Based on a tally of 32 major chain stores, the council found that sales at stores open at least a year rose 0.7% compared with April 2008. But factoring in the effect of the Easter shift would lower the industry’s performance by 3 percentage points, Niemira said.
Looking at March and April together, he said the two-month period registered a sluggish 0.6% decline.
“March overstated the weakness and April overstates the strength,” he said. “There were a lot of things across the month that started to look more positive, but it didn’t seem to have a material impact.”
Prolonged job fears have left consumers such as Tracy Rodgers, 52, unwilling to spend on anything but basic items. At Westfield Santa Anita mall in Arcadia this week, Rodgers said she would start shopping freely “in a year or so -- when I feel more comfortable with everything.”
“I think twice about buying,” the drugstore manager from Seattle said. “Like today, I saw a lot of things that I liked, but what I did buy I bought for my granddaughters.”
Total retail sales were helped by another healthy performance by discount giant Wal-Mart Stores Inc., which posted a 5% sales gain, excluding fuel sales. The world’s largest retailer has benefited from consumers trading down from higher-priced stores.
“We gained new customers, improved our market share position and found that when customers had more money to spend, they spent it more often at Wal-Mart,” Vice Chairman Eduardo Castro-Wright said in a statement.
There were several surprises, particularly in the apparel group, which benefited from the late Easter date, warmer weather in many regions of the country and shoppers stocking up on summer clothing.
Discounters Ross and TJX Cos. registered surprising gains of 6% and 3%, respectively, and both retailers consequently raised their quarterly guidance. San Francisco-based Gap Inc., parent of the Banana Republic, Gap and Old Navy chains, reported a 4% sales decline, which was better than the 7.8% drop that analysts surveyed by Thomson Reuters had expected.
Teen retailer Aeropostale Inc. surprised Wall Street with a whopping 20% year-over-year sales increase; analysts had expected sales to rise 8.5%.
Results are based on sales at stores open at least a year, called same-store sales and considered a key indicator of retail health.
Many of the industry’s weaker performers continued to lag, such as upscale retailers Saks Inc. and Nordstrom Inc., which both posted double-digit declines.
Some of the biggest disappointments came from retailers that had performed relatively well in recent months.
Hot Topic Inc., which had received a huge sales boost from sales of “Twilight” merchandise, disappointed with a 3.1% sales increase that was below the 7% increase analysts had expected. The City of Industry retailer is facing slowing sales of women’s pants and items from the teen vampire franchise.
Although retailers are still waiting for a turnaround in sales, the silver lining is that many have taken smart cost reductions during the recession that will help boost profit margins, said Mitch Kummetz, an analyst at Robert W. Baird & Co.
“To some extent I think things have stabilized,” he said. “I’m encouraged that retailers have their inventories in line and the overall environment hasn’t continued to deteriorate.”
Retailers and mall owners are slowly moving forward, saying they see signs that pent-up demand will drive consumers to return to stores soon.
On Thursday, Westfield Santa Anita debuted its newest expansion, the open-air Promenade, which features 30 new stores and restaurants including Banana Republic, Coach and Foreign Exchange.
“The economy is what it is, but we’re excited and we’ve been having a lot of requests for these stores for a really long time,” said Amanda Farnsworth, the shopping center’s marketing director.
The day before the Promenade’s grand opening, Albert Han, director of business development at Foreign Exchange, said the clothing company was optimistic that sales would rebound.
“Our experience is we’ve bottomed out,” he said. “Even though we’ve had some difficult months, it’s slowly been picking up. This is actually the perfect time to be opening because when the economy does turn, we’ll be well-positioned to take full advantage of it.”
--
