Retailers Buoyed by March Holiday
The early Easter holiday drove U.S. shoppers to malls and shopping centers last month, helping retailers report strong March same-store sales, but a profit warning from Wal-Mart foreshadowed more difficult times ahead.
Some California retailers offered better-than-expected results in the month, while others disappointed Wall Street.
Wal-Mart Stores Inc. said its sales at stores open at least a year rose 4.3% as customers on average bought more items per shopping trip. Easter-specific items sold about as well as last year, but the unusually soggy weather dented sales of spring merchandise, the world’s largest retailer said in an update over the weekend.
Wal-Mart also said it expected first-quarter earnings to be around the low end if its previous forecast of 56 cents to 58 cents a share, with sales landing at the low end of expectations.
Analysts worry that the high cost of gasoline could cut into retail sales. Nationwide, the average price of regular gasoline is $2.25 a gallon, up from $1.94 last month and $1.77 last year, according to an AAA daily survey of 60,000 gas stations.
“Americans are basically in distress as a result of the high cost of gasoline,” Kurt Barnard, president of Barnard’s Retail Consulting Group said. “People are tapping into their savings in order to buy the latest fashions, and they are also adding to their credit card balances, neither of which is exactly the medicine the doctor has ordered.”
Cold, rainy weather in the Northeast and mid-Atlantic regions dampened sales of spring items, but Easter sales plumped up the month’s results relative to last year, when the holiday fell in April.
Teen apparel retailers, which have enjoyed soaring sales in recent months, were in the spotlight again. Spring breaks for many high school and college students coincided with Easter, giving them ample time for shopping, analysts said.
Foothill Ranch-based Wet Seal Inc., which closed 100 of its namesake stores and two Arden B outlets in the nine weeks ended April 2, posted a surprising 36.3% increase in same-store sales, contrasted with a 21.1% decline in March 2004. That was 14% higher than analysts were expecting. American Eagle Outfitters Inc. and Abercrombie & Fitch Co. also posted surprisingly strong gains in March of 29.2% and 21%, respectively.
Guess Inc. of Los Angeles and City of Industry-based Hot Topic Inc. also posted stronger than predicted increases of 6.7% and 5.3%, respectively. And Brisbane, Calif.-based Bebe Stores Inc. logged a 30.6% gain, more than the 25.9% that analysts were expecting.
But Gap Inc., which operates more than 3,000 Gap, Old Navy and Banana Republic stores, disappointed analysts. The San Francisco-based retailer’s same-store sales slumped 4% as its Old Navy chain slid 9%. Analysts were forecasting that Gap would drop 0.3%. Anaheim-based Pacific Sunwear of California notched a 4.8% rise, but that was lower than the 7.9% increase analysts were expecting.
Discounters such as Wal-Mart and warehouse stores such as Costco Wholesale Corp. fared well as consumers shopped for bargains. Costco’s March same-store sales climbed 7%.
On the other end of the price spectrum, luxury retailers such as upscale department store Nordstrom Inc. posted solid sales as its March same-store sales rose 5.5%.
Mid-priced retailers such as Limited Brands Inc., however, posted unexpectedly weak results. Limited, which has been struggling to shore up its apparel division in recent months, reported a 7% drop in its same-store sales. Wall Street analysts had forecasted a drop of 2.3%.
“Income growth for the high-end consumer continues to outpace that of the average worker, and high year-over-year gas prices continue to pressure spending of low-income households,” Emme Kozloff, senior retail analyst at Sanford C. Bernstein & Co. wrote in a recent research note.
