Shoppers stay cautious, but sales declines ease
The worst may be over for some of the nation’s retailers, but experts say the industry will remain stuck in neutral for several months.
After a glimmer of hope from February’s better-than-expected retail sales, major chain stores saw sales fall 2.1% in March compared with the same month in 2008, the International Council of Shopping Centers said Thursday.
Most of the 33 chains surveyed -- including Abercrombie & Fitch Co., Nordstrom Inc. and Costco Wholesale Corp. -- reported sales declines, with several apparel and upscale retailers again posting double-digit drops. Even discount giant Wal-Mart Stores Inc. fell short of expectations.
“I think where we are is kind of treading water,” said Michael Niemira, chief economist for the shopping council. “We’ve hit bottom, I think, in terms of the weakest point growth-rate-wise. And now what we’re trying to do is find that point where we actually see sales in a sustainable manner post positive gains. We’re not quite there.”
Upscale retailers were among the worst performers, as consumers continued to spend sparingly on luxury items. Saks Inc. reported that sales fell 23.6%, and Nordstrom posted a 13.5% decline.
The results are based on sales at stores open at least a year, considered an important barometer of a retailer’s health.
“A worry that I have right now is it looked like high-end consumer confidence was picking up, but now it looks like it’s weakening sharply again,” Niemira said. “We’re not getting a lot of momentum.”
Retailers were negatively affected last month because Easter, which usually gives many retailers a sales boost, is being celebrated this year in April instead of March. Sales were further weakened because March had one fewer Saturday than it did in 2008.
But if the data were adjusted to compensate for the calendar shifts, total sales would be about 3 percentage points higher, Niemira said. He noted that even as they reported negative sales figures, several retailers -- including American Eagle Outfitters Inc. and J.C. Penney Co. -- issued more upbeat quarterly guidance.
“This is one of those months that you’re always cautious in interpreting,” he said. “What you see is not necessarily what the trend really is. And it makes it very difficult to really know for sure until you get the April reading.”
Economists and analysts have been closely watching the retail industry for signs of life after a sharp contraction in spending that began last fall. Thursday’s results provided little hope that consumer spending, which accounts for about two-thirds of U.S. economic activity, was close to a recovery.
“I don’t think you’re going to get the big turning point until maybe fourth quarter at the earliest,” said Christine Chen, a retail analyst at Needham & Co.
For now, many consumers are continuing to look for deals and spend frugally. At the Third Street Promenade in Santa Monica this week, Marie Healy said she had skipped shopping trips lately in favor of wearing clothing she already owned.
“It’s cool now to wear your old stuff,” said Healy, a film location scout from Santa Monica. “The stores I would typically go in to buy trendy stuff, I’m passing by. I don’t even want to see what I’m missing.”
Even the discount sector, which has generally fared well during the recession, posted a 0.4% sales decline, according to Thomson Reuters. That was worse than the 1.3% gain expected by analysts surveyed by the information company.
Wal-Mart’s 1.4% increase also missed expectations for a 3.2% gain, which the world’s largest retailer blamed on the later Easter date.
The teen and children’s apparel sector was a mixed bag of deep lows and decent gains.
Sales at Abercrombie & Fitch, which has struggled for months with double-digit declines, plummeted 34% in March after falling 30% year-over-year in February.
“Abercrombie’s comps are certainly not stellar, and a large part of it is because they won’t discount,” Chen said.
“Long-term it is better for the brand; near-term it’s quite painful.”
Close competitor American Eagle Outfitters reported that sales declined 16%, and Wet Seal Inc. saw sales fall 11.4%.
But Hot Topic Inc., known for selling music- and pop culture-inspired clothing and accessories, reported that sales increased a healthy 7.1%. The City of Industry retailer credited brisk sales of teen vampire romance “Twilight” DVDs and accessories.
To drive sales, retailers have resorted to cutting inventory levels, shutting underperforming stores and slashing prices.
That tactic lured shopper Katie Zuniga, 23, who bought a pair of discounted shoes from Banana Republic at the Third Street Promenade this week.
“It seems like everything’s on sale. I have very little willpower,” she said. “I should cut back but I haven’t.”
But the markdown mentality is wearing thin after one of the most discount-driven holiday seasons in years.
“We’ve actually reduced the number of promotions and markdowns in stores,” said Harlan Bratcher, chief executive of A|X Armani Exchange.
“I think there’s a point of no return that retailers discovered during the holidays. If anything, we’re putting the right merchandise in the stores and not marking it down to discount standards.”
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