Consumers continued to shop cautiously in March, still sticking mostly to necessities such as food, but there were some glimmers of stabilization in retailers’ sales reports on Thursday.
The later Easter hurt some chains’ results — notably Wal-Mart Stores Inc. — but Easter is expected to boost sales for many in April.
Retailers have been slashing costs and cutting inventory in an effort to improve results amid weak consumer spending.
Consumer spending is closely watched by economists and analysts because it accounts for 70 percent of all U.S. economic activity. Any sign of stability could be a hint of a bottom to the recession.
The economy’s steep contraction in late 2008 was caused in large part by the 4.3 percent drop in consumer spending in the fourth quarter. That was the largest drop in more than 28 years.
While many retailers reported same-store sales declines, some boosted at least the low end of their quarterly guidance, including Hot Topic Inc., Cache Inc. and J.C. Penney Co.
According to a preliminary tally by the International Council of Shopping Centers, same-store sales fell 2.1 percent in March. But ICSC Chief Economist Michael Niemira said that includes a 3 percentage point decline related to the later Easter and calendar shift.
“Today’s numbers are the type that the tone from retailer’s comments is better than the reported performance,” Niemira said. “It’s really a mixed bag.”
Niemira added that because of Easter, a shift in the calendar and the plunge in gas prices, looking at March and April figures together will be a better indicator of any stabilization in consumer spending.
“On the surface, March is weaker than we’ve been seeing last few months but we know that’s not the underlying trend,” he said. “The tone and comments from retailers really reflect a better performance than reported, but the jury is still out on whether we really have stabilized.”
Same-store sales, or sales in stores open at least on year, are considered a key measure of a retailer’s health.
Discounters continued to report better results than most retailers, but there was some improvement in results for mall-based chains such as Gap Inc. and Limited Stores Inc. Though weak sales persisted, many retailers reported foot traffic improved.
“It looks like the whole ’less worse’ phenomenon continues in March,” said Ken Perkins, president of Retail Metrics LLC. “The numbers are still soft, but at least they’re stabilizing and maybe improving a little bit.”
March’s figures are expected to mark the industry’s sixth straight month of overall same-store sales declines.
Groceries, health products and accessories remain the most popular sellers, as consumers continue to shop cautiously amid massive job cuts and tight credit. The retail sales reports came as The Labor Department new jobless claims fell more than expected last week, to a seasonally adjusted 654,000, down from a revised 674,000 the previous week. Still, claims are stuck at a high level, while those continuing to receive unemployment insurance set a record for the 11th straight week.
Wal-Mart Stores Inc., the world’s largest retailer, said same-store sales rose 1.4 percent, excluding fuel sales, falling short of the 3.2 percent rise analysts polled by Thomson Reuters predicted. The world’s largest retailer said a later Easter was to blame. Wal-Mart said it expects first-quarter results will be at the high end of its predicted range.
“Based on the initial strength of our sales this week, we expect Easter to drive April sales performance,” said Eduardo Castro-Wright, vice chairman of Wal-Mart Stores.
Rival discounter Target Stores Inc.’s same-store sales fell 6.3 percent, better than analysts expected.
Warehouse operator Costco Wholesale Corp. said same-store sales fell more than analysts expected. But the figure rose after adjusting for plunging gas prices and the stronger dollar. Food purchases helped results.
Amid the department stores, mid-tier players showed improvement while the luxury sector remained weak. Macy’s Inc., J.C. Penney Co. and Kohl’s Corp. all reported same-store sales drops that were smaller than analysts expected. However, Saks Inc. same-store sales dropped 23.6 percent, worse than expectations.
Mall-based stores, many of which have been struggling, showed some improvement in March. Gap Inc. same-store sales fell 8 percent but beat analysts predictions, helped by better results from its Old Navy chain. Limited Stores Inc. also reported a smaller drop than analysts predicted.
Teen retail remained a bright spot. The Buckle Inc. and Hot Topic Inc. both reported higher same-store sales increases than analysts predicted.
