Cold, gas costs and tardy Easter bunny hurt sales

For retailers, quarter is slowest in a year

April 07, 2006|By BLOOMBERG NEWS

NEW YORK -- Retailers reported the slowest sales growth in more than a year as cold weather, higher gasoline prices and a late Easter limited spending in March.

Wal-Mart Stores Inc. said its comparable sales rose 1.4 percent, less than analyst estimates and the smallest gain in 11 months. Federated Department Stores Inc., Gap Inc., J.C. Penney Co. and Abercrombie & Fitch Co. fell short of estimates, but Target Corp. and Costco Wholesale Corp. exceeded expectations.

Stores stocking spring clothing were hurt as turbulent weather swept the U.S. and gasoline prices hit their highest levels of the year. Retailers are forecasting stronger gains this month as they benefit from the Easter holiday and an improving job market.

"With cool spring weather, retailers were unable to sell much seasonable merchandise in March," said Dan Popowics, an analyst with Fifth Third Asset Management in Cincinnati, which manages $22 billion in assets, including Wal-Mart shares. "Easter is coming at the tail end this year. That means April will make or break their fiscal first quarter," which runs from February through this month.

The International Council of Shopping Centers said yesterday that same-store sales rose 1.9 percent, the smallest increase since November 2004, according to data from 60 retailers. It forecast a 5 percent gain for April.

The Goldman Sachs same-store sales index rose 1.6 percent, less than the firm's forecast of 2 percent. Specialty retailers were hardest hit, followed by department stores, it said. Discounters had the best performance, Goldman said.

Research firm Retail Metrics LLC said 60 percent of retailers missed expectations for the second consecutive month.

Rick Rubin, a retail analyst at Mercantile Bankshares Corp., said the results signal that consumer spending might be curtailed as shoppers face higher interest rates and energy costs.

"The consumer is slowing," Rubin said. "There are some real head winds that they're going to be facing going forward."

Target, the second-largest U.S. discount chain, said its March sales at stores open at least a year rose 2.2 percent, beating estimates, and it forecast an April sales increase of 9 percent to 11 percent. Wal-Mart, the world's largest retailer, forecast a gain of 4 percent to 6 percent for April.

Costco's same-store sales climbed 7 percent, exceeding estimates from Retail LLC. Costco also raised its annual fee by $5 for individual and business memberships.

A late Easter shifted up to 1.5 percentage points of same-store sales to April, said ICSC chief economist Mike Niemira. Easter falls on April 16 this year, the latest in three years. The holiday accounted for $9.6 billion in sales last year, according to the National Retail Federation.

Federated, the second-largest U.S. department store operator, said its sales were unchanged in March, and it forecast an April sales decline of 2.5 percent to 3.5 percent.

Comparable-store sales at J.C. Penney, the third-largest U.S. department store operator, fell 1 percent, missing the forecast of a 1.9 percent gain.

Limited Brands Inc., owner of the Victoria's Secret and Express chains, said March sales climbed 2 percent.

Gap, the largest U.S. clothing chain, said comparable sales fell 13 percent, missing analysts' estimates for a decline of 7.3 percent. Sales at its Gap and Old Navy chains fell more than forecast because traffic declined.

Sales at teen clothing retailer Abercrombie & Fitch were little changed, missing the forecast of a gain of 3.8 percent.

Luxury retailer Nordstrom Inc. posted a 4.3 percent increase, better than the 3.2 percent gain analysts had expected. It said sales were strongest in the Northwest and South. Its best-selling categories were accessories, cosmetics and men's apparel.

Saks Inc.'s sales fell 0.6 percent, pulled down by a 1.7 percent decline at its luxury Saks Fifth Avenue unit. Talbots Inc. said sales dropped 3.4 percent.

AnnTaylor Stores Corp.'s sales gained 0.8 percent, less than the 3 percent gain analysts estimated.

Retailers should recover in April and have a "pretty healthy rebound" in sales, Popowics said.

Western states had a very cold and wet March, and snowfall was heavy in the Midwest, according to Weather Trends International, a weather-consulting firm.

Mall traffic declined 10 percent that week, pulling the overall month's traffic down 1 percent, said Stacy Pak, a Prudential Equity Group LLC analyst.

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