Retailers show strong gains, boost optimism

April 09, 2010|By Andrea Chang | Tribune Newspapers

The nation's retailers had a blowout month in March as shoppers went on a spending spree that increased sales by a record 9.1 percent, providing the best monthly showing in at least a decade and offering bold new evidence that a strong economic recovery could be ahead.

Robust growth was widespread, fueling excitement from Main Street to Wall Street. Department stores, discounters, apparel sellers and luxury chains reported strong gains, and many retailers boosted their earnings guidance. Retail stocks buoyed the stock market, and economists said they saw promise for the turnaround because consumer spending accounts for about 70 percent of economic activity.

"Consumers are feeling better and have begun to open their wallets," economist Sung Won Sohn said. "They are willing to buy luxury items, higher-priced items, and they're not as cautious as they were a year ago or even a couple months ago.

"They've been saving money and scrimping and scraping, and now, 'Spring is here and the economy is improving, so let's go out and buy,' " said Sohn, a professor at Cal State Channel Islands in Camarillo, Calif., and a board member of fast-fashion retailer Forever 21.

More than a dozen major chains posted double-digit gains, including discounter Target Corp., department store Kohl's Corp., luxury chain Saks Inc., midprice seller Gap Inc. and teen retailer American Eagle Outfitters Inc. Results are based on sales at stores open at least a year, known as same-store sales, which are considered a reliable measure of a retailer's health.

Of the 28 retailers whose results were tallied by Thomson Reuters, 92 percent beat sales expectations. The group's 9.1 percent sales gain was significantly better than the 6.3 percent increase analysts had been expecting and marked the best month on record since the company began tracking data in 2000.

Although sales results were helped by an earlier Easter and comparisons with a weak March 2009, when sales declined 5 percent, analysts said the gains reflected real underlying strength. Pent-up demand, warmer weather and broader economic improvement helped drive spending, they said.

"The fact that retailers vastly exceeded already raised expectations suggests to us that there is more going on here," said Ken Perkins, president of research firm Retail Metrics Inc. "The consumer is feeling better about their situation and is more willing to make discretionary purchases than at any time that we've seen in the last couple of years, since the onset of the recession."

Department stores, a sector that has struggled for years, posted the best results of all major retail categories with a 12.3 percent year-over-year increase.

Apparel sellers reported an 11.8 percent gain and discounters followed with a 10.1 percent increase. The teen sector, which has shown signs of life recently as young shoppers have hit the malls again, reported a 9.6 percent increase. The exception was Hot Topic Inc., which saw sales fall 7.5 percent.

Many retailers said strong sales of spring apparel helped boost their results.

Kevin Mansell, chief executive of Kohl's, which saw March sales rise 22.5 percent, said "all lines of business and all regions" saw double-digit same-store sales growth. The chain, which raised its first-quarter earnings projection, said the West was one of its strongest regions and said home and children's items as well as footwear were among its top-selling categories.

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