Consumers Defy Analysts to Rescue March Retail

 

Analysts expected a later-than-usual Easter, higher rates of inflation and chilly weather during March to significantly push sales into April, but retailers ended up significantly outperforming expectations. The International Council of Shopping Centers, which tracks 29 major retail chains, excluding Wal-Mart, reported that aggregate comps improved 2.0% for fiscal March – at the high end of the organization’s preliminary projections. Many retail analysts had predicted the first monthly sales decline since 2009 in the wake of the aforementioned factors.

Moreover, the gain came despite an estimated 1 to 2 percentage point drag generated by the latest Easter holiday since 1943, which falls nearly three weeks later than Easter 2010. Economists originally expected holiday buying to be pushed deeper into April, but it appears lower unemployment numbers and pent-up demand for spring apparel has prompted the consumer to start spring shopping earlier than usual. In February, analysts surmised that discretionary income would be at a premium due to skyrocketing fuel and food prices, and while that has caused people to cut down on vacations, it doesn’t appear to have impacted sales in the aisles.

If an improving labor market, better economic conditions and the reduction in payroll tax continue to offset concerns related to higher priced fuel and food and mounting material costs that are passed onto the consumer, summer 2011 could be a pleasant surprise for industry manufacturers and retailers. Even more surprising, retailers in all reporting sectors outperformed estimates, suggesting at least a temporary rebound for consumers of all income levels. Granted, expectations were very low for the month, but retailers are optimistic as the buyer-friendly Easter holiday approaches.

Among the highlights for the month, Warehouse Clubs recorded an aggregate comps improvement of 9.2% as both Costco (+13.0%) and BJ’s Warehouse (+5.3%) capitalized on rising gas prices and strengthening foreign currencies. It’s worth noting that Costco’s reporting calendar was an exception to the calendar shift – the five-week period included 35 days of sales compared to 34 last year, which management said impacted comps by one to two percentage points. Excluding the impact of gasoline, aggregate comps for Costco and BJ’s improved 4.7% for the five-week period. Of note, ICSC concluded that rising gasoline prices inflated industry-wide comps by about 1.1 percentage points; excluding the Wholesales Club gasoline sales impact, overall industry sales would have increased 0.9%.

At Department Stores, J.C. Penney (-0.3%) reported a small decline but heftily outpaced analysts’ projections on strength from women’s apparel, fine jewelry and women’s accessories along with pronounced strength from the Southwest region. Management also noted that online sales through jcp.com improved a healthy 7.6% for the month. Stage Stores (-5.3%) also reported better-than-expected results on strength generated from junior’s and men’s clothing and cosmetics along with favorable results from the Southeast and Southwest regions. At Macy’s (+0.9%), comps edged up on a 34.8% spike in online sales. Chairman and President Terry Lundgren pointed to  a solid reception of spring fashion assortments as well as comp improvement from both Macy’s and Bloomingdales stores. Analysts had expected consolidated Macy’s comps to decline 2%. The mood wasn’t as bright at Bon-Ton (-6.1%), where management blamed the falloff in children’s clothing, women’s sportswear and men’s furnishings on the Easter shift.

For the Luxury sub-segment, results remained strong on growth from all contributors. Neiman-Marcus (+8.8%) reported a very strong month due to a stellar performance from its Neiman-Marcus Direct segment (+17.0%) and strong specialty sales of women’s fine apparel, designer handbags, shoes and precious jewelry. At Nordstrom (+5.1%) comps growth exceeded projections by more than five percentage points as customers hit the aisles for more “big ticket” items. Saks (+11.1%) continued its stellar pace on strong returns from men’s apparel, shoes, fashion jewelry and women’s designer collections.

For the Discounters, Target (-5.5%) posted a smaller-than-expected drop as strong sales of workout clothes partially offset weakness from movies, books and home products. Management noted that the Easter shift hurt sales of candy, clothing and toys during the month, but the company expects comps to improve mid-teens for April. At Stein-Mart (-3.9%), comps missed estimates by more than two percentage points on weakness from the Gulf Coast and Midwest.

For the Teen Retailers, the story revolved around usually-reliable Gap (-10.0%), which missed estimates significantly. CEO Glenn Murphy said the company’s 150 locations in Japan have suffered considerably due to the recent disaster. Comps at Gap North America fell 9% while comps at Banana Republic and Old Navy fell 8% and 12%, respectively. International comps fell 9%.

For the Teen sector, which has been adversely affected due to lower mall traffic amidst the recession, stores reporting comps has been pared down from nine during the pre-recession days to five at present. Abercrombie & Fitch, American Eagles and Aeropastale reported recently that they would cease reporting monthly figures.
Looking ahead, ICSC research forecasts that industry sales are likely to increase between 5% and 6% in April with about a one to two percentage point lift due to the later Easter.

Zumiez March Comps Up As Transactions, Average Selling Prices Rise…

 

Zumiez reported comparable store sales increased 8.9% for the five-week period ended April 2, 2011 compared to a 13.2% increase in the year-ago period. Total sales increased 15.1% to $41.2 million for the month from $35.8 million in the year-ago period.

Comparable sales growth was driven by an increase in comparable store transactions partially offset by a decrease in dollars per transaction. ZUMZ said that dollars per transaction were down due to a decrease in units per transaction partially offset by an increase in average unit retail. Accessories, footwear, men’s and juniors posted positive comps while hardgoods boys posted negative comps.

The Buckle reported that March’s comparable store sales increased 8.4% while total net sales increased 11.4% to $96.9 million compared to $86.9 million a year ago.

On the men's side of the business, which represented approximately 49.5% of total sales for the month, sales were up about 14.5% and overall price points were up approximately 5.0% for the period. Strong categories on the men's side included denim, woven and knit shirts and accessories.

Women's sales, which represented about 60.5% of total sales, were up approximately 9% versus the prior-year period.  Overall price points on the women's side of the business were down approximately 1.0%.  Strong categories in women's included denim, knit tops, active apparel, accessories and footwear.

Accessory sales increased 32% for the month, while footwear sales increased 10.5% for the period.