The nation's retailers had a slow start to the spring season as unseasonably cold weather in February chilled demand for lightweight apparel, resulting in disappointing sales. The slowing economy, particularly the weakening housing market, could challenge shoppers in the months ahead.
As merchants reported monthly sales results early Thursday, those with disappointing results included Wal-Mart Stores, Costco Wholesale, and Limited Brands.
"Cooler weather clearly dampened spring apparel sales," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "Customers were not shopping for capri pants." He noted that winter storms in the Midwest and East Coast hurt Valentine's Day sales.
But Perkins also said a major concern for consumer spending in the months ahead is the defaults and delinquencies in the mortgage industry. That, coupled with the decline of mortgage equity withdrawls that give consumers extra cash, could curtail spending.
At Thomson Financial, nearly two-thirds of the 52 retailers that had reported turned in same-store sales that fell short of forecasts. Only one met estimates.
Same-store sales are sales at stores open at least a year and are considered a barometer of a retailer's health.
"I think February was a tough month," Dana Telsey, chief research officer at Telsey Advisory Group, told CNBC's "Worldwide Exchange." "The end of the month was stronger than the beginning of the month. Most retailers who went into the month are essentially coming out 1% to 2% lighter than they would have thought. March is much more important given the shift of the Easter holiday."
The muted sales reports followed a rebound in January, when the late arrival of winter weather helped clear out cold weather items like boots and coats. But that meant there was little for shoppers to buy last month.
Retailers are concerned that consumers will finally turn frugal because of the housing market's continuing slump, and that last week's stock market tumble might also cause shoppers to be more conservative.
There's also the lingering specter of higher gasoline prices. Gasoline prices have jumped above $3 a gallon in some parts of California and Hawaii, and may hit that level other parts of the country when the summer driving season approaches.
While February is one of the least important months of a retailer's calendar, merchants do hope to get some idea of which spring fashion trends are resonating with shoppers.
Wal-Mart Sales Rose 0.9% Below Views
Wal-Mart reported a lower-than-expected 0.9% rise in February sales at its U.S. stores open at least a year, and provided a tepid forecast for its March same-store sales.
The world's largest retailer, which has been struggling to reinvigorate its U.S. sales, said that during February it continued to see weakness it its home and apparel business, and the trend is expected to persist through the spring. Like many retailer, Wal-Mart also blamed the unfavorable weather.
Analysts, on average, had been expecting Wal-Mart to report a February same-store sales increase of 1.7%, according to a Reuters survey. Wal-Mart itself had forecast a rise of 1% to 2%.
For March, Wal-Mart forecast sales at its U.S. stores open at least a year to rise between 1% to 2%.
The story was different at rival Target, which said its same-store sales rose 5.7%, beating Wall Street projections and pushing shares higher in premarket trading.
Wall Street analysts had expected Target's same-store sales to be up 5.1%, according to Thomson Financial.
High-End Retailers Show Strength
High-end retailers also saw some strength. Nordstrom said same-store sales rose 9.1% in February, solidly beating Wall Street's expectations. Analysts polled by Thomson Financial predicted the department store would post same-store sales of 5.7% for the month.
Saks posted a same-sales increase of 25% last month, helped by full-priced sales of spring merchandise. The performance blew past analysts' estimates, which had projected a 6.4% increase.
Costco, Federated Fall Short Of Views
But such strong performances were not universal. Costco Wholesale said its sales at stores open at least a year rose 4% in February, slightly lower than overall same-store sales for its fiscal second quarter.
The rise was also lower than the 5.3% rise analysts surveyed by Briefing.com predicted.
Costco said February same-store sales rose 4% in the U.S., while sales at its international stores gained 5%. In addition the company matched analysts expectations for a fiscal second-quarter profit of 66 cents a share, excluding one-time items.
Meanwhile, Federated Department Stores, which operates the Macy's chain, said Thursday its same-store sales rose 1.2% in February, missing both internal and Wall Street expectations as winter weather hurt Valentine's Day sales.
The company had said its same-store sales would rise 2% to 3% during the month. Analysts polled by Thomson Financial were expecting the company to post a jump of 2.8%.
"Sales in February were impacted by a series of snow and ice storms in the eastern half of the U.S., including those during the important selling days immediately preceding Valentine's Day," said Terry J. Lundgren, chairman, president and chief executive.
J.C. Penney had a 0.2% decline in same-store sales in its department store business, below the 0.5% analysts expected.
The company said sales improved at the end of last month, particuarly in areas where weather turned warm. It added that customer response to its newly developed lingerie line called Ambrielle and an exclusive collection from Liz Claiborne has been positive.
Dillard's same-store sales dropped 9% -- far deeper than the minus-1.2% view. The Little Rock, Ark.-based retailers said sales of children's and men's apparel, as well as home décor products were "significantly below trend."
Dollar General, a discount retailer, said it had a 4.9% increase in same-store sales. However, excluding seasonal markdowns and 130 stores in the process of closing, sales rose 4.2%. Analysts expected a 4.6% increase.
Apparel retailer Limited also was hurt by poor Valentine's Day sales at its Victoria's Secret and Bath & Body Works chains. The company posted a 3% increase in same-store sales, below the 4% estimate.
Gap had a 4% decline in same-store sales, but analysts had expected a 4.5% drop, according to a Reuters survey.
Bebe Stores had a 2.2% decline in same-store sales, its first monthly decline in 46 consecutive months. Analysts were expected a 2.2% gain.
Pacific Sunwear of California suffered a 5.7% decline in same-store sales, worse than the 3.7% analysts expected.
Pier 1 Imports, which continues to languish, saw same-store sales decline 8.4%, worse than the 4.4% forecast.
Sharper Image suffered a 24% drop, worse than the 16.7% decline projected by Wall Street.