Will Retail's Bloom Fade in April?
Retailers turned in very solid gains in March, but the big question now is: can the momentum continue?
If you exclude the drug stores, the Thomson Reuters Same-Store Index rose 6.8 percent in March. That’s well above the monthly same-store gains of 3 percent to 5 percent recorded throughout 2011.
“You are seeing the momentum that kicked off in February continue in March,” said Adrianne Shapira, a broadlines retail analyst at Goldman Sachs.
Although the early spring weather, which prompted shoppers to buy shorts and T-shirts earlier than normal, was a help in March, Shapira said there were other factors at play, including a strong apparel trend toward colorful clothing, particularly denim, and the early timing of Easter.
"So we're seeing the sustainability of some current trends, and that's encouraging," Shapira said.
She added that until now there hasn’t been a new fashion trend to drive consumers to stores in a long while. This trend not only helped Gap , which has been struggling for some time, post a strong same-stores sales gain, but other retailers such as Target , TJX and even Costco are benefiting from consumers who are seeking out colorful new spring clothing.
"You might not love it, but you certainly don't have it," she said.
Until this point, consumers had focused on accessories to freshen up their wardrobes, but the spring’s colorful style is very fashionable and more exciting for shoppers, who are tired of “boring fall colors,” Shapira said.
Consumers also are in a better mood, according to Ron Friedman, head of the retail practice at Marcum, a national accounting firm.
“I think you have a couple of years of pent up demand,” Friedman said. He expects the trend to not only benefit to apparel retailers but he also sees strong trends ahead of those who sell home furnishings.
According to Friedman, consumers have spent the last few years whittling down their debt and they are feeling better about their financial situation, and that is what is giving them more confidence to fix up their homes, plant flower early, and buy new wardrobes.
“Hearing good news perpetuates more good news,” he said.
Friedman expects that teen apparel retailers such as Zumiez will benefit from teenagers' increased spending power, and he expects shoppers to head back to department stores such as Macy’s after years of shopping at discount stores.
He also is watching JC Penney “very closely” because the changes they are making in their business to reduce the number of promotions and focus on everyday low prices.
“It could be the most refreshing thing in the marketplace if they are successful,” he said.
Even if sales come in at a relatively slower pace in April, Shapira expects that retailers have already scored a huge win. Because when shoppers come into the stores early in the season, they are buying more clothing at full price, and that means higher profit margins.
“The sooner you move it, the less you have to markdown,” she said.
And the proof of this was seen in the increased forecasts from retailers such as Target and TJX.