Retail analysts had been expecting weak sales in March, but an early Easter holiday, chilly weather and recession-wary consumers combined to deliver dreary March sales that were the weakest in 13 years.
Wholesaler Costco topped estimates, while discount retailer Wal-Mart Stores raised estimates for its first quarter, citing expense controls and fewer markedowns. However, these retailers were the exception.
Consumers, fretting about a sluggish economy and soaring gasoline prices and food prices, are limiting their shopping to the essentials. In addition, the Easter holiday fell on March 23, the earliest Easter in 95 years. With the weather still cold, many consumers passed on buying new spring apparel.
"The reality is that shoppers are stepping up their plans to cut back spending," said Frank Badillo, Senior Economist at TNS Retail Forward. "So we’ll likely see more of these weak retail numbers in the coming months.”
Seventy-five percent of retailers reporting same-store sales fell short of analysts expectations, according to Thomson Financial. Collectively, sales fell 0.7 percent, a bit wider than the 0.1 percent decline that was forecast by analysts, Thomson said. Excluding Wal-Mart, March same-store sales fell 2.2 percent, compared with a 1.1 percent estimate.
Despite the poor results, investors snapped up retail stocks, sending the Standard & Poor's retail index up 2 percent in afternoon trading after five sessions of declines.
Patricia Edwards, managing director at investment firm Wentworth, Hauser and Violich, attributed some of the gains to short covering, or traders who had been betting on declines moving to cover their positions. She also said investors were taking a bet that the economic downturn may have hit a bottom and conditions should improve for retailers.
"They're looking through the valley of the recession to the other side," she said.
Among those reporting sales shortfalls wereapparel retailers Gap ,Children'sPlace , Wet Seal , and Pacific Sunwear .
Gap same-store sales shrank 18 percent, far below the 7.7 percent decline that had been forecasted, on average, by analysts polled by Thomson.
In addition to Costco, the strongest results came from Costco rival BJ's Wholesale , drugstore Walgreen's and teen retailers The Buckle and Aeropostale.
The Buckle reported an impressive 20.9 percent increase in same-store sales last month, smashing its 10 percent final Thomson estimate, while Aeropostale same-store sales rose 2.5 percent outpacing analyst estimates of a 0.6 percent gain.
Wal-Mart Raises Forecast
Wal-Mart said Thursday its total U.S. same-store sales for March rose 0.7 percent, without the impact of fuel, and 1.1 percent, including fuel.
The average estimate of analysts polled by Thomson Financial was for an increase of 1% for the month, excluding fuel.
Also, the Bentonville, Ark., retailing giant increased its earnings outlook for the first quarter, citing strong inventory management at its namesake stores in the U.S. that has led to lower levels of markdowns.
The company now sees earnings from continuing operations of 74 to 76 cents a share for the first quarter, up from its prior outlook for earnings of 70 to 74 cents a share.
Wall Street's current consensus estimate is for a profit of 72 cents a share in the April period.
Wal-Mart, a component of the Dow Jones Industrial Average, expects domestic same-store sales without fuel to rise between 1 percent and 3 percent for April, in part because of the Easter holiday calendar shift.
Meanwhile, Costco said Thursday sales at stores open at least a year rose 7 percent in March, topping analysts' expectations.
Analysts surveyed by Thomson Financial predicted a 5.9 percent rise in the bulk-buy chain's same-store sales. Overall, Costco said sales for the five weeks ended April 6 rose 11 percent to $6.57 billion.
Although consumers appear to be pinching pennies, not all discounters are benefiting. Target , reported a bigger-than-expected 4.4 percent decline. This continued a string of disappointing results from Target.
TJX , the parent of discount retailers TJ Maxx and Marshalls, reported flat same-store sales, below expectations, and lowered its fiscal first-quarter outlook. However, the company expects lower inventories in April will lead to fewer markdowns.
"We have begun to see a pickup in sales trends in certain areas where the weather has become more seasonable," said Carol Meyrowitz, company president and chief executive.
Department Stores Disappoint
Department stores continued to struggle. J.C. Penney had set the tone two weeks ago by cutting its fiscal first-quarter outlookas sales through Easter were "well below expectations."
The company also slashed its March forecast to a same-store-sales drop in the double digits on a percentage basis, compared with the prior view of a low-single-digit decline. Sales ended up falling 12 percent and the firm projected a mid- to high-single digits increase in April.
Weak sales of summer clothing hurt same-store sales at Kohl's, which reported a 15.5 percent decline in March. That was a steeper drop than had been expected, and it prompted Kohl's to cut its fiscal first-quarter earnings forecast to 40 cents to 42 cents a share from 50 cents to 54 cents.
Still, Target, J.C. Penney and Nordstrom were optimistic about the outlook for April.
Nordstrom same-store sales fell 9.1 percent, which was wider than the 8 percent decline that had been expected by analysts surveyed by Thomson.
At Saks , same-store sales fell 2.9 percent, also short of analyst estimates.
Teen retailer American Eagle Outfitters cut also cut its first-quarter earnings guidance, saying its same-store sales fell 12 percent in March.
The company said it now expects earnings between 18 cents and 20 cents per share. Previously, the company said it would likely earn between 25 cents and 27 cents per share.
--Reuters and Associated Press contributed to this report.