Is Less Severe Good Enough for Retailers?

So the big question for retailers is: Is less worse good enough?


After months of dismal sales reports, retailers are likely to report a less severe drop-off in monthly same-store sales growth, and investors are seeing this as good news for stocks.

Bu that take on the sector might be premature, warn several analysts.

Many chain-stores will report their monthly sales reports on Thursday. According to Thomson Reuters, analysts on average are expecting sales in March to be down 1 percent.

Discounters such as Wal-Mart Stores are once again expected to post solid sales gains, while high-end retailers like Saks and Nordstrom are expected to see steep double-digit sales declines.

Retailers such as The Buckle , Hot Topic and Aeropostale that cater to teens also may see healthy growth.

Will There Be Any Surprises?

Will there be any surprises?Perhaps. Weather was warm in some parts of the country and that could mean stronger sales of springtime clothes. Steep, steep discounts also may have coaxed consumers to spend, especially considering that some had a little extra cash in their pockets from tax refund checks.

These factors may help to stabilize sales in March, but it's still tough-going for many retailers.

"The stabilization we're experiencing right now in retail is not a positive stabilization in the sense that it's starting to improve, it's just not deteriorating any further," said Jeff Klinefelter, a retail analyst at Piper Jaffray. "So that's step one in the recovery: to find a less negative trend, and I think we're going to see that in the March numbers."

But what to make of the upward push in retail stocks?

"People want to believe it, but I think we're going to see starting tomorrow and in Q1 earnings that we are nowhere out of the woods yet with retailing," said Eric Beder, an analyst at Brean Murray Carret.

Beder expects to see some "really explosive earnings growth" in the second half.

"I think the first half is going to be a real slog here. To us, this is definitely a head fake. We would definitely wait for prices to come down more before we'd be more aggressive in this sector," Beder said.

One point of caution: Beware of the Easter shift. The timing of the Easter holiday, which is later this year than it was last year, may skew results. Sales may be lower as some sales of clothing, chocolate and other trinkets for Easter baskets shift to April's results.

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