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UPDATE: US Retailers Report Strong Momentum For March Sales

Date : 04/05/2012 @ 10:10AM
Source : Dow Jones News
Stock : Saks Incorporated (SKS)
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UPDATE: US Retailers Report Strong Momentum For March Sales

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Retailers generally reported strong sales for March, as warmer weather, an earlier Easter and appealing fashions drew customers in.

Standouts included Gap Inc. (GPS) and Target Corp. (TGT), while Costco Wholesale Corp. (COST) and teen retailer Buckle Inc. (BKE) came up short.

Easter falls two weeks earlier this year than in 2011, which provided a sales boost for everything from apparel to seasonal goods. March also benefited from unseasonably high temperatures in many parts of the country, which brought customers into malls and other shopping locations. Compelling fashions also played a role, analysts said, with people more willing to pay fuller prices for fresh merchandise. Retailers were also able to move older merchandise at promotional prices.

"While apparel retailers still rely on discounting to drive traffic, for the near-term, I believe that the industry is benefiting for the first time in many seasons from a trifecta of relatively clean inventories, seasonal demand, and decent full-price selling," said Dave Weiner, retail analyst at Deutsche Bank.

The 18 retailers tracked by Thomson Reuters posted a 6.9% rise in March same-store sales when a 5.3% gain was expected. The figure compares with 1.7% growth a year ago, when Easter came two weeks later in April. One drawback of the March momentum is that it likely took some sales from April, a number of retailers said.

Target cited "a healthy underlying trend" as it reported a 7.3% rise in March same-store sales, when 5.4% was expected, and the mass merchant lifted its first-quarter guidance.

Macy's Inc. (M) raised its March-April comparable-store sales projection after same-store sales for March increased 7.3%, when 4.8% was expected. Same-store sales for the two months are expected to be up 4.3% to 4.5%, compared with previous guidance for 3% to 3.5%. March sales "exceeded our expectations beyond the benefits we anticipated" from an earlier Easter and the shift in a cosmetics sale, Chief Executive Terry Lundgren said.

Fellow department store Kohl's Corp. (KSS) reported a 3.6% rise when 2.1% was projected. Children's apparel, driven by Easter demand, was the strongest business while men's and women's apparel also performed well, the company said. Department store J.C. Penney Co. (JCP) said last month it will not be reporting monthly same-store sales while it revamps operations.

Longtime struggler Gap continued showing turnaround signs. The apparel retailer reported an 8% rise in March comparable-store sales, when 5.4% was expected. This was the first time analysts had projected monthly growth for Gap since December 2010, and the second month in a row the retailer showed strong momentum. February same-store sales rose 4%, when a 1.4% decline was expected. The company was "pleased with customer response to product across all brands," in March, Chief Executive Glenn Murphy said.

Limited Brands Inc. (LTD), which operates Victoria's Secret and Bath & Body Works, posted an 8% rise in March same-store sales when 4.4% was expected.

On the high end, Saks Inc. (SKS) reported a 6.3% rise in same-store sales, meeting analysts' expectations. Comparable-store sales at Nordstrom Inc. (JWN) increased 8.6% when 5.8% was expected.

Off-price retailers Ross Stores Inc. (ROST) and TJX Cos. (TJX) both reported much-bigger-than-expected 10% gains in March same-store sales, and both boosted their first-quarter earnings targets.

The strength retailers have shown so far this year, which has now extended into March, may have broad ramifications for down the road. "Retailers are likely taking another look at their holiday orders," said John Long, retail strategist at Kurt Salmon.

The month did have some laggards, though. Costco posted a 5% gain in March same-store sales in the U.S. excluding gas, when 5.7% was expected.

Teen retailers were mixed. Buckle Inc. (BKE) said same-store sales increased 6.4%, when 8.8% was projected. Wet Seal Inc. (WTSLA) same-store sales fell 7.8% when a 6% drop was projected. Zumiez Inc. (ZUMZ) posted a 14.1% rise in same-store sales when 8.9% was expected.

The misses by some companies were surprising, analysts said. "March was an absolute bull month for the consumer, so it leads me to believe those retailers that fell short did not have products and prices that resonated with consumers," said Joel Bines, managing director of the retail practice at AlixPartners.

--By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com



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