"With consumers' wallets firmly closed and an earlier Easter, colder weather and the most difficult comparisons of the quarter for most players in place, March had all the ingredients for the weakest results in the last few years ... and it did not disappoint," Eric Beder, senior VP at Brean Murray, Carret & Co., wrote in a research note.
Indeed, worries about the deteriorating economy, along with soaring gasoline prices, conspired to limit much of consumers' shopping to food and other essentials. And an earlier Easter holiday combined with chilly weather compounded retailers' woes, eliminating the need for consumers to buy new spring merchandise.
Specialty retailers and department stores, including Gap Inc., Kohl's and JC Penney, were particularly hard hit, all reporting double-digit drops in sales at stores open at least a year. Those retailers selling consumables, including Wal-Mart and Costco, fared better.
"It's definitely worse than we expected," said Erin Armendinger, managing director of the Jay H. Baker Retailing Initiative at the Wharton School. "People are just not spending. ... Whether people are directly impacted by the current economic environment or not, they're thinking about it."
Gap Inc., which has been struggling to redefine its merchandise mix, saw same-store sales plummet 18%, compared with a 6% rise during the year-ago period. Kohl's also faced difficult comparisons, reporting that same-store sales plunged 15.5%, compared with a 16.8% increase in March of last year.
JC Penney also had a tough month, as same-store sales dropped 12.3%, compared with an 11% rise in March of last year. The retailer did note in its monthly sales call that consumers are responding positively to its much-advertised American Living launch.
Even luxury feels the sting
Players in the luxury space also were hurting. Saks Fifth Avenue saw same-store sales slide 2.9%, compared with a 10.1% jump in March of last year. Nordstrom, meanwhile, reported a 9.1% drop in March same-store sales, as opposed to a 15% increase last year.
Wal-Mart reported during its monthly sales call that grocery was a solid performer, with paper and consumables, as well as dry grocery goods. Same-store sales at the retailer rose a modest 0.7%, compared with a 4% rise during the year-ago period. Target reported strength in the health care, household, personal care, baby care, consumables and perishables categories. It saw same-store sales decline 4.4% during March, compared with a 12% gain a year ago.
Costco, meanwhile, continued to be one of the few bright spots in the retail landscape, as it reported a 5% climb in March same-store sales at U.S. outlets, on top of a 5% gain a year ago.
Hard to predict
Looking ahead, opinions are mixed on whether the retail slump will continue. Mr. Beder's outlook for April is "somewhat brighter," given the fact that few retailers have reduced their earnings estimates for the first quarter, in the face of the dreary March results. However, some expect it will be a longer recovery period for the retail sector, given consumer sentiment.
"Looking forward to April, record-high gasoline prices and consumers' worry about the economy will continue to curb discretionary spending power," said Michael Niemira, chief economist and director of research at ICSC.