Retailers Find Hope in Another Month of Sales Declines

Consumers Still Aren't Spending Much, but Results Aren't Quite so Bad as Execs Initially Feared

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NEW YORK ( -- Same-store sales fell in March for the sixth straight month, yet retail executives are positively upbeat.

On the surface, same-store-sales trends appear unchanged from previous months. Walmart and lower-price teen retailers such as The Buckle and Aeropostale remained bright spots. Luxury retailers, including Saks and Nordstrom, posted double-digit declines. And department stores reported single-digit declines. Yet many executives struck a more optimistic note, citing "encouraging" signs and "better-than-expected" performances.

Despite sales slumps, JCPenney improved its outlook for the first quarter.
Despite sales slumps, JCPenney improved its outlook for the first quarter.
Patricia Edwards, retail analyst and founder of Storehouse Partners, said retailers seem to be celebrating because sales weren't as poor as they initially feared. There are also signs the bottom could be near, she said. Consumer spending accounts for roughly two-thirds of economic activity and is a leading indicator, meaning any positive signs in retail sales have broader implications.

Gains among discounters
"We're seeing the consumer [is] spending a little bit more than they were, but they're not spending the same way they were [before the recession]," Ms. Edwards said. "But the big gains, the happiness, the guiding up [of expectations] -- it's all the discounters. Anyone that sells full price or tries to hold the line, like Abercrombie, which is down basically a third from last year, [is seeing] hideous numbers."

A shift in the calendar also pushed Easter into April, leading to an unfavorable comparison with last March, industry watchers said. The International Council of Shopping Centers said same-store sales declined 2%, but adjusting for the calendar shift would give retailers a 1% sales gain.

"The overall tone for March was actually stronger than the reported sales performance," said Michael Niemira, the ICSC's chief economist.

The ICSC expects April same-store sales to be flat to up 1%.

Walmart reported a modest 1.4% increase at U.S. stores open at least a year, excluding fuel, while JCPenney saw sales slump 7%. Yet both retailers improved their outlooks for the first quarter. Walmart said it expects Easter to be a sales driver this month, while JCPenney cited the success of its spring assortment.

Reluctance to spend
Clearly consumers are still spending cautiously and looking for bargains. Richard Jaffe, an analyst with Stifel Nicolaus, said consumers did not respond to periods of warm weather, even though retailers were stocked with spring goods, indicating a reluctance to spend.

"Perhaps a significant and sustained shift in the weather will fuel the 'need' for new seasonal apparel, and possibly new merchandise assortments will inspire the consumer to spend," he wrote in a research note. "This view seems overly optimistic, given the economic uncertainty facing the U.S. economy and every consumer."

One source of optimism, however, is the trimming of inventories and sales staff, analysts said. Those moves better reflect the weak sales environment and could stem sales and earnings declines. The retail sector shed 48,000 jobs last month. Retailers have cut 675,000 jobs since the recession began in December 2007.

"[Retailers] are ratcheting back and adjusting costs however they can," Ms. Edwards said. "They are catching up. But am I willing to get out the pompoms and do a cheer and bet on retail stocks? Not so much."

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