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Apr 5, 2011
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March sales likely fell as shops await Easter

By
Reuters
Published
Apr 5, 2011

April 5 - March sales at retail chains are expected to fall modestly, held back by the combination of a later Easter and higher gasoline prices.

Department stores such as Kohl's Corp are expected to post the biggest declines after tallying huge gains a year earlier, when consumer demand picked up steam and shoppers bought spring clothing.


Several hundered people wiat in line at 2:45am outside of Kohl's, St. Petersburg, for the store to open at 3am.

March sales at stores open at least a year, or same-store sales, are expected to have fallen 0.9 percent across 25 chains tracked by Thomson Reuters. Such sales jumped 9 percent in 2010. Easter lands on April 24 this year, after falling on April 4 in 2010.

Low consumer confidence and higher food and gasoline prices appear to be tempering any major recovery, even though shoppers have started to see improving economic data, including last week's reports that the unemployment rate dipped to 8.8 percent and nonfarm payrolls rose again.

"There is definitely a lot going on right now in terms of the inflation that we're seeing from fuel prices. That's really just the tip of the iceberg, we believe," said John Long, a retail strategist at consulting firm Kurt Salmon.

The average price of regular gasoline is now around $3.66 per gallon, up from less than $2.83 a year ago, according to AAA. Much of the spike has come during 2011 amid unrest in the Middle East and Northern Africa.

It typically takes anywhere from four to six months of sustained price changes to get consumers to behave differently, Long said, so higher gas prices are not yet a huge concern.

Shoppers will also soon be hit with more expensive clothing, as retailers raise prices due to increased cotton and transportation costs. Those prices, combined with gasoline and food inflation, may impact spending later in the year, especially around back-to-school and winter holiday periods.

A decline in March same-store sales would be the first drop since August 2009.

DECLINES EXPECTED

Target Corp and Macy's Inc are among those that already said their same-store sales were likely to fall in March and rise in April.


Holiday Shoppers heading towards Macy's at Herald Square, New York, on 8/12/2010

Department stores, which posted the biggest gains in March 2010, are expected to report the steepest decline, at 3.6 percent.

One chain that should buck the trend is Costco Wholesale Corp, which had an additional sales day in its March period and gets a lift from selling gas at some locations. Costco is expected to post the biggest gain, a 6.9 percent increase.

The later Easter, and therefore many later school spring breaks, may trim apparel retailers' same-store sales by 3 to 4 percentage points in March and lift them by 4 to 5 percentage points in April, according to Goldman Sachs.

Chains catering to college students may have done better than those aimed at a younger set as college spring breaks generally fall in March.


Victoria's Secret 'Pink' collection

"Of those that report monthly, we believe Victoria's Secret is best positioned given its Pink and swim collections," Nomura analyst Paul Lejuez said in a note. Limited Brands Inc, which owns Victoria's Secret, is Lejuez's top pick.

Retailers with fresh merchandise may also thrive.

"I've certainly heard anecdotally that retailers have done surprisingly well in March with new spring goods," said Long.

Chains rang up a 4.2 percent increase in February same-store sales.

(Reporting by Jessica Wohl; Editing by Richard Chang)

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