Retail Sales Get Reality Check in April

As expected, same-store sales crashed back to earth in April following March's out of this world results.

Weak year-over-year comparisons, pent-up demand and the "Easter shift" made March the best month for retailers in about a decade. But April was not as kind.

The researchers crunching the numbers found that same-store sales rose by about 1.0 percent for the month. That puts the combined March/April figure at about 4.5 to 5.0 percent. The weak April results were the direct result of the Easter boom the previous month. March got all the benefit of Easter-driven sales. Moreover, the run of spending spurred on by pent-up demand that went on during the early months of the year may have run its course. Many consumers have now returned to their frugal ways. And is it that big a surprise really? The jobs picture remains bleak. Consumer credit is less available and the housing market remains in shambles. Those were three major factors driving consumer spending during the boom year. Without robust recoveries, there will be no sustained consumer spending binge.

"We know that things probably are not going to get worse, but the consumer is not out there leading us forward," said Stephen Hoch, a marketing professor at Wharton School.

The results came a week after data showed that the U.S. economy expanded at a 3.2 percent annual rate in the first quarter, the fastest pace of consumer spending in three years.

But that translated into mixed results for U.S. businesses, as people are more selective about where they spend, analysts say. In addition, a fresh report on jobless claims showed a slightly smaller-than-expected drop in unemployment filings, suggesting a more gradual recovery.

"Nobody has told American consumers that the recession is over although some officials have rosy predictions of growing consumer spending," consumer trend expert Britt Beemer said in a note. "We're seeing a lot of people on the edge of financial distress."

Retail Forward recorded the year over year gain as 1.2 percent. ICSC and Retail Metrics said sales rose 0.8 percent compared with April of last year.

ICSC's tally shows that same-store sales rose 0.8 percent in April.

ICSC's numbers are based on 31 retailers. In the commentary in its monthly report, ICSC said:

ICSC Research estimates that the shift in the date of Easter (April 4, 2010 vs. April 12, 2009) boosted industry comp‐store sales growth by about 4‐5 percentage points in March‐‐adding to the outsized 9.0% gain‐‐and was a drag on overall industry sales by the same magnitude in April.

The two‐month March‐April average sales pace was a very strong and encouraging 4.9%‐‐far above the December‐February average pace of 3.4%. ICSC Research attributes this outsized two‐month gain to the confluence of factors from the earlier Easter/Spring breaks/warmer weather, improving economy, increased catch‐up demand and some consumers beginning to step up their purchases of higher margin/higher price‐point merchandise. A number of retailers pointed to the two‐month strong performance of their company sales and some noted the underlying improvement as well.

Here are ICSC's results going back to 1993.


(Click for larger image.)

According to Retail Forward, sales-weighted same-store sales excluding Walmart increased 1.2 percent in March for the 31 retailers that reported numbers. (A pdf with each retailer's results can be downloaded here.) Frank Badillo, senior economist at Retail Forward, said in a statement, More than one-third of the retailers reporting posted gains in April on top of March's gains. These results provide some signs of the pickup in spending that shoppers are sustaining despite the Easter calendar shift.

Retail Metrics, meanwhile, reported that same-store sales increased 0.8 percent. That is the smallest monthly comp increase for the firm's same-store sales index since November 2009. Overall, the firm counted 14 chains posting gains while 19 posted declines.

According to the firm's monthly report:

Negatively impacted by the Easter holiday shift and coupled with adverse weather conditions in the back half of the month, April retail sales fell off sharply from the torrid 8.7% gain racked up in March. Our Retail Metrics Same Store Sales Index posted a disappointing 0.8% gain, which fell well short of expectations by 120 bp and marked the weakest monthly comp performance since November 2009.

Consumers look to have taken a breather after unleashing pent up demand in February & March. Teen apparel turned in a particularly disappointing month with comps plummeting 6.2% with all chains posting negative comps and missing expectations.

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