April 15, 2011 > Shopper spending surprisingly strong in March
Shopper spending surprisingly strong in March
By Anne D'Innocenzio, AP Retail Writer
NEW YORK (AP), Apr 07 - Shoppers shrugged off higher gas prices and cool temperatures to give retailers a surprisingly solid March.
Revenue reports Thursday from retailers from Costco to Victoria's Secret extend the streak of strong spending from late last year and suggest that an improving economy and recent job growth are outweighing pressure from higher pump prices.
Retailers collectively saw a 2 percent increase over last March, the International Council of Shopping Centers said. That compares with expectations for flat revenue or a small decline.
The increase is better than it looks because this year's late Easter depressed results by 3 to 5 percentage points, analysts say.
"Neither the lack of the Easter Bunny, nor cool temperatures nor spiking gas prices could keep consumers at bay," said Ken Perkins, president of RetailMetrics LLC, a research firm. "There is still a significant amount of pent-up demand. I think the job recovery is catching on."
Many stores reported revenue gains that handily beat Wall Street expectations. Target Corp. reported a smaller decline than Wall Street expected.
Saks Inc.'s sales surged beyond estimates, proving once again that the wealthy are buying status goods from Gucci bags to Hermes scarves.
Gap Inc. was one of the few big losers, reporting a decline that was worse than expected and warning of disappointing earnings. Japan's earthquake, tsunami and nuclear crisis also took a toll on Gap, which operates 150 stores there.
The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer's health.
Many analysts had expected retail revenue to decline slightly in March, largely because the late Easter will shift most holiday spending into April.
The calendar quirk meant retailers faced their toughest comparison in at least 10 years, Perkins said. An Easter that fell on April 4 helped drive last March's revenue figures up 9 percent. This year, Easter is on April 24.
Analysts were particularly worried about how rising gas prices would hurt shoppers' willingness to buy, particularly low to middle-income shoppers. In March, gas averaged about $3.53 a gallon, according to AAA, Wright Express and Oil Price Information Service, up about 75 cents per gallon from March 2010.
Many other prices also are increasing. Food prices are expected to rise 3 percent to 4 percent this year, with the steepest hikes in dairy, meat and coffee. Clothing sellers are raising prices to offset soaring costs for labor in China and for raw materials like cotton.
Consumers surveyed in March for the Conference Board's Consumer Confidence Index voiced concerns about inflation and stagnant incomes. The index fell sharply from a three-year high in February, reversing five straight months of improvement.
But analysts say that March's revenue results shows an improving job picture is supporting spending. Companies added workers at the fastest two-month pace since before the recession began.
Costco said Thursday that revenue at stores open at least a year, excluding membership fees, climbed 13 percent last month. Analysts polled by Thomson Reuters expected a 7.4 percent increase.
Taking out rising gas prices and strengthening foreign currencies, sales at stores open at least a year climbed 8 percent.
Target posted a 5.5 percent drop in March, smaller than the 6.4 percent expected.
The discount chain says groceries were its best-selling category. Clothing also sold well, particularly workout clothes. The later Easter particularly hurt sales of candy, clothing and toys.
The discounter expects a happy Easter, with the figure rising in the mid-teens percentage range in April.
Among department stores, Cincinnati-based Macy's Inc. reported a 0.9 percent increase, better than expected, as shoppers picked up new spring clothing.
"March sales exceeded our expectations and demonstrated that our spring fashion assortments are hitting the mark with customers," CEO Terry J. Lundgren said in a statement.
J.C. Penney Co. reported a 0.3 percent decline in March, less than the 3.4 percent decrease analysts expected.
Limited, based in Columbus, Ohio, reported a robust 14 percent gain, sharply higher than analysts expected, driven by strength at its Victoria's Secret stores.
The company said a later Easter this year hurt revenue in stores open at least a year by 3 to 5 percentage points. Analysts expected a much smaller 1.5 percent gain.