Will April Turn After Soft March Comps? - Analyst Blog

After a soft comparable-store sales performance in March, all eyes are on April. As retailers continued to grapple with cold weather in March, spring merchandise moved slowly from the shelves. In fact, retailers are still reeling under margin pressure as promotional activities undertaken during a soft holiday season as well as adverse weather conditions in January and February played spoilsport. Moreover, a shift in the Easter holiday also subdued March sales.

Although comps showed improvement over February, the growth was not enough to alleviate the tough year-over-year comparison, as the prior-year period benefited from Easter holiday on March 31 that shifted to April 20 this year.

Data compiled by Retail Metrics Inc. revealed that comparable-stores sales during March increased 3.5% from the projected 2.5%. However, excluding the healthy comparable-store sales performance of Costco Wholesale Corp. COST, sales grew 1.6%, the retail research firm stated.

Costco emerged strongly, posting comparable-store sales growth of 5%, when most retailers witnessed soft sales. Retailers such as L Brands, Inc. LB, The Gap, Inc. GPS and Zumiez, Inc. ZUMZ saw their comparable-store sales declining 1%, 6% and 2.9%, respectively, during March. On the other hand, The Buckle, Inc. BKE and The Cato Corporation CATO registered comps decline of 1.8% and 5%, respectively, while Stein Mart Inc. SMRT experienced comps growth of 0.9%.   

Now the question is whether April will bring showers of good fortune for retailers after soft comparable-store sales in March. We foresee an answer in the affirmative, and there are factors that also echo the same. A quick analysis will give a clearer picture.

Analysts remained optimistic about a sales surge in April due to increasing consumer spending activity, given moderating weather conditions, pent-up demand on account of Easter and higher disposable income because of tax refunds. Moreover, the unemployment rate of 6.7%, hovering near the Fed's target and consumer confidence moving north also validates a better scenario for April. The recent Conference Board's data showed that Consumer Confidence Index improved to 82.3 in March from 78.3 in February.

Thus overall situation seems to be rebounding and could result a pickup in store traffic and online sales. International Council of Shopping Centers (ICSC) anticipates comparable-store sales increase of 3.5% to 4% in April, while National Retail Federation projects total Easter spending to reach $15.9 billion. But how far the month of April will prove favorable for retailers, is a wait-and-see story.