US retailers posted better-than-expected monthly sales results for a second straight month last month, giving fresh evidence that consumer spending is warming up with the spring weather.
Nearly two-thirds of the retailers that reported last month’s sales at stores open at least a year topped Wall Street estimates and a handful said their first-quarter results, which start landing next week, will be better than expected.
“Overall, you are seeing some signs of a return to discretionary purchases throughout different areas of retail,” said Barclays Capital analyst Robert Drbul.
He said the shift of Easter into April this year from March last year aided the comparisons, while lower gasoline prices and payroll taxes likely cushioned household budgets.
Thomson Reuters’ revenue-weighted same-store sales index showed that overall same-store sales rose 1.2 percent, surprising analysts who expected a drop of 0.2 percent.
Excluding Wal-Mart Stores Inc, sales fell 2.7 percent, still topping the 3.4 percent drop analysts expected.
Nonetheless, retail shares fell in afternoon trading, with the Standard & Poor’s Retail Index down almost 2 percent.
“It’s hard to really ... be terribly excited,” said Michael Niemira, chief economist with the International Council of Shopping Centers (ICSC), since the results only demonstrate a move from “extreme weakness” to “moderate weakness.”
Niemira added the ICSC expects same-store sales to be flat to down 1 percent for this month.
Retailers did not say whether the H1N1 flu drove demand for health-related items, nor whether fear of catching the virus kept US shoppers away from malls already seeing lighter traffic during the recession.
With the S&P Retail Index up 14 percent since the beginning of last month, Drbul struck a cautious tone, noting comparisons would get more difficult as money from tax rebates wanes and retailers cycle the boost from last year’s economic stimulus checks.
Wal-Mart’s US sales at stores open at least a year rose 5 percent, compared with analysts’ average estimate for a 2.9 percent increase, Thomson Reuters data showed. The world’s largest retailer cited demand for Easter merchandise, as well as discretionary items such as entertainment and home goods.
Target Corp, in the heat of a proxy battle with Pershing Square Capital Management, said its sales rose 0.3 percent, just below analysts’ view for a rise of 0.4 percent.
Still, Target said it now expects first-quarter profit to be “well above” US$0.52 per share, driven by better than expected results at its stores, where it has been keeping tight controls on inventory. Its shares rose about 2 percent.
Analysts, on average, were expecting Target to earn US$0.53 per share, Reuters Estimates showed.
Gap Inc posted a smaller-than-expected 4 percent same-store sales drop and plans to post a first-quarter profit of US$0.29 to US$0.30 per share, above analysts’ estimate of US$0.24. Gap said operating expenses should be about US$70 million less than a year ago and its shares rose about 3 percent.
Lazard Capital Markets analyst Todd Slater noted much of Gap’s strength stems from its lower-priced Old Navy chain improving its merchandise to attract cost-conscious shoppers.
“While trends at Old Navy are improving, we believe business momentum at Gap stores and Banana Republic continues to deteriorate,” Slater said.