Costco Boosts Retailers To Top March Sales Views Despite Cold

Retailers posted modest sales gains in March but managed to top analysts' forecasts Thursday, even as persistent cold weather in much of the U.S. chilled spending on spring merchandise.

Chains look to recharge sales in April amid warmer weather and a boost from the Easter holiday.

March sales at stores open at least a year were up 2.8% from a year earlier, according to Ken Perkins, president of Retail Metrics. Helped by a solid beat from Costco Wholesale (COST), retailers beat views for a 2.5% increase. But taking Costco out of the March mix, comps rose just 1.2%.

'Onus Is On April'

March's modest results followed a soft 2.1% February gain.

"The month's sales weren't as bad as feared, given the adverse weather conditions retailers faced throughout the month," said Perkins. "The onus is on April to turn in a very solid month. There should be some pent-up demand for spring merchandise that should be unleashed with warmer temperatures.

The Easter holiday falls late this year, on April 20. So "virtually all" Easter-related sales should land in April's data, Perkins adds.

Michael Niemira, chief economist for the International Council of Shopping Centers, figures the late Easter had a 1% negative impact on total March comps.

He calculates that last month's same-store sales rose 2.9% from a year earlier. While that was a much better showing than February, when retailers were "sizably impacted by adverse weather," retailers were up against easy comparisons, given March 2013's 1.1% rise, he adds.

Overall, March results were mixed, Perkins says. Costco was the standout performer, as it benefited from an extra selling day this March vs. March 2013. Its total-company March comp rose 5%, compared to forecasts for a 3.3% gain. Core U.S. same-store sales, excluding gasoline, popped 6% vs. views for a 5% rise. Other retailers in the discount space — and beyond — weren't so lucky. Regional discount-chain operator Stein Mart (SMRT) saw a 0.9% rise in March comps, shy of forecasts for a 2.7% gain.

PriceSmart (PSMT), which owns membership-shopping warehouse clubs in Latin America and the Caribbean, on Wednesday reported a 1.9% March comps rise, short of views for a 6% gain.

Family Dollar Stores (FDO) on Thursday reported Q2 earnings and revenue below the view of analysts polled by Thomson Reuters. The deep discounter plans to cut jobs and close about 370 underperforming stores.

Perkins says that discounters' soft showing in March was largely related to adverse weather.

"The lower-income consumer has still been struggling and looks to be struggling for the foreseeable future," Perkins said. "They're not seeing wage gains, and the jobs available to them are not paying higher wages.

Big apparel retailer Gap (GPS) posted a 6% year-over-year decline in March comps — below the 3.9% drop that analysts had forecast. Victoria's Secret owner L Brands (LB) saw March comps slip 1% from a year earlier, better than the 1.7% decrease forecast. Action sports retailer Zumiez (ZUMZ) posted a 2.9% decrease in March comps on Wednesday, ahead of views for a 4% decline.

Retailers overall got hurt by adverse March weather, says Perkins.

There has been "a somewhat sluggish spending environment for traditional retailers for a better part of a year or two," he added. He cites the fact that auto sales and bigger-ticket purchases have been "siphoning sales" from department stores and specialty-apparel retailers.

Bad weather and other head winds didn't seem to hurt fourth-quarter results for drugstore chain Rite Aid (RAD). Its Q4 sales and earnings Thursday handily beat views.

Home decor retailer Pier 1 Imports (PIR) also reported fourth-quarter results Thursday. Earnings and revenue were both slightly ahead of forecasts, though both measures were down from a year earlier.

Perkins is somewhat upbeat on retailers' April outlook. He says that spring fashions look "attractive and should generate some interest if the weather cooperates." And consumer confidence has "ticked up a bit.

Niemira forecasts April same-store sales to rise in the range of 3.5% to 4% from a year earlier. He says that he would have expected over a 4% gain; but his forecast is lower because the weather is not expected to be "favorable.

"We're still in a holding pattern, where over the past three months we've had various weather impacts that cumulatively have created pent-up consumer demand," he said. "I'm still looking for some bigger surge from that pent-up demand."