April Cruel to Retailers

Several companies miss same-store sales expectations after strong first quarter.
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Updated from 9:10 a.m. EDT

In what's been a strong year for retailers so far, April may be the cruelest month.

Same-store sales results for the month were mixed -- with many companies missing expectations -- as some were more impacted than others by the earlier Easter holiday.

The disappointing numbers were dragging down stock prices in Thursday trading as the broader market was also down. The

Retail HOLDRs

(AMEX)

index was lately down 1.1% at 91.42.

Beyond the negative Easter shift impact on April sales, Ken Perkins, an analyst at Thomson First Call, also cited a decrease in the amount of tax-refund checks going out to consumers and "unfavorably cool weather" in parts of the country during the month.

Perkins, who had predicted an aggregate 4.9% increase in April same-store sales, called the results a "significant slowdown from the scorching 6% plus sales growth racked up through the first three months of the year." Total March same-store sales rose 6.6%; February's results were up 7.1%; and January posted a 6% increase, according Thomson First Call data.

Another important aspect to note, said Craig Johnson, president of retail consulting firm Customer Growth Partners, is that April's year-ago results were much stronger than March 2003's results. That made March 2004 same-store sales comparisons easy and April 2004 comparisons difficult. March 2003 was the beginning of the war in Iraq, while during April, the American military gained control of Baghdad.

Of specific companies,

Wal-Mart

(WMT) - Get Report

had uneven April results in its two divisions. The company posted a total 4.4% rise in same-store sales, narrowly missing the Thomson First Call consensus for a 4.5% increase. The results came in below April 2003's 4.6% increase.

By division, Sam's Club same-store sales rose 8.3%, easily surpassing the 6.4% consensus, but Wal-Mart stores had a 3.6% increase, falling short of average estimates for a 4.2% gain.

Total company sales in April were up 11.7% at $20.77 billion with stand-alone Wal-Mart sales up 10.5% at $13.98 billion and Sam's Club sales up 9.7% at $2.74 billion.

Looking to May, Wal-Mart predicted its usual same-store sales increase of 4% to 6%. Shares of the company were down 33 cents, or 0.6%, at $55.53.

Same-store sales at

Target

(TGT) - Get Report

increased 4.9%, below the estimate for a 5.4% rise. Total sales were up 11.8% at $3.54 billion.

By segment, the company's Mervyn's stores had a 6.6% decline in same-store sales -- far below the consensus for a 0.8% decline -- while Marshall Field's had a 0.6% increase, also missing the consensus for a 4% increase. Shares of Target were dropping 50 cents, or 1.1%, at $44.21.

Richard Hastings, retail analyst at Bernard Sands, said he is concerned that "stronger supermarket sales at Wal-Mart may not convert into cross-product migrations in the supercenters, with some grocery shoppers buying electronics and home softlines like bedding and linens at other retailers."

As a result. "Target stores continue to outperform Wal-Mart supercenters on comps and total sales growth rates," Hastings added.

In the rest of the discount arena,

BJ's Wholesale Club

(BJ) - Get Report

had a 5.4% increase, missing the consensus estimate for a 6.6% rise, while total sales increased 10.8% to $505.3 million.

The company also said first-quarter same-store sales increased 6.6%, with total sales up 12.1%. BJ shares were down $1.15, or 4.7%, at $23.52.

And

Costco

(COST) - Get Report

, posted a 10% increase in same-store sales, ahead of the consensus for a 9.8% rise. Total sales rose 13% to $3.56 billion. The company said results were helped by currency exchange. The stock was down 47 cents, or 1.3%, at $36.84.

In the department store space,

Sears

(S) - Get Report

said domestic same-store sales fell 1.8%, missing estimates for a 1.2% increase. Total sales also fell, down 2.8% to $1.94 billion. Sears shares were down $1.61, or 4%, at $38.39.

J.C. Penney

(JCP) - Get Report

had a 5.3% increase in comparable department-store sales, beating the Thomson First Call consensus for a 5% increase.

The company noted that same-store sales fell 4% at its

Eckerd

discontinued operation, which is in the process of selling about half of its stores to rival

CVS

(CVS) - Get Report

. That compared with the consensus for a 3% drop.

In May, the company said it sees comparable department-store sales up in the low single digits. The company also said operating profit is trending higher than previously guided. Consequently, J.C. Penney expects to earn 30 cents to 35 cents a share in the first quarter, compared with the consensus estimate of 25 cents a share.

Shares of J.C. Penney were lately up 65 cents, or 1.9%, at $34.65.

Federated Department Stores

(FD)

said same-store sales in April rose 5.4%, beating estimates for a 5% increase. Total sales increased 5.5% to $1.134 billion.

The company forecast May same-store sales to be "relatively flat" from the prior year, due to a shift of sales into June because of a later Memorial Day weekend this year. Second-quarter same-store sales are expected to be up 2% to 3%. Federated shares were down 99 cents, or 2%, at $48.01.

Kohl's

(KSS) - Get Report

said same-store sales dropped 4.6%, compared with the analyst consensus for a 1.9% decrease. Total sales, however, rose 10.1% to $2.38 billion.

The company said it is still comfortable with its first-quarter earnings estimate of 32 cents to 34 cents a share; the consensus is for 33 cents a share. Kohl's said expenses were well-controlled and merchandise margins increased due to improved inventory management.

Shares of Kohl's were dropping 4 cents, or 0.1%, at $40.92.

May Department Stores

(MAY)

said same-store sales plunged 8.1%, significantly below the First Call estimate for a 0.2% decline. Total sales fell 6.8% to $902 million. May shares were down 73 cents, or 2.5%, at $29.11.

Same-store sales at

Gap

(GPS) - Get Report

rose 3%, falling short of analysts' estimates calling for a 3.9% increase. In comparison, the company had a 20% rise in April 2003 same-store sales.

Total sales in the month rose 7% to $1.25 billion, while total first-quarter sales increased 9% to $3.7 billion. Gap said it sees a first-quarter profit of 31 cents to 32 cents a share, including certain expenses from an early debt retirement.

Analysts are calling for earnings of 27 cents a share in Gap's first quarter. Shares of Gap were down 32 cents, or 1.4%, at $22.33.

Limited Brands

(LTD)

had a 2% increase in April same-store sales, missing estimates for a 4.8% increase. Total sales rose slightly to $586.6 million, from $580.6 million in the year-earlier period.

The company said first-quarter sales increased 7% to $1.98 billion, while first-quarter same-store sales increased 8%. Shares of the company were down 16 cents, or 0.8%, at $20.65.

Pier 1 Imports

(PIR) - Get Report

posted a 1.7% decline in same-store sales; the consensus estimate, according to Thomson First Call, was for a decline of 0.7%. The company had announced last week that results would come in weaker than previously expected due to the Easter shift. Total sales in the month were up 7.7% at $129.9 million, however.

The company lowered it first-quarter earnings guidance and predicted that May same-store sales will see a decline of 4% to 6%. First-quarter profit is now seen at 14 cents to 17 cents a share, down from a prior estimate of 21 cents to 24 cents a share. Analysts were calling for 21 cents a share. Pier 1 shares were recently down 99 cents, or 4.9%, at $19.21.

Same-store sales results at

Pacific Sunwear

(PSUN)

rose 11.4%, sailing past estimates for a 7.6% increase, and total April sales increased 21.8% to $73.7 million. Nevertheless, shares of the company were falling 46 cents, or 2.1%, at $21.79.

Urban Outfitters'

(URBN) - Get Report

same-store sales surged 32%, while total sales in the first quarter jumped 59% to $170.3 million, a new company record. Thomson First Call was expecting a 21.7% increase for April same-store sales. In comparison, the company had a 2% increase in April 2003 same-store sales. Shares of the company were down 74 cents, or 1.5%, at $47.88.

Abercrombie & Fitch

(ANF) - Get Report

said April same-store sales were unchanged from the prior year, while total sales increased 19% to $121.7 million. Consensus was for a 1.5% decline in April same-store sales.

The teen retailer said it sees first-quarter earnings at the high end of its previously forecast range of 28 cents to 30 cents a share. The consensus is for 30 cents a share. Shares of Abercrombie were lately up 15 cents, or 0.5%, at $31.90.

"Apparel merchants have maintained streamlined inventory positions, which have translated into limited markdowns and higher margins," said Perkins. "Moreover, merchandise selection has generally been fashionable and well received by consumers."

Continuing the recent trend, same-store sales at luxury department store

Nordstrom

(JWN) - Get Report

rose 10%, beating the consensus for a 9.1% increase, while total sales in the period jumped 12.4% to $491.7 million.

The company lifted its first-quarter earnings guidance to 40 cents a share, compared with the Wall Street consensus estimate for 38 cents a share and the prior year's earnings of 20 cents a share. Nevertheless, shares of Nordstrom were down 10 cents, or 0.3%, at $37.31.