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Early Easter Holiday Likely Crimped Retail for April

Conversely, the holiday probably boosted March same-store sales by 1-2%.

With an earlier Easter inducing more sales in late March, same-store sales in April likely will be modestly lower than last month, but analysts still expect growth above year-ago levels. Perhaps just as important, though, the reports will give Wall Street a sneak peek at retailers' first-quarter earnings performance, while potentially driving estimate revisions.

Mixed April consumer sentiment readings showed shoppers may have been concerned about rising gasoline prices and the still somewhat weak job market -- the Conference Board's April consumer sentiment reading came in last week at 92.9, up from March's revised reading of 88.5. The University of Michigan's revised consumer confidence index reading for April was 94.2, down from March's reading of 95.8.

But analysts still expect significantly improved results. Ken Perkins, an analyst at Thomson First Call, is calling for a 4.9% aggregate increase in April same-store sales, up from a 3.7% increase in the year-ago period. First Call tracks 68 major retailers.

While a 4.9% increase "would be somewhat slower than what we've seen in the first three months of the year," Perkins pointed out that April is up against the most difficult comparisons year to date. "If there is a month for potential downside risk, it could be this month. Analysts are human," he said, suggesting the first three months of the year could affect analysts' outlooks, "they have a tendency to project out strength across the board."

Most retailers will report same-store sales on Thursday, with a few to be released on Wednesday.

The International Council of Shopping Centers expects a 5% increase in April's same-store sales based on its tally of 74 chain stores. That would be well above ICSC's year-ago increase of 3.1%. The council reported a 7% increase in March same-store sales over March 2003.

"With the U.S. economy exhibiting positive signs, clearly consumers feel comfortable with their ability to buy goods and services," said Michael Niemira, chief economist and director of research at the ICSC. "Last week's sales increase more than offset the prior week's decline, but more importantly, the sales pace remains healthy."

It's All in the Timing

Perkins said the Easter shift this year has "absolutely" hurt April's results, as most analysts believe March's same-store sales were helped by at least 1% to 2% from an early Easter. Easter was on April 11 this year, compared with April 20 last year.

The world's largest retailer by revenue,




said that in the last two weeks of the month same-store sales were expected to come in at the low end of its guidance for a 4% to 6% increase, hurt by the Easter shift.

Interestingly, however, Wal-Mart's main rival



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has had sales stay on track for an overall 4.5% to 6.5% increase and a 5% to 7% increase at its namesake discount stores.


Pier 1 Imports


said last week that

sales fell off after the Easter weekend.

The company now expects April same-store sales to be flat to down 2%, compared with a previous estimate for a 3% to 5% increase. That would compare with a decrease of 2.6% in April 2003.

In Pier 1's defense, Rob Wilson, an analyst at Tiburon Research, defended the company's downward revision, saying sales predictions are "probably the hardest thing ever to do with a calendar shift."

"I think a lot of the time

retailers get it wrong. They saw how successful they were in January, February and March and tend to think it's them rather than the macro environment. They get 'irrational exuberance,'" Wilson said.

As a result, Wilson predicted that for most retailers "April is going to be a slap in the face."

Perkins, however, believes Pier 1's situation is company-specific, as other furniture retailers haven't adjusted same-store sales estimates.

As a way to offset the trouble of analyzing the two months that can each contain the moving holiday, Perkins suggests combining March and April results to get the best sense of a company's growth rate.

Inside the Sectors

Within specific retail sectors, Pacific Growth analyst Dawn Stoner is cautious on the specialty retailers, even though they likely will have one of the highest aggregate same-store sales gains in April, following March's total 7.4% increase and February's 8.3% rise. She believes investors will be anticipating the harder comparisons companies will face in the second half of the year.

"With tougher same-store sales comparisons for many companies as we move into the second half, we think specialty retail stock performance could be lackluster over the near term," she said.

Meanwhile, Bernstein analyst Emme Kozloff believes the luxury retails could dominate results due to pent-up demand, tax-law changes that benefit higher income levels as well as an overall decline in tax payments owed.

In addition, higher fuel prices could contribute to the underperformance of the discount retailers. Kozloff noted that while gas prices are up only about 3% from March, they have risen about 10% from April 2003. "Year-over-year gas-price increases typically have a statistically significant adverse effect on Wal-Mart discount store comps," Kozloff said.