Not Enough Ka-Ching This Spring

Boosted by Easter sales, retailers likely had a good April, but the greening of the retail sector may not be at hand.

Many retailers are slated to report their same-store sales for April on Thursday. Many will likely show big gains compared to last year. But those numbers may be a bit misleading. With Easter falling in April this year, compared with March last year, many sales may have simply shifted from one month to another.

Meanwhile, the slow sales in February and March could weigh heavily on many retailers' bottom lines for the first quarter. And retail analysts don't see much hope for a turnaround anytime soon.

"I think it's going to be very difficult to improve bottom-line profitability all this year," said Britt Beemer, chairman and founder of America's Research Group.

For the most part, the big retailers have been struggling for months. After a slow holiday season, retailers have continued their slow sales into 2003. Retail sales in February, for instance, posted a substantial sequential decline. Although overall sales rebounded in March, individual stores that release their monthly same-store sales figures largely reported disappointing sales results.

Same-store sales, which compare results at outlets open more than one year, are widely used to forecast a retailer's performance and its market share changes.

ShopperTrak on Tuesday estimated that retail sales grew by 7.4% on an annual basis in April. But combined with March, retail sales grew by just 3.1% over that two-month period, ShopperTrak said. That's far off the pace of a year ago, when retail sales in the combined March-April period grew by 6% on an annual basis.

The disappointing sales results already have started to take a toll. In the last three months, retailers including Target ( TGT), Sears ( S), Safeway ( SWY) and Best Buy ( BBY) have warned that their earnings won't meet analysts' expectations or their earlier projections.

Nordstrom ( JWN) added to the chorus on Wednesday. The company had previously warned that its earnings wouldn't meet its initial guidance of 23 cents to 27 cents a share, but didn't give new guidance about where its earnings would fall. But saying that its April same-store sales fell 0.3% and its combined same-store sales for March and April fell 1%, the company now expects to post first-quarter earnings of 12 cents to 15 cents a share.

"Gross margin as a percentage of sales, previously anticipated to achieve moderate improvement, is now expected to decline, primarily as a result of below-plan sales and above-plan markdowns," the company said in a statement. "Selling, general and administrative expense, previously expected to improve slightly on a percent to sales basis, is now expected to increase compared to the prior year as a result of lost leverage due to below-plan sales."

Even if retailers are able to make their numbers in the first quarter, the continuing slow sales may jeopardize later results.

"Unless the top-line growth is there, the bottom line can only be positive for so long," said Russell Jones, president of Decisive Retail Technology.

The problem is that retailers aren't doing what they can to entice consumers into their stores or to convince them to buy, Jones said. Few are offering "must-have" products, he said.

Meanwhile, cutbacks in customer service have meant that retailers have less ability to convert shoppers into buyers.

"You continue to see a conservative outlook on the part of retailers," Jones said. "That's part of the reason why sales have been weaker than in the past."

But to Kurt Barnard, president and chief economist of Barnard's Retail Consulting Group, the explanation is much simpler: jobs. With the latest unemployment reports showing that the economy continues to lose jobs, consumers are keeping a tight grip on their wallets, Barnard said.

"Retailing is a function of one thing -- jobs," Barnard said. "Not until such time that you read about people being hired will you see a boost in retail."

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