By  on April 7, 2010

An early Easter might have gotten shoppers into the stores last month, but it was a solid reaction to spring merchandise that got them to amp up their spending in March.

Easy year-ago comparisons will also help translate last month’s result into a fruitful beginning to spring for retailers reporting comparable-store sales on Thursday, analysts said. They cautioned, though, that the shift in holiday timing, which concentrated Easter spending in March, will likely cut into April sales.

March 2009 represented the low point of consumer spending, Michael McNamara, vice president of MasterCard SpendingPulse, said, explaining this year’s results will be a marked improvement, albeit an expected one.

SpendingPulse, an information service provided by MasterCard Advisors that estimates total U.S. retail sales by cash, check or credit card, said specialty apparel sales are expected to be up 5.2 percent for the month, thanks to strong sales gains of 9.3 percent, 7 percent and 4.2 percent in men’s apparel, footwear and women’s apparel, respectively.

Department store sales, however, are anticipated to slip 3.2 percent. According to McNamara, this is indicative of “longer-term contraction” and is “not an economic barometer.”

On the other hand, he noted, luxury sales provide a better sign of health and are projected to jump an “eye-popping” 22.7 percent.

“We are really seeing the retail landscape reset,” he said, explaining the improvement in the stock market has generated an increase in sales of high-end goods.

Easy comparisons are just one side of the story in March, according to Michael Niemira, International Council of Shopping Centers director of research and chief economist.

“The calendar shift due to the earlier Easter this year versus last year caused sales to surge on an unadjusted basis, but even on a seasonally adjusted basis, sales were quite strong as well,” he said, noting his monthly expectation is more in line with the 1994 seasonal pattern when there was a “substantial” lift from an earlier Easter.

Niemira, who expects March sales to increase 8 to 10 percent, attributed about six percentage points of year-over-year growth to the shift.

According to ICSC research, during the week ended April 3, retailers saw a 4.7 percent increase year-over-year and a 2.1 percent week-over-week increase. The year-on-year increases for the first three weeks of the month were 3.2 percent, 3.7 percent and 4.7 percent, respectively.

MKM Partners retail analyst Linda Tsai said she expects a 3 to 5 percent gain from the Easter scheduling, which could cause retailers to “quantify this shift in their monthly sales releases.”

The “uncertainty around these estimates” combined with the effects from the Easter shift could “limit stock gains,” she said, “despite potentially stronger-than-reported sales.”

While Lazard Capital Markets analyst Todd Slater agreed March gains have already been “baked” into retail stocks, leading to a potential “hangover in April,” many companies will likely raise their first-quarter guidance Thursday.

Nonetheless, Slater advised investors to look at March and April together, which he estimated should result in a 5 percent comp jump.

March, which he anticipates to increase 8 percent on a comp-store basis, benefited from a healthy 14 percent gain in mall traffic the last week of the month, thanks to the Easter shift. Overall, last month’s mall traffic was up 5 percent.

“Fashion is also driving some of the growth in demand” and “value is obviously important,” Slater said, adding that color, prints and feminine detailing in apparel are must-haves this spring.

Leggings and jeggings, accessories, cage sandals, skirts and dresses were big sellers last month, Slater said, adding that teen retailers and discounters should have the strongest numbers on Thursday, even though he is seeing “broad-based strength.”

Spring breaks combined with the holiday shift should translate into a 9.7 percent bump for teen retailers, which will outpace the expected 6.7 percent rise in the specialty space, Slater said. Mass merchants are projected to register an 8.4 percent increase, while department stores will report a 6.5 percent gain.

According to RBC Capital Markets analyst Howard Tubin, fashion newness and value remain “critically important,” and retailers like The TJX Cos. Inc. and Aéropostale Inc. will continue to profit as long as this is the case. The analyst also favored American Eagle Outfitters Inc. and Limited Brands Inc. for their “product-driven turnaround” and “margin-recovery” stories.

Ultimately, what is driving sales is the consumer’s “newfound desire for purchasing apparel” since January and February, he said. “Three months makes a trend.”

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