Hit and miss.
This story first appeared in the May 9, 2014 issue of WWD. Subscribe Today.
That seems to be the retail trend these days as April comparable-store sales figures released Thursday showed a strong uptick while other data sounded a more bearish note.
An exclusive look at a RetailNext study of point-of-sale and customer traffic data from more than 14 million shopping trips around the country found that sales and traffic at a broad array of retailers fell 2.1 percent last month while the number of transactions declined 4.5 percent.
Even so, the RetailNext study also offered a ray of hope. Chitra Balasubramanian, head of business analytics at RetailNext, said shoppers were spending more once they opened their wallets. The average transaction value rose 2.8 percent in April and sales per shopper inched up 0.5 percent.
Taking March and April together to eliminate any impact from Easter’s later timing versus last year, RetailNext found that sales for the two months fell 6.9 percent as traffic dipped 5 percent.
“It’s not so great on one hand that traffic is down, but on the other hand, it’s a pretty good sign that those who are making it into stores are spending more across all regions of the country,” Balasubramanian said.
The dynamic might reflect a more purpose-driven shopper.
“They kind of do their homework before they buy these days,” Balasubramanian said. “There’s already that sort of conviction that you’re going to buy something if you take the time to go into the physical store.”
The ever-dwindling sample of stores reporting comparable sales for the month — diminished further by American Apparel Inc.’s withdrawal from the group — supplied numbers far better than analysts had expected, even given the shift of Easter-related business into the month from March.
The results led L Brands Inc. and Cato Corp. to raise earnings estimates for the quarter just concluded, and Gap Inc. rebounded solidly from its 6 percent decline in March with a 9 percent comp gain and profit guidance that surpassed analyst consensus estimates for the first quarter.
The strong finish to the first quarter of the retail calendar prompted Gap to lift first-quarter earnings expectations above the 53-cent analysts’ consensus estimate to a range of 56 to 57 cents, and its revenues for the quarter, now in the books at $3.77 billion, surpassed the estimated level of $3.69 billion.
While the Gap and Banana Republic divisions’ comp gains of 3 and 7 percent, respectively, beat estimates, Old Navy’s 18 percent leap, versus the consensus estimate of just a 1.1 percent gain, drew the rating of “blow-out” from Retail Metrics president Ken Perkins.
Gap also said that it expects the erosion in its first-quarter gross margin to be less than the one weathered in the fourth quarter, hardly the harbinger of a boom but an indication of at least a small let-up in promotional pressures. Shares closed up 1.2 percent at $39.24 but added 4.5 percent in the first hour of after-hours trading following the April report.
Similarly, L Brands Inc.’s comps were up 8 percent versus a 4.3 percent estimate, leading it to elevate its first-quarter earnings per share guidance to a range of 50 to 52 cents against earlier estimates of between 44 and 49 cents.
Cato Corp. boosted its guidance following its 18-point comp increase.
The positive read on April was barely felt on Wall Street, though. The S&P 500 Retailing Industry Group was off less than 0.1 percent to 837.08. The index, which was up 43.9 percent last year on expectations of improving conditions for retail sales, is down 10.9 percent so far in 2014 on what is generally being regarded as a turnaround stuck in first gear and unable to gain traction.
Covering the comp crowd, Thomson Reuters put the median increase for the month at 6.4 percent and, excluding drugstores, at 6 percent. But Jharonne Martis, Thomson Reuters’ director of consumer research, cautioned against making too much of the gain, calling it “essential to combine March and April to get a fair reading of sales growth.”
Doing so, the gain for the two-month period — eliminating the effect of the Easter shift but not the persistence of chilly, stormy weather — came in at 4.6 percent, 2 points higher than for the two months last year.
Breton Birkhofer, head of insights for Euclid Analytics, which also processes data based on traffic and transactions, said retailers have been showing signs of sluggishness since around the time of the 16-day government shutdown last October.
“We saw for the first time, back in about September, an elevation in the bounce rate” — customers drawn to a store but declining to buy there for any number of reasons — “that has persisted since,” he said. “When they went to stores, the visits were very targeted. They weren’t browsing. If they couldn’t find what they wanted or there wasn’t help, they came and they left.”
That trend began to reverse last month, and the duration of shoppers’ stays lengthened a bit.
“Customers seem to be a bit more engaged finally, perhaps because they get a sense some of the economic issues are easing up,” Birkhofer said.
Still, while storefront conversion and average duration were up 1 and 7 percent, respectively, in April, traffic declined 10 percent, partially on increased dependence on online shopping, and repeat visits to the same store declined 2 percent year-over-year.
“The overall trend was one of weak sales and weak traffic,” he said, “and apparel specialty retailers reflected that. Big-ticket items [like cars and appliances] continue to cannibalize spending on apparel. We were definitely expecting more of a move upward.”