Retail shares fell 2.5 percent Tuesday as an unexpected drop in March retail sales undermined hopes the recession might be near or even past its low point.
Sales at specialty stores last month decreased a seasonally adjusted 1.8 percent versus February, while department store sales fell 0.3 percent, the Commerce Department reported. Compared with a year earlier, specialty store sales declined 5.1 percent to $17.9 billion and department store sales dropped 5.5 percent to $16.1 billion.
Sales at all retail and food service providers slid 1.1 percent in March from the preceding month, following a 0.3 percent increase in February and a 1.8 percent rise in January. Economists were looking for a much stronger 0.3 percent gain last month.
The government figures offer a broader view of March sales than same-store sales reports from major chains, which were released last week and, hurt by a smaller-than-expected increase at Wal-Mart Stores Inc., were weaker than expected.
“Clothing and apparel stores were slashing prices at a very steep pace [in March],” said Richard Yamarone, director of economic research at Argus Research Corp. “At the same time, volumes were weak because we are in the midst of a sharp consumer recession. The combination of falling prices and extremely weak volume is a recipe for poor sales performance and that’s what we got last month.”
Yamarone said April sales, which will include Easter this year, could turn positive again.
Calling the report “disappointing,” Patrick Newport, U.S. economist at IHS Global Insight, said, “Pending April’s release, March’s estimates throw cold water on the notion that consumer spending has hit bottom.”
Some of that cold water hit retail investors as well.
The S&P Retail Index fell 8.26 points to 319.65 as the Dow Jones Industrial Average dipped 1.7 percent, or 137.63, to 7,920.18, after closing above 8,000 for two straight trading sessions.
Signs of stabilization in consumer spending have helped retail shares rebound more robustly from recent lows than the market overall. Retail shares are up 43.2 percent since hitting their March 6 low and the Dow is ahead a lesser 23 percent since its March 9 nadir.
Shares of The Talbots Inc. were hit particularly hard Tuesday, falling 25 percent to $3.43 as investors reacted to news of the retailer’s $366.5 million fourth-quarter loss.
Other decliners included Saks Inc., down 8.4 percent to $2.62; AnnTaylor Stores Corp., 8 percent to $5.86, and Macy’s Inc., 7.3 percent to $11.99.
Still, the Conference Board reported that chief executive officers became less pessimistic during the first quarter, even as their outlook for employment remained gloomy. Its CEO Confidence measure rose to 30, up from its all-time low of 24 during the final quarter of 2008. The scale runs from zero to 100, with 50 representing an even split of favorable and unfavorable responses.
Twenty-six percent of ceo’s said they expected improvement in their own industries in the next half year, more than double the 12 percent saying the same thing three months earlier. About 17 percent expect general economic conditions to improve in the next six months, up from about 11 percent.
However, less than 3 percent of the ceo’s polled expect growth in employment in their own industries, down from 26 percent a year ago.