Weak comparable-store sales gains in April dumped a bucket of cold water on what had been budding enthusiasm in retail.

This story first appeared in the May 4, 2012 issue of WWD. Subscribe Today.

With an Easter calendar shift that pulled sales out of April and into March, unfavorable weather and a still-troubled economy, shoppers opted to stay home last month.

April sales rose just 0.6 percent according to the International Council of Shopping Centers — a much weaker showing than the 3 to 4 percent increase the group forecast a week ago. And retail stocks felt the pinch. The S&P Retail Index, which is still near its all-time high, fell 0.9 percent, or 5.94 points, to 649.78, as the Dow Jones Industrial Average slipped a milder 0.5 percent, or 61.98 points, to 13,206.59.

“We had pretty muted results. That being said, when there’s such a dramatic calendar shift, we look at March and April together,” said Joel Bines, managing director at AlixPartners’ global retail practice.

“We’re going to see steady but not spectacular comp increases in 2012 because there’s still a significant amount of pent-up demand from 2008,” he said, adding that there seems to be a “real separation” between the winners and the losers.

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When viewed together, March and April’s total comp increase was 2.5 percent compared with a 5.4 percent climb last year.

In the midtier channel, Macy’s Inc., which posted a 1.2 percent comp rise, appears to be snatching up market share. Kohl’s Corp. logged a 3.5 percent decline and J.C. Penney Co. Inc. is in the midst of a major reset that is disrupting sales.

Barbara Kahn, director of the Jay H. Baker Retailing Center at the Wharton School of the University of Pennsylvania, said Macy’s has been innovative and is benefiting from its “omni-channel selling philosophy.”

Kahn said Nordstrom Inc., with a 7.1 percent comp gain, and Limited Brands Inc.’s Victoria’s Secret unit, with an 8 percent rise, have been standouts.

“They have been surprisingly great,” she said. “They have the right product and they are doing the right thing at the right time.”

But retailers posting big numbers are few and far between.

“It’s going to be a slow recovery,” Kahn said. “There are things on the horizon that can still throw a monkey wrench in the recovery.”

High gas prices, rising retail prices and housing and employment markets that are showing little signs of improvement are just a few of the headwinds, she said. With the U.S. presidential election looming and Europe tilting toward recession, consumers may decide to coast through the rest of the year.

“There’s still a sizable population living under postrecession conditions,” said Arnold Aronson, managing director of retail strategy at Kurt Salmon. “Gas prices are not fictitious. You can’t manufacture money.”

Aronson described the economy as “stabilizing” but “not flying.”

“April brought things back to Earth” after “unjustified enthusiasm” from February and March, he said.

Even though the luxury market has slowed somewhat from last year, it is still moving forward.

Case in point: Saks reported a 2 percent gain versus last April’s 5.8 percent increase.

The tea leaves are harder to read with far fewer retailers reporting monthly sales.

Big names such as Neiman Marcus Inc., Wal-Mart Stores Inc., Penney’s and a slew of teen retailers, from Abercrombie & Fitch Co. to American Eagle Outfitters Inc., have all dropped out of the monthly ritual.

“There’s a lot hidden under the covers,” Aronson said. “Value and luxury are going to be OK. But it’s going to be a zero-sum game for midtier retailers. Value retailers are benefiting from consumers who traded down [from the middle], and many of them stayed there.”

That’s just fine for value-centric players such as The TJX Cos. Inc., Ross Stores Inc. and Zumiez Inc., which turned in respective increases of 6 percent, 7 percent and 10.1 percent.

“The new normal that we’re seeing includes 8 percent-plus unemployment, it includes people who are underemployed and not making as much money,” said Michael Brown, a partner in the retail practice at A.T. Kearney.

That potentially sets the scene for more store closures as retailers rightsize their fleets or consolidate with other brands.

“I don’t think we’re seeing anything that’s making people want to spend more money than they have in the last couple of years,” Brown said. “People have migrated to new levels of consumption.”


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