New York — The first week of spring and the arrival of the baseball season didn’t pull consumers out of their wartime shopping stupor.

Stores reported more shutouts than home runs during the final week of the calendar month. Nordstrom was even left doubting its most recent forecast for the first quarter.

This story first appeared in the April 1, 2003 issue of WWD. Subscribe Today.

Major chains gave tepid revenue reviews to the month, which wraps up this week for most stores. Concerns over the war in Iraq have glued many consumers to their television sets, a host of economic issues have constrained spending and the shift of Easter into April this year, from March last year has complicated comparisons.

Taken together, conditions have added up to three strikes for many merchants. The final tally for the month will be ascertained when the majority of retailers report March sales results on April 10.

Additionally, Nordstrom warned that war had hampered already soft sales, contributing to a drop in first-quarter earnings estimates below the firm’s prior projections. The company is now forecasting profits below its previous guidance of 23 to 27 cents, versus profits of 22 cents for the same period a year ago. A more exacting estimate was not given due to the lack of visibility in consumer trends.

The bottom line has drifted downward with the top. Nordstrom, in a statement, said sales were trending down by a percentage in the low-single digits so far this quarter, which will end May 3.

For the fiscal month of March, Wal-Mart Stores Inc. reported Monday that its comparable-store sales would increase just barely, at the low end of the low-single digits. This forecast was based on results through Friday, the end of the fourth week in its five-week fiscal month.

Last week, the discounter experienced negative trends in both average ticket price and traffic, compared with the week prior to Easter last year. This made for tough comparisons Saturday and an easier go of it on Sunday and into this week.

“We continued to see some ‘CNN Effect,’” last week, said a Wal-Mart spokeswoman on a recorded call, referring to the preoccupation by at least some consumers with news of the Iraqi war. The strongest product categories in the U.S. included intimate and ladies’ apparel and swimwear.

Other stores, lacking Wal-Mart’s focus on basics and its ultralarge customer base, were even less optimistic about the month.

Federated Department Stores Inc. said sales last week continued to be “soft” and that it’s now looking for a comp decline of roughly 6 to 7 percent in March. The parent of Bloomingdale’s and Macy’s was earlier in the month targeting a drop of 3 to 4 percent.

J.C. Penney Co. Inc., which just wrapped up the fifth and final week of its fiscal month, said same-store sales in its department stores last month trended below the planned flat to slightly down performance. Bright spots for the week came from family shoes and women’s accessories.

ShopKo Stores Inc., which finishes its fiscal month this week, said comps were below plan last week, but it remains on track for a high-single-digit drop for the whole month.

UBS Warburg department store analyst Linda Kristiansen noted, “We have been expecting sluggish retail sales momentum to persist through at least the back-to-school season.”

Kristiansen now projects a 4 percent comp-store sales decline in department stores for March, implying a negative underlying trend of 2 to 2.5 percent, after adjusting for the Easter shift. Accordingly, the analyst modestly reduced her already-below-consensus first-quarter projections for Federated, Penney’s and May Department Stores Co.

Keeping Kristiansen’s sales projections down are a group of economic issues including: a slowdown in real income growth, reduced momentum in home sales, a slowing of mortgage refinancings and lagging consumer confidence. On the plus side, she noted, interest rates are still low.

Wall Street was not enthralled by the prospects for March. The Standard & Poor’s retail index sank 4.22 points, or 1.5 percent, to end at 272.44. However, that outperformed the broader S&P 500, which fell 15.32 points, or 1.8 percent, to 848.18.

Among the declines on the New York Stock Exchange were Wal-Mart (down 2.1 percent to $52.03), Federated (1.8 percent to $28.02) and Penney’s (1.2 percent to $19.64). Managing an increase was ShopKo, rising 3.1 percent to $11.65.

With its amorphous first-quarter warning, though, Nordstrom endured more of its investors’ ire and registered a 6.5 percent drop in its share price to $16.20. The ultimate extent of the damage should be apparent on May 19, when the firm is expected to report its earnings.

“The company’s fundamentals remain solid and we are continuing to focus on opportunities within our control,” said president Blake Nordstrom. “Our team is taking appropriate action to respond to current conditions, however, sales are a key performance driver and based on current trends, we felt it was prudent to adjust expectations.”

The firm said it believes that general consumer demand has softened since January and the conflict with Iraq has further impacted results.

Jennifer Black, an analyst with Wells Fargo Securities, said she believed the Nordstrom’s sales shortfall is attributable to macroeconomic and geopolitical issues, rather than with the merchandise, which she described as well balanced and appealing to its core customers.

“Although the current environment is making it tough for Nordstrom to generate positive comps, we continue to believe the company’s product mix looks well balanced and substantially better than what we are seeing in the more traditional, as well as the more upscale, department stores,” she wrote in a research note.

Black anticipates an acceleration of markdowns in April and lowered her first-quarter earnings estimate to 19 cents from 28 cents.

Goldman Sachs analyst Adrianne Shapira is also looking for Nordstrom’s first-quarter profits to come in at 19 cents a share. Additionally, she noted, “The combination of war with Iraq, unseasonably cool weather and a late Easter shift has exacerbated already soft consumer demand for most mall-based retailers beyond Nordstrom. However, Nordstrom’s lofty valuation of 13.2 times fiscal 2003 earnings per share estimates appears even more unwarranted. We continue to rate the shares in line across our neutral coverage view.”

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