Big retailers fret about spring sales

NEW YORK - Retailers yesterday reported generally strong sales for March, but there were warnings that spring could be bleak.

Wal-Mart Stores Inc., whose customers cut back on shopping last year when gas prices were high, said April's selling environment would be tough with gas prices rising again.

Federated Department Stores Inc. said its first-quarter sales would come in at the low end of expectations.

And Children's Place Retail Stores Inc. said its first-quarter earnings per share would be roughly the same as last year's, missing Wall Street estimates.

The nation's retailers were clearly helped by a number of temporary factors in March. The arrival of warmer weather after an unusually cold January and February helped chains such as Wal-Mart recover from a slow start to the spring selling season.

Easter's occurring eight days earlier than a year ago also boosted business, although it will depress April's results. Winners for March included Costco Wholesale Corp., J.C. Penney Co. Inc. and teen retailer Pacific Sunwear of California Inc.

But some analysts were skeptical.

John Morris, managing director at Wachovia Securities, said he didn't think the March performance "is all that it is cracked up to be. You do see evidence of hesitation on the part of the consumer" to spend.

The International Council of Shopping Centers-UBS same-store-sales tally posted a 5.9 percent gain, exceeding estimates of 4 percent to 5 percent. Same-store sales, or sales at stores open at least a year, are the industry standard for measuring a retailer's health because most chains frequently open new stores and close older or underperforming ones.

Michael P. Niemira, chief economist at the shopping centers group, said the improving weather and earlier Easter boosted March results by 3 percentage points.

Niemira also said he expected growth in same-store sales to be no more than 1 percent this month, in part because the weather has turned cooler in recent days, stifling sales of spring clothing.

Bigger worries are how long the housing market's problems will persist and the effect of rising gasoline prices. There are predictions of $3-a-gallon gas by summer, which would force many consumers to cut back discretionary spending.

Wal-Mart posted a 4 percent gain in same-store sales, above the 1.6 percent estimate from Wall Street analysts surveyed by Thomson Financial.

Tom Schoewe, Wal-Mart's chief financial officer, noted that the company has estimated first-quarter earnings of 68 to 71 cents a share. But he warned in a statement: "While the earnings guidance is still attainable, given the tough sales environment for the April period, it will be a challenge."

Wal-Mart said it expected April same-store sales to range from unchanged to a 2 percent decline.

Federated, which operates Macy's and Bloomingdale's, posted a modest increase in same-store sales of 2.3 percent, below the 3.3 percent estimate from Wall Street.

"March sales fell just short of our expectations in most regions across the country, largely attributable to weakness in home-related merchandise categories," Terry J. Lundgren, Federated's chairman, president and chief executive officer, said in a statement. "Unseasonably cold weather as new spring merchandise flowed into the stores in the pre-Easter period also contributed to disappointing sales in the month."

Among stronger performers, Penney had a 10.6 percent gain in same-store sales in its department-store business, above the 7.5 percent Wall Street forecast.

Pacific Sunwear had a 14.1 percent gain in same-store sales, well exceeding the 3.4 percent estimate.

Three Philadelphia-area chains reported strong sales, but a fourth said sales fell. The percentage changes are for sales at stores open at least a year, a key retail gauge.

The Bon-Ton Stores, York: Sales fell 3.8 percent, compared with March 2006 despite strength in children's clothing, shoes, better sportswear, juniors and cosmetics. Bon-Ton, which operates 279 department stores, blamed cold weather during much of the month. Home merchandise and furniture were weak.

Deb Shops, Philadelphia: Sales rose 6.5 percent, helped by having five Saturdays in March 2007, compared with four last year. The company has 335 specialty apparel stores.

Mothers Work, Philadelphia: Sales were up 3.6 percent, mostly because of the extra Saturday and an earlier Easter this year. April sales will be hurt by not having those factors, the maternity- clothing chain said. It projected a profit for the full second quarter of 37 cents to 42 cents a share, compared with 9 cents in last year's quarter - a gain attributed to better profit margins, fewer price promotions, and lower product costs at its 795 stores.

Rite Aid, Camp Hill: Sales rose 3.3 percent, with gains about equal for pharmacy items and other products at its 3,334 stores.

-Paul Schweizer

SOURCE: Companies listed.

EndText