Wow. Comp store sales for March 2011 were impressive. What’s even more impressive is that the sector was lapping a great weather month. Let’s go one step further… the sector now bumps up against an easy weather comparison in April 2011 versus LY.
It’s becoming clear that simply looking this year’s macroeconomic tailwinds versus LY may not be the best way to forecast a company’s (or the broader retail sector’s) comp store sales growth this year. Essentially, the materially depressed consumer spending of FY 2008 & FY 2009 suggests that investors/analysts need to evaluate sales trends over a much longer timeframe (than 1 year) to more effectively forecast forward top-line trends.
Then again, let’s all remember that 1-year ago today the sector was experiencing a similar top-line sales trend (i.e. greatly outperforming expectations) that began to come to a halt in April/May 2010.
JCP disclosed that its average unit retail (AUR) declined – LSD in March 2011 versus LY. This follows a flat result in February 2011. The company’s monthly sales recording suggests that the AUR decline was a function of higher clearance activity. Let’s remember that the company has historically suggested that clearance activity has been a top-line driver.
Even more odd is the fact that units per transaction (UPT) declined at the same time AUR declined. The chain’s clearance activity did not drive higher unit sales?
There was almost no discussion about year-over-year merchandise margin trends in March 2011. Per usual, LTD discussed the topic in its monthly sales recording (total company flat versus LY).
In March 2011, TGT was again outperformed by BJ.
What’s interesting is that the company expects its comp store sales to increase +20% in April 2011 versus March 2011 (-5.5% in March 2011 versus guidance of “mid-teens” for April 2011). Last year’s March/April ‘swing’ was 16.2% (largest in the past 10 years) and that was exacerbated by weather (favorable weather in March 2010 and unfavorable weather in April 2010) in addition to the Easter calendar shift.
Yes, Easter is much later this year. But, it’s worth remembering that TGT management has a poor track record of late forecasting its comp store sales. No other retailers are forecasting a ‘swing’ in April 2011 anywhere near as large as the folks at TGT.
You can almost see April 2011’s top-line ‘miss’ at TGT coming a mile away.
ZUMZ reported its first year-over-year increase in average unit retail since March 2009. What most interesting is that the company was able to produce a higher AUR in the month despite the Hardgoods category delivering negative comp store sales.
Our compology this month is measuring relative top-line strength/weakness by comparing March 2011 comp store sales versus February 2011.
The following retailers reported a stronger comp store sales result in March 2011 versus February 2011 (relative strength/improving trend):
- BKE (+6.3% improvement in March 2011 versus February 2011)
- LTD (+2.0% improvement in March 2011 versus February 2011)
- SSI (+1.9% improvement in March 2011 versus February 2011)
- DDS (+0.0% improvement in March 2011 versus February 2011)
The following retailers reported a weaker comp store sales result in March 2011 versus February 2011 (relative weakness/decelerating trend):
- CATO (-14.0% decline in March 2011 versus February 2011)
- SMRT (-12.1% decline in March 2011 versus February 2011)
- KSS (-11.5% decline in March 2011 versus February 2011)
- TGT (-7.3% decline in March 2011 versus February 2011)
Looking Ahead by Looking Back… What happened in April 2010?
Comp store sales in April 2010 were negatively impacted by an unfavorable Easter calendar shift. Also, unfavorable weather were mentioned as negatively impacting sales, especially in the second half of the fiscal month.
In April 2010, the strongest category performance was in shoes, home, and handbags. Weak categories included televisions, children’s apparel, and junior apparel.
In April 2010, a few retailers reported merchandise margin improvements versus the prior year (e.g. ARO, DEST, and LTD) and many retailers increased their quarterly EPS guidance (e.g. ARO, CATO, GPS, ex-GYMB, JCP, KSS, M, SSI, TGT, and WTSLA).
Week #2 was generally considered to be the strongest fiscal week in April 2010 (via Easter calendar shift). Week #1 was generally held to be the weakest fiscal week in April 2010.
The Midwest was generally held to be the strongest comp store sales region in April 2010. The West was generally held to be the weakest comp store sales region in March 2010.
In April 2010, COST disclosed that its average retail price per gallon of gas was $2.79 (+37% versus $2.03 in April 2009).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.