Holiday, end of war fail to help retailers

By Anne D'Innocenzio
Associated Press

NEW YORK — The arrival of Easter and the winding down of the war in Iraq couldn't lift retailers out of their slump in April — cool weather and consumer worries about jobs dampened spending for yet another month.

As the nation's largest retailers reported their monthly sales yesterday, department stores again languished amid piles of spring shorts and sundresses that proved a hard sell to shoppers still wearing sweaters and rain gear. Discounters fared better, but even their results were mixed.

Wal-Mart Stores Inc., the world's largest retailer, late Wednesday reported slightly lower-than-expected sales at stores open at least a year, known as same-store sales.

Among the companies reporting yesterday, Kohl's Corp. had same-store sales that were below analysts' expectations. The retailer cut its first-quarter earnings forecast.

One big bright spot was Gap Inc., which continued its comeback, reporting a same-store sales surge almost double what analysts expected. Same-store sales are considered the best measure of a retailer's strength. The apparel chain also boosted its earnings estimate for the first quarter.

"The consumer is way off her game," said Todd Slater, an analyst at Lazard Freres. "People are worried about a lot of things."

Job security has weighed on consumers for some time. But in a positive sign for the job market, the Labor Department announced yesterday that new claims for unemployment benefits fell by a seasonally adjusted 28,000 to 425,000 for the work week ending May 3. Still, the level remains high, another indication that companies are keeping their work forces lean.

Still, some industry experts are heartened that the retail sales pace improved toward the end of the month, helped by warmer weather. Consumer confidence also surged last month, driven by lower oil prices and the end of the war in Iraq.

"Things are starting to turn around for the consumer and companies," said John Champion, vice president at Kurt Salmon Associates, a retail consulting firm.

Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., said that although the sales trend is still relatively weak, there "may be some positive surprises ahead."

Bank of Tokyo-Mitsubishi's same-store sales tally of 79 stores' results was up 3.2 percent in April, slightly lower than what was expected earlier last month. That compared to a 1.6 percent gain in the year-ago period.

Analysts were hoping for a better performance, partly because Easter fell on April 20, three weeks later than a year ago.

The shift in the calendar boosted sales for the month by about 2 percentage points, while depressing March results by that same amount. Same-store sales were down 0.2 percent in March, according to the index.

Niemira and other analysts believe that studying the average of both March and April sales — a 1.5 percent gain — offers a better reading of the spring season, and is in line with the lackluster pace seen since last August.

Wal-Mart said same-store sales for April were up 4.6 percent, slightly lower than analysts' 5 percent estimate, and down from Wal-Mart's own forecast of 5 percent to 7 percent.

Looking ahead, Wal-Mart remained conservative, projecting same-store sales would be up 1 percent to 3 percent in May. But the company raised its first-quarter outlook late Wednesday.

Meanwhile, Kohl's, blaming cool weather, said same-store sales were down 2.4 percent in April. Analysts surveyed by Thomson First Call expected a 3.5 percent gain.

Target Corp. posted a better-than-expected 3.9 percent gain in same-store sales in April. The increase was fed by its namesake discount division, while Mervyn's and Marshall Field's results were below expectations.

Kmart Corp., which emerged from bankruptcy Tuesday after more than 15 months in Chapter 11 protection from creditors, said earlier in the week that it eked out a same-store sales gain of 1.1 percent. That was the first increase since August 2001.

Department stores fared the worst, posting a 4.9 percent decline in same-store sales on average, Niemira said.

May posted a 5.6 percent decline in same-store sales, worse than the 5 percent drop that analysts expected.

Sears, Roebuck and Co. said same-store sales at its domestic stores were down a worse-than-anticipated 8.5 percent.

At J.C. Penney Co. Inc.'s department stores, same-store sales fell a disappointing 6.9 percent.

Gap was the big pleaser, announcing that same-store sales were up 20 percent, compared with a 24 percent decrease in the year-ago period. Analysts expected a 12.9 percent gain.

The company said it now expects to earn 19 cents to 22 cents per share for the first quarter, well above the 11 cents per share analysts had projected.

"Our performance shows continued turnaround momentum in our business, particularly at Gap and Old Navy, with customers responding favorably to our summer product and marketing," said Sabrina Simmons, senior vice president of Gap Inc.