The International Council of Shopping Centers (ICSC) declared that March sales were the "best in 16 years." The L.A. Times said that "Pent-Up Demand Explodes for Retailers in March." CNNMoney announced that "super shoppers set records." With all those credible news sources screaming all those exuberant headlines, it's only logical to conclude that the U.S. retail industry must have been recovering, rebounding, rejuvenating, replenishing, and rebuilding the U.S. economy all at the same time in March.
All exuberant headlines aside, some clear-headed analysis of March's same store sales figures, in context with store closings and openings, unemployment numbers, and other underreported retail data tells the real story of the U.S. retail industry. In the real story, the plot is more complicated than the headlines suggest, and in the next chapter, as much as March figures were encouraging, the forecast for April is set up to be an equal disappointment.
According to the Thomson Reuters Same Store Sales Index, the 9.1% gain in same store sales in March was the biggest monthly gain since it began keeping records. Of that 9.1% year-over-year increase, six percentage points are attributed to an early Easter which motivated sales in the month of March, according to the ICSC. The record-breaking March sales figure is a comparison to the March 2009 index, which was down 5.0%, (excluding Wal-Mart (WMT) sales, which is today's norm). This is also on top of a March 2008 index decline of 2.1% (also excluding Wal-Mart).
Doing the math, 9.1%, take away 6 holiday percentage points, makes a 3.1% gain. A 3.1% gain on top of a 5.0% loss, on top of another 2.1% loss does not inspire as much euphoria as the headlines indicated we should all be feeling.
Basically, March stole sales from April, and April 2009 stole sales from March 2009, which is how the Easter dance goes each year. There will be no meaningful conclusions that can be made about retail recovery, rebound, rejuvenation, replenishment or economic rebuilding until April sales results come in and the two months are looked at together. And, so far, nobody is forecasting April sales to break any records, at least not any good records.
Even if overall March same store sales figures weren't as impressive as they seem to be on first impression, certainly there were some noteworthy individual chain results to be exuberant about, right?
Comparing the March 2009 same store sales with March 2010, it is obvious that a list filled with double-digit gains this year is preferable to a list full of double-digit losses last year. But once again, reason subdues the euphoria because same store sales is a year-over-year comparison, which means that unless you take both years into consideration, the figures have no meaning.
In March, 2009, only nine major retail chains managed to pull out a positive same store sales number. Besides these nine, every other gain this year is in comparison to a loss, and many of this year's headline writers seem to have forgotten how devastatingly large those March 2009 losses actually were.
It wasn't really difficult for Abercrombie & Fitch's (ANF) sales this year to best the 34.0% decline of March 2009. Nor was it a stretch for Neiman Marcus' sales numbers to look good compared to its 30.0% March, 2009 same store sales plummet. Saks' (SKS) 12.7% same store sales increase this year, was barely more than half of its 23.6% decline last March.
The March same store sale increases at American Eagle (AEO), Costco (COST), Zumiez (ZUMZ), Wet Seal (WTSLA), JC Penney (JCP), Stage Stores (SSI), and Dillard's (DDS) while positive this year, did not cover the losses that they posted in the same month last year. Their losses weren't recovered this year even with the holiday, warm weather, and pent-up demand that supposedly caused consumers to "come back from the dead," and sales to "surge" in March.
A look at a multi-year comparison of March same store sales provides even more perspective about the relativity of March's sales gains across the board for the U.S. retail industry.
Thinking logically, if retailers were unable to cover last year's losses in a perfect storm of positive conditions, what do we really expect they are going to be able to produce in a non-holiday April 2010 to compare with the Easter April of 2009? And when all four of those months are looked at together, do we really think we're going to be describing what we see as "explosive" or the "best in 16 years?"
Aren't we ever going to grow weary of the roller coaster ride of economic microanalysis and short-sighted predictions?
Certainly there were some same store sales winners in March, but most of them were not at the top of the list. Cato (CATO) is a chain that isn't generally seen as a U.S. retail industry pacesetter, so to find the conservative fashion retailer at the top of the same store sales figures list in March is definitely notable. Digging into its March history, though, reveals that Cato's March 2010 sales were just slightly higher than its 2005 sales, which diminishes the significance of the chain's March accomplishment.
Of the nine retailers that managed to eke out same store sales gains in 2009, three really stand out as no-excuses, consistent, positive performers this year.
Buckle (BKE) was at the top of the same store sales list in March, 2009, with a 14.7% increase. That March increase was on top of the 20.9% increase in March 2008, and a 10.7% increase in March, 2007. Buckle had the same holiday calendar, weather conditions, and economic pressures as every other retailer, and yet it still found a way to improve its performance for several challenging March's in a row. Although its March, 2010 same store sales increase was not a double digit and, therefore, was far from the top of the list this year, Buckle's year-over-year-over-year-over-year increases really are the most impressive of the month.