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Retail sales rise 1.7% in March, surprising analysts

Retailers report a modest 1.7% year-over-year increase in March despite rising gas prices, high unemployment and a later Easter. Experts had expected a 0.7% decline in retail sales.

April 08, 2011|By Andrea Chang and Shan Li, Los Angeles Times
  • A couple of shoppers walk by a store window at the Westfield Culver City, formerly known as the Fox Hills Mall. Retailers delivered a decent performance last month, with shoppers continuing to spend despite poor weather, high gasoline prices and a later Easter.
A couple of shoppers walk by a store window at the Westfield Culver City,… (Ricardo DeAratanha/Los…)

Shoppers hit the malls in March and provided an unexpected boost to the nation's retailers, a good sign for consumer spending this spring — despite worries about the continuing effects of rising gas prices and high unemployment.

With Easter coming later than last year, retailing experts had anticipated that consumers would hold off with some spring purchases. But shoppers weren't deterred.

Many said they went shopping again after a dreary winter in anticipation of warm weather, but they kept their eyes peeled for good deals and sales.

"We'll definitely be spending a bit more in the next few months," said nurse Anne Nord, 44, who was browsing for floral dresses with her daughter Emma, 6, at the Westfield Santa Anita mall in Arcadia. "We've reined in our spending, but now it's time to relax a little."

On Thursday, the nation's retailers reported a modest 1.7% year-over-year increase for March, better than the 0.7% decline that had been expected, according to Thomson Reuters' tally of 25 major retail chains. Expectations for April are considerably higher.

"This gain, in the face of somewhat adverse factors, was encouraging and reflected a solid underlying trend in consumer demand," said Michael Niemira, chief economist of the International Council of Shopping Centers.

More than 80% of retailers beat expectations. Among the month's top performers was Limited Brands — parent company of Victoria's Secret and Bath & Body Works — which posted a 14% increase. Warehouse club Costco Wholesale Corp. said sales rose 13%, and teen retailer Zumiez Inc. saw an 8.9% gain.

Results are based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer's health because it excludes the effect of store openings and closings.

Luxury retailers performed well as higher-income consumers continued to shop, buoyed by a rallying stock market, analysts said. Department store chain Saks Inc. reported an 11.1% rise. Nordstrom Inc. saw a 5.1% increase.

"The aspirational consumer is also coming back with high degrees of confidence," said Sherif Mityas, a partner in the retail practice at consulting firm A.T. Kearney. "They're the ones who will buy one really special luxury item and had put off those purchases during the recession."

The later Easter date this year — April 24 versus April 4 last year — should give retailers an extra boost in sales this month, experts said. The International Council of Shopping Centers is predicting a 5% to 6% rise for April.

But looking ahead, industry experts predicted that the rising prices of gasoline, cotton and overseas labor would put a damper on consumer spending in the months to come as retailers are forced to pass along higher costs to shoppers.

"Retailers, for now, have held off on raising prices for fear of stalling growth," said Bruce Cohen, a retail strategist at consulting firm Kurt Salmon. "But there will be some increases showing up, and it remains to be seen how consumers will respond."

At Westside Pavilion in Los Angeles on Wednesday, Maria Torres rolled her eyes and grimaced when talking about rocketing gas prices. The 43-year-old Glendora resident, who cleans houses for a living, said she was relying on public transportation to save money.

"It's terrible! My car is permanently parked in the garage now and it's cut down even further on how much I can spend on anything else," Torres said, showing off five T-shirts she snagged for $12 total. "I only buy when there's a great deal like this."

A U.S. unemployment rate of 8.8% for March continues to curb discretionary spending for many consumers, analysts said, hurting retailers geared toward shoppers with more modest incomes including Kohl's Corp., with a 6.5% decline, and Target Corp., down 5.5%.

Gap Inc., parent company of Banana Republic, Old Navy and Gap, reported a 10% drop. The company, which has more than 150 stores in Japan, said last month's earthquake and tsunami affected sales and lowered its guidance for the current quarter.

Mityas noted that "a lot of folks are still out of work and still very cautious."

He said many people were using federal and state income tax refunds, normally spent for a few fun and nonessential splurges in the spring, to pay off debt.

"We're going to see continued growth through 2011," he said. "It's not going to be blow-the-roof-off performance, but a nice and steady increase."

At Westfield Santa Anita on Wednesday, Beth Ynclan, 79, was toting bulging shopping bags full of tiny dresses and button-down shirts for her 11 grandchildren.

Ynclan, a part-time lighting technician for local theaters, has been routinely sending gifts of checks and clothes to struggling family members.

"Nobody in my family is hurting as bad as a year ago," the La Verne resident said. "But my attitude is, give it to them now while I can see them enjoy it."

andrea.chang@latimes.com

shan.li@latimes.com

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