Stores Blame Cold Weather, Early Easter for Season’s Slow Start
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\"March2013RetSales\"Retailing is a lot like professional sports. Both are highly competitive, both require a combination of talent and luck, and both involve big money.

And sometimes, there’s so much drama taking place off the playing field that it’s hard to remember there’s a real game taking place on it.

No matter how interesting we find all the “what if” questions surrounding JCPenney, or the tussle between Martha and Macy’s, or the Lululemon yoga pant recall, it’s what’s going on at the cash registers in the stores – be they brick-and-mortar or online – that determines the success of the industry and, in turn, the U.S. economy. Consumer spending – people shelling out money for goods and services – accounts for 70% of economic growth, and spending at retail just isn’t growing very quickly these days, for a variety of reasons.

Last week, the Department of Commerce released March retail sales figures. Total sales rose by 3.8% on a 12-month smoothed basis to a seasonally adjusted $418 billion, their slowest pace in seven months. As the chart below shows, monthly sales growth has been running several percentage points below where it was this time last year, while retail inventory growth has been rising, placing downward pressure on pricing and profits.

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Auto sales helped a bit, as folks continued to replace older gas guzzlers with smaller, more fuel-efficient cars. Excluding auto from the total, sales were up by only 3.2%.

There were wide variations in growth rates by channel in March. The big winner was, once again, non-store retailing, as Internet pure-plays continue to outpace all other channels. In March, sales at non-store retailers grew by 13%, to $40 billion in sales, making the e-commerce-only segment bigger than department and specialty apparel stores combined.

The channel with the biggest numbers in the loss column in March was the department, chain and discount store, which suffered a collective 5% decline in sales on a 12-month smoothed basis. Although not as steep as last month’s 6% dive, it represents the twelfth straight month on the disabled list for big stores.

Whatever progress Macy’s, Dillard’s and Nordstrom have made has been more than offset by declines at the others, most notably JC Penney. Can you remember the last time a single store got this much media attention? I can’t. Between the plummeting sales, plunging stock price and CEO ouster, you’d think it was Lance Armstrong all over again. Except in this case, it was the misguided attempt to wean consumers off the discount doping that led to Ron Johnson’s dismissal.

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Apparel specialty store sales grew, as they continue to steal share from the department stores. Sales rose by 2.75% for the second straight month, but remained sluggish relative to this time last year. Part of the problem, at least in the short term, was the unseasonable cold weather. I mean, who feels like buying shorts when it’s 30 degrees outside?

Yet apparel retailers are loaded up with Spring merchandise and hopeful that April’s warmer weather will buoy sales of all those brightly colored jeans, flowered tops, and vibrant footwear and accessories.

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There is one company that might not fare so well in April, however, and that’s the one that has made yoga a contact sport! Lululemon has built its business on product quality, and has enjoyed meteoric growth from a relatively small collection of styles that its customers have found impossible to resist, even at premium prices. Why they didn’t have someone stationed full-time in the factory testing and approving fabrics and garments is nothing short of remarkable. Even more shocking, however, is the fact that the pant recall was one of the lead stories on the national news the day it was announced. The coverage it got, no pun intended, was beyond priceless. Sales will temporarily stumble, and customers will be temporarily disappointed, but the PR value of this snafu was worth much more than the temporary profit hit. Millions more people will remember Lululemon long after they forget about the quality problem. In the meantime, however, Gap’s Athleta and Nike will almost certainly benefit from the stumble.

In other segments, general merchandise store sales dropped 4.6% to $51 billion, a big blow to the overall figures since this is such a huge segment. Sales at electronics stores were flat to slightly down, while those at home furnishings stores have been increasing a bit, thanks to the improving housing market. Food and beverage store sales increased by low-single digits, consistent with the trend of recent months.

So what’s really responsible for the lackluster month? Is this a slow start to the season, or a continuation of a situation that has been in the making for a very long time?

The answer is: a little of both. Besides the weather, retailers cited the early Easter, which resulted in one fewer weekend shopping day compared to last year. I find this odd, though, because in past years, the days leading up to Easter usually delivered a big sales windfall.

Another oft-cited culprit was the slow job market, keeping consumers cautious and skeptical about the recovery, as evidenced by the more than 8-point drop in the March Consumer Confidence Index.

Still another reason is higher income tax rates, which have taken a bigger bite out of paychecks and left less to spend on discretionary purchases.

Whatever the underlying reason(s), consumers have become ultra-careful with their money, and they’ve been rewarded for that behavior. They’ve learned that if they wait long enough, coupons will appear in their email inboxes, and things they want to buy will go on sale.

And, honestly what’s the rush? There’s always a make-up game after a rain-out.

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