- The Washington Times - Thursday, April 12, 2007

NEW YORK (AP) — The promise of spring was fleeting for the nation’s big retailers who had a strong March but now see signs that point to weaker sales in April and beyond.

Wal-Mart Stores Inc., which released its monthly results along with other merchants yesterday, expects the current month to be “tough.” Federated Department Stores Inc. said that its first-quarter sales will come in at the low end of expectations. And Children’s Place Retail Stores Inc. warned that its first-quarter earnings per share would fall short of Wall Street forecasts.

March sales got a boost from an early Easter and the reappearance of warmer weather. But analysts saw some indications that consumers are starting to feel pinched financially, and rising gasoline prices, a difficult housing market and the specter of higher interest rates are likely to make consumers pull back in the coming months.

“I don’t think that [March sales] is all that it is cracked up to be,” said John Morris, managing director at Wachovia Securities. “You do see evidence of hesitation on the part of the consumer.”

March helped retailers like Wal-Mart recover from a slow start to the spring selling season. The International Council of Shopping Centers-UBS same-store sales tally posted a 5.9 percent gain, exceeding estimates for 4 percent to 5 percent. Same-store sales, or sales at stores open at least a year, are the industry standard for measuring a retailer’s health. Michael P. Niemira, chief economist at the ICSC, said the improving weather and earlier Easter boosted March results by 3 percentage points.

Mr. Niemira expects same-store sales growth to be no more than 1 percent this month, in part because the weather has turned cooler in recent days, stifling sales of spring clothing.

A bigger worry is how long the housing market’s problems will persist. Another concern is rising gas prices — there are predictions of $3-a-gallon gasoline by summer, which would force many consumers to cut back their discretionary spending.

Meanwhile, minutes from the Federal Reserve’s most recent meeting showed the central bank is not ruling out an interest-rate increase to contain inflation.

Higher rates mean consumers will be paying more on their credit-card balances, and they can further hurt the already weak housing market.

One of the big pillars for spending has been the solid job market. The Labor Department reported earlier this month that employers added 180,000 jobs in March; the unemployment rate slipped to 4.4 percent, matching a five-year low. But that could weaken if the housing market continues to slump, analysts said.

The latest report from the department about unemployment benefits was not encouraging. The government reported yesterday that the number of Americans filing new claims for unemployment benefits rose last week to the highest level in two months. However, the jobless-claims figure is expected to show some volatility.

Wal-Mart posted a 4 percent gain in same-store sales, above the 1.6 percent estimate from Wall Street analysts surveyed by Thomson Financial.

Tom Schoewe, Wal-Mart’s chief financial officer, noted that the company has estimated first-quarter earnings of 68 to 71 cents per share. But, he warned, “while the earnings guidance is still attainable, given the tough sales environment for the April period, it will be a challenge.”

For April, Wal-Mart said it expects same-store sales to be from unchanged to a 2 percent decline.

Federated, which operates Macy’s and Bloomingdale’s, posted a modest same-store sales increase of 2.3 percent, below the 3.3 percent estimate from Wall Street.

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