An unusually early Easter holiday drove Americans to malls and shopping centers last month, helping retailers report strong March same-store sales, but a profit warning from Wal-Mart signaled more difficult times ahead.
Wal-Mart Stores Inc. (WMT) Thursday said first-quarter earnings could fall short of its previous forecast, with cold, wet weather hurting sales of seasonal goods like lawn and garden items.
"We now estimate earnings will come in around the low end of our previous estimate of 56 cents to 58 cents per share," the world's largest retailer said in a press release.
"Around the low end" is a phrase used by Wal-Mart to indicate that earnings could be below the forecast.
Analysts' average first-quarter earnings forecast is 57 cents a share, according to Reuters Estimates.
"It looks like the combination of a very early Easter and horrible spring weather" hurt sales of higher-margin seasonal items and apparel, Bill Dreher, analyst at Deutsche Bank, said. He has a "buy" rating on the shares.
Wal-Mart said sales at stores open at least a year rose 4.3 percent in March, in line with analysts' estimates. Total sales rose 11.3 percent to $27.98 billion in the five weeks ended April 1, it said. Sales of apparel and lawn and garden items were hurt by the weather, the company said.
For April, the retailer forecast same-store sales would be flat to up 2 percent in the United States, saying unseasonable weather and the early Easter would hurt results.
Cold, rainy weather in the Northeast and Mid-Atlantic regions dampened sales of spring items such as shorts early in March, but Easter sales plumped up the month's results relative to last year, when the holiday fell in April.
Teen apparel retailers, which have enjoyed soaring sales in recent months, were in the spotlight again. Spring breaks for many high-school and college students coincided with Easter, giving them ample time for shopping, analysts said.
Also, the average price of regular gasoline is $2.25 a gallon, up from $1.94 last month and $1.77 last year, according to a AAA daily survey of 60,000 gas stations.
"Americans are basically in distress as a result of the high cost of gasoline," Kurt Barnard, president of Barnard's Retail Consulting Group said. "People are tapping into their savings in order to buy the latest fashions, and they are also adding to their credit card balances, neither of which is exactly the medicine the doctor has ordered."
Discounters like Wal-Mart and warehouse stores like Costco Wholesale Corp. (COST) fared well as consumers shopped for bargains. Costco's March same-store sales climbed 7 percent.
On the other end of the price spectrum, luxury retailers such as upscale department store Nordstrom Inc. (JWN) posted solid sales as its March same-store sales rose 5.5 percent.
Mid-priced retailers like Limited Brands Inc. (LTD) and Gap Inc. (GPS), however, posted unexpectedly weak results. Limited, which has been struggling to shore up its apparel division in recent months, reported a 7 percent drop in its same-store sales. Wall Street analysts had forecast a drop of just 2.3 percent. Gap's same-store sales slumped 4 percent, below an average forecast of a 0.3 percent drop.
"Income growth for the high-end consumer continue to outpace that of the average worker, and high year-over-year gas prices continue to pressure spending of low-income households," Emme Kozloff, senior retail analyst at Sanford C. Bernstein & Co. LLC wrote in a recent research note.
Among the teen clothing stores, Bebe reported same-store sales in March surged 30.6 percent, easily sailing past Wall Street estimates for a rise of 25 percent. American Eagle's jumped 29.2 percent, and Abercrombie & Fitch's climbed 21 percent.
Reuters and the Associated Press contributed to this report.