Retail Sales Rising (TGT, WMT, COST)

We’re getting a positive blizzard of retailers reporting March sales today. Without exception, sales are up, and in some cases, way up. Target Corp. (TGT) and Costco Wholesale (COST) lead the way. Target is reporting same-store sales are up 10.3% in March compared with March 2009 sales. Apparel sales were particularly strong, and the company’s chairman/CEO/president said Target expects to beat analysts’ quarterly EPS estimates of $0.74 “by 10 cents or more.”

Costco reported same store sales up 10% for March. The company’s 153 international stores grew sales by a whopping 28%, while U.S. store sales grew by 5%. Wal-Mart Stores (WMT), the world’s largest retailer, no longer reports monthly sales figures.

Other same-store increases were reported by Ross Stores (ROST) – 14%; Nordstrom (JWN) – 16.8%; Kohl’s (KSS) – 12.4%; American Eagle Outfitters (AEO) – 15%; Saks (SKS) – 12.7%. Gap Stores posted a sales gain of 12% for the month, blowing past the analysts’ estimate of 3.7%. Limited Brands (LTD), which owns Victoria’s Secret and Bath & Body Works, gained 15% in sales, compared with expectations of 6.8%.

J.C. Penney (JCP) may be the only retailer that missed the analysts’ estimate. Penney’s reported a gain of 5.4% against expectations of 5.7%.

Every retailer got a boost from the calendar, with the Easter holiday falling in the five weeks of March. Expectations for April are lower, but the combined two months should offer a good gauge of how strongly consumer spending has recovered.

And that’s the important news. When consumers start spending on non-essential goods, for example at Victoria’s Secret, that spending indicates growing confidence in the economy and a consumer’s place in it. In March, shoppers bought more items per transaction and more of the transactions included discretionary items.

The month of April has no special holiday or event that could give sales a one-time boost. It’s a plain vanilla month. Will the retailers be able to hold on to shoppers without resorting to price cuts? Retailers still depend heavily on promotional pricing to lure shoppers. There may be some pent-up demand for goods, but without promotions that demand could decide to stay home.

American consumer borrowing fell by 5.6% in February, and revolving credit dropped by more than 13%. Which is more important: consumer spending, which accounts for about two-thirds of U.S. GDP; or reducing consumers’ credit card debt?

The retailers appear to be on the side of the angels here, gaining sales without having shoppers resort to credit.

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