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March Retail Gain Brings Little Relief to Stores

Photographer: Ben Torres/Bloomberg

A woman rolls a shopping cart inside a Family Dollar Stores Inc. location in Mansfield, Texas. Close

A woman rolls a shopping cart inside a Family Dollar Stores Inc. location in Mansfield, Texas.

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Photographer: Ben Torres/Bloomberg

A woman rolls a shopping cart inside a Family Dollar Stores Inc. location in Mansfield, Texas.

For companies such as Bed Bath & Beyond Inc. (BBBY) and Family Dollar Stores Inc. (FDO), a rebound in March retail sales may prove too little late.

While the Commerce Department yesterday said retail sales gained 1.1 percent last month, Moody’s cut its forecast for 2014 sales, saying that March’s results will give little comfort to companies whose sales were crimped by frigid temperatures in January and February. And even as spending thawed last month, analysts continued to slash estimates for retailers’ first-quarter profits.

The government report suggested warmer temperatures brought shoppers back into stores and enticed them to make purchases the blizzards had forced them to delay. Yet with incomes still stagnant and the job market still sluggish, it remains to be seen whether the momentum will carry into April, said Rick Snyder, an analyst at Maxim Group LLC in New York.

“You can’t take this short-term data and jump to the conclusion” that spending is primed for big gains, Snyder said yesterday in an interview. “Things got better, but it’s relative. How bad did they start off?”

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Sales dropped 0.7 percent in January, the biggest decline since March 2013, and rose 0.7 percent in February.

Retail sales this year will rise 3 percent to 4 percent, Moody’s said in a statement yesterday. That’s down from its original range of 4.5 percent to 5.5 percent.

Analysts’ Estimates

When the year started, analysts estimated retailers’ first-quarter earnings would grow more than 13 percent, Retail Metrics Inc. said. That average had dropped to 7.5 percent on March 1 and now stands at 3.2 percent, the researcher said.

The Standard & Poor’s 500 Retailing Index rose 0.1 percent at the close in New York, while the broader S&P 500 advanced 0.7 percent.

While most retailers won’t provide fresh forecasts until they report earnings for the February-April quarter next month, those who operate on other schedules and have reported profit recently have posted lackluster results.

Family Dollar Chief Executive Officer Howard Levine cited a more cash-strapped customer earlier this month when the chain said holiday-quarter results trailed its expectations and announced that it would close about 370 stores. The Matthews, North Carolina-based company said sales at its established locations will fall at a low single-digit percentage rate in the quarter that started in March and runs through May.

Bed Bath & Beyond last week forecast profit that trailed analysts’ estimates for the same time span. Earnings will be 92 cents to 96 cents a share in the period, the Union, New Jersey-based company said. Analysts had estimated $1.02 on average, according to data compiled by Bloomberg.

Differing Signals

The retail industry’s signals often differ from government figures because chains compare their own sales with year-ago rather than month-ago results. In addition, the Commerce Department numbers encompass a broader universe than the 100-plus publicly held U.S. retailers tracked by industry analysts. The government also frequently revises its figures.

“We don’t think it gives us the all-clear signal that the consumer is in really good shape as we still have a long way to go on both the job creation and personal income fronts,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said in an e-mail. “However, given all the negative pre-announcements we have seen and downward revisions to earnings estimates, this is the best piece of news in retail land in a while.”

To contact the reporters on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Kevin Orland at korland@bloomberg.net Ben Livesey

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