Sector Review: March Same-Store Sales

Analysts predicted weak results because consumers have been cutting back as they face high food and gas prices and weak credit and housing markets. That was compounded by cooler-than-expected temperatures and the loss of a shopping day due to an earlier Easter this year.

According to a poll by Thomson Financial, same-store sales, or sales in stores open at least one year, fell 0.7 percent overall in March, compared with the 0.1 percent growth analysts had expected. In the same month a year ago, same-store sales rose 6 percent.

"All in, there weren't too many major surprises out of March same-store sales and generally speaking, sales trends appeared to get worse as the month progressed (and even into April, in some cases)," wrote JPMorgan analyst Charles Grom in a note to investors Friday.

The best performers were discounters, as consumers shopped for bargains on essentials such as food. Wal-Mart Stores Inc. said same-store sales rose 0.7 percent, just short of expectations. However, the retailer raised its guidance based on stronger April results.

BJ's Wholesale Club Inc. also had strong results, with same-store sales rising 6 percent.

In the specialty apparel sector, Gap Inc. was among the worst performers with an 18 percent same-store sales decline. Chico's FAS Inc. and the Limited Inc. also posted weak results.

"We remain concerned that the March weakness portends a continuation of a challenging environment which could make it difficult for the specialty retail group to continue to outperform the S&P 500 without some meaningful improvement in topline trend to drive an acceleration in earnings," wrote Cowen & Co. analyst Lauren Cooks Levitan in a note to investors on Friday. She said share prices could fall back to lows reached in January if there is no improvement.

The department-store sector was one of the weakest sectors, with an 11.2 percent decline overall. Kohl's Corp. lowered its quarterly outlook below Wall Street analyst estimates after reporting its same-store sales fell 15.5 percent. Elsewhere, J.C. Penney Co. said same-store sales fell 12.3 percent.

Thomas Weisel Partners LLC analyst Liz Dunn said she expects many companies underestimated the amount an earlier Easter would hurt results. She expects April results to improve, helped by warmer weather, an extra selling day due to the Easter shift and easy comparisons from a year ago.

"The market had already priced in March weakness and investors appear focused on positive catalysts ahead in April," she wrote in a client note on Friday.