Despite encouraging macroeconomic signals, in the retail space much of the news has been grim. And that’s likely to translate into the worst first-quarter same-store sales reports in years.
Retailers’ combined same-store sales are expected to rise just 0.3% in the fiscal first quarter, the industry’s worst performance in four years, according to Retail Metrics, which tracks Wall Street estimates. The measure is an average for 110 chains, from Walmart and Home Depot to Macy’s and JC Penney.
Initially, in February, the average was projected to register a 0.8% gain. That was revised down to 0.6% in March, and now has been lowered yet again.
If not for a positive contribution from Walmart, the industry actually is on track to see a small decline in quarterly performance. The quarterly same-store sales data is a key industry performance metric because it strips out results from newly opened and closed stores.
“Retailers can’t blame the economy for their ongoing woes,” said Retail Metrics President Ken Perkins, pointing to the better-than-expected private sector ADP payroll numbers released Wednesday as an example. “Things continue to change rapidly, resulting from the tectonic shifts taking place on the consumer spending front.”
The quakes shaking the sector include Amazon's continued growth, consumer use of mobile devices in and out stores, and evolving consumer tastes that have led many shoppers to favor purchasing experiences over things.
Amazon by itself is eating up an enormous amount of the overall industry's key area of growth potential, which is ecommerce. Slice Intelligence estimated that Amazon grabbed 53% of all retail ecommerce sales growth in 2016.
A reflection of the rugged retail environment is the fact that few retailers now report same-store sales data on a monthly basis--mainly because the comparisons were so consistently bad. What once was a virtual flood of reports has dwindled to a trickle. Just seven chains are expected to release monthly numbers on Thursday, compared with the more than 60 retailers who used to post monthly numbers before the Great Recession, Perkins said.
“Retailers got tired of putting out monthly metrics that were down month after month,” Perkins told eMarketer.
To be fair to retailers, he said the monthly numbers tend to have an outsized effect on companies' stocks, which in turn can lead management to take a short-term view of how they run their businesses.
Indeed, fast-casual bakery chain Panera Bread, which on Wednesday agreed to be taken private by the investment firm that owns Krispy Kreme and Caribou Coffee, was partly driven to make the move out of a desire to get out of the glare of the public markets.