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Slow start to spring projected for retailers

Slow start to spring projected for retailers

April 6th, 2011 in News

NEW YORK (AP) - A late Easter, lingering cold weather and rising gas prices are squeezing discretionary spending this spring, according to data being released Wednesday.

Figures from MasterCard Advisors' SpendingPulse show sales growth slowed in some categories last month. But consumers spent more on clothing - and most other items from electronics to luxury goods - than they did in March 2010.

SpendingPulse tracks spending across all payments including cash.

Growth in online sales, still less than 10 percent of all retail sales, accelerated last month as shoppers tried to save on gas, according to Michael McNamara, vice president of research and analysis for SpendingPulse.

Online spending in all categories rose 16.1 percent, compared with lower rates in January and February and a 15.9 percent increase in March 2010.

"March wasn't too bad; the momentum is continuing," McNamara said. "But gas prices could have a bigger effect (on spending) if they continue to rise."

Separately, selected major retailers are to report Thursday on revenue at their stores open at least a year. Analysts expect merchants collectively to report a decline for March from a year earlier, the first drop since August 2009. The comparison is considered a key indicator of retailers' health.

An important factor in the expected drop is that Easter falls on April 24 this year, so sales won't get a boost from holiday-related spending until this month. Last year, Easter fell on April 4 so shoppers bought holiday goods in March. Analysts say combining March and April figures gives the best read on consumer spending.

Clothing sellers, including J.C. Penney Co. and Kohl's Corp., are expected to have been hit hardest in March by shoppers delaying spending on holiday items. Lingering wintry weather also made short-sleeve shirts and shorts less enticing. Some stores tried to sell both cold-weather items along with spring fashions, says Stifel Nicolaus analyst Richard Jaffe.

"That doesn't create a powerful fashion statement in the stores," Jaffe said.

Ken Perkins, president of the RetailMetrics LLC research firm, agreed that gas prices are "a cloud looming" that could stall the increases in consumer spending that stores saw in January and February.

He said he expects a 0.5 percent drop in revenue at stores open at least a year for March, compared with an 8.7 percent increase in March 2010. For March and April combined, Perkins expects about a 3.5 percent increase, in line with the rate spending has been growing since January. Thomson Reuters predicts a 0.7 percent decline for March.