An unusually cold winter and lackluster consumer spending have produced heavy headwinds for many retailers in recent months. However, things seem to be taking a turn for the better for players such as Costco (NASDAQ:COST), Gap (NYSE:GPS), and L Brands (NYSE:LB), as the three companies have recently reported remarkably strong sales performance for the month of April.
Costco is still the leader in discount retail
Costco delivered lower-than-expected sales and earnings for the company's fiscal second quarter of 2014, and this produced some concern among investors. But sales performance in March had already signaled a big improvement, and April data is confirming that Costco continues to be solid as a rock.
While comparable sales in February increased only 2%, March brought a remarkable rebound with a 5% increase in comparable-store sales, and April confirmed that February weakness was just a bump in the road, with another increase of 5% in same-store sales during the month.
Total sales in April increased by 7% to $8.56 billion, versus $7.98 billion in the same month of 2013. Comparable-store sales excluding fluctuations in gasoline prices and foreign currencies increased by 5% in the U.S. and by a stronger 7% in international markets during the month.
Discount retail is a remarkably competitive industry in which many companies are finding it hard to increase sales at all. In this context, Costco's performance in March and April is showing not only that the company is leaving its weakness in the past, but also that Costco is materially outgrowing its competitors in a notoriously challenging industry.
Gap is back in fashion
Unlike Costco, Gap gave no cause for optimism in its March sales report. The company announced a big 6% drop in comparable-store sales during the five weeks ended on April 5. Same-store sales at Gap global fell by 7% versus the prior year, while Banana Republic delivered a 4% decline in global same-store sales and Old Navy same-store sales fell 7%.
But good things come to those who wait, and investors in Gap were well rewarded for their patience with a huge improvement in performance during April. Gap not only delivered a whopping increase of 9% in comparable-store sales during the month, but the company also provided encouraging earnings guidance for the first quarter of fiscal 2014.
Total sales in April increased by 10% to $1.33 billion, versus $1.21 billion in the same month last year. Performance was strong across the board: Comparable sales increased by 3% at Gap Global, Banana Republic delivered an increase of 7% in same-store sales, and Old Navy excelled with an explosive increase of 18% in same-store sales during the month.
Management is also expecting earnings in the coming quarter to land between $0.56 and $0.57 per share, versus an average forecast by Wall Street analysts of $0.54 per share, according to data compiled by FactSet.
While weakness during March was particularly worrisome for Gap investors, the company has more than compensated for those concerns with a big rebound in sales during April and a healthy earnings guidance for the first quarter of fiscal 2014.
Victoria's profitable secret
L Brands delivered uninspiring performance in March, with comparable-store sales declining by 1% at Victoria's Secret and 2% at Bath & Body Works, for a total decline of 1% in same-store sales at the company level. But things are looking much better for the company, judging by April data.
L Brands announced a big 9% increase in total revenues during April to $717.6 million, versus $660.5 million in April 2013. Total comparable-store sales increased by a remarkable 8% versus the prior year, and both Victoria's Secret and Bath & Body Works grew their same-store sales by 8% annually.
In addition, the company increased its earnings-per-share guidance for the first quarter of fiscal 2014 to between $0.50 and $0.52, versus a previous guidance of $0.44 to $0.49. L Brands' new guidance is also above analysts' forecast of $0.48 in earnings per share for the quarter.
Victoria's Secret and Bath & Body Works are two leading brands with huge popularity and a loyal customer base, and April data proves that L Brands continues benefiting from them in spite of a transitory slowdown in previous months.
Winter has come and gone, and while many retailers suffered a considerable slowdown because of harsh weather conditions and sluggish consumer spending, things are looking much better for retailers such as Costco, Gap, and L Brands. Judging by recent sales data, these companies are ready to blossom in spring.
Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.