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Jennifer Marks

Tiptoeing Out of the Woods

There was much to cheer last week in retail news.

Bed Bath & Beyond reported a 56% spike in earnings for the fourth quarter. Family Dollar's quarterly profit jumped 35%. Pier 1 swung to a profit during the quarter and reported its best merchandise margin since 1999.

In the back half of the week, retailers reported their monthly sales results. Comps were up for every single retailer on HTT's monthly tracker. I can't tell you the last time that happened. I've been here 10 years now, and I'm not sure I've ever seen it.

Six retailers were sufficiently encouraged by March sales and early April trends to raise their earnings forecasts last week: JCPenney, Kohl's, Macy's, Ross Stores, Target and TJX.

The Johnson Redbook put the total industry's comp gain for the month at +9.0%. Thompson Reuters called it a 9.1% gain and said it was the best month for the industry in the past decade.

So, hooray! Retailers are making money again.

How are suppliers doing?

Ay, there's the rub.

They find themselves in a frustrating Catch-22. Business opportunities are growing, but soaring costs — cotton, polyester, down & feathers, shipping — are crippling the bottom line.

While smaller, less nimble global producers folded their tents during the downturn, an overabundance of international capacity remains. Ironically, although nearly every manufacturer I've talked to in recent weeks has acknowledged the excess capacity, several are expanding their own this year.

The idea that you have to stay big to play big continues to resonate.

Now, back to those March results. If Easter had not moved into the month this year, those comps certainly would not have been as rich. To get a true measure of spring sales, we'll need to look at March and April comps as a unit.

But no one suggested last week that without the Easter shift March would not have been a better month year-over-year. And considering how lousy the first half of 2009 was, we can probably expect some shiny, happy numbers in the next few months.

It feels as though everyone is beginning to exhale. The environment remains challenging, no doubt. But 99.9% of the manufacturers with whom I've spoken recently see better business ahead.

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