Retailers exit first quarter with higher inventory

May 15, 2014: 11:16 AM ET

Inventory levels rise, but retailers see improving sales trends.

After a harsh winter, inventory levels are high at major retailers.

After a harsh winter, inventory levels are high at major retailers.

FORTUNE -- Severe winter weather, which led to weaker sales and traffic trends and some major U.S. retailers, also broadly pushed up inventories during the first quarter.

Macy's Inc. (M), Wal-Mart Stores Inc. (WMT), and Kohl's Corp. (KSS) each reported sales weakness in the U.S., not a complete surprise as poor weather generally hurt traffic. Though the retailers struck a bullish tone about improved sales trends as the year progressed, the Commerce Department this week reported retail sales grew a less-than-expected 0.1% in April from the prior month.

Poor winter weather also left the retailers with more inventory on hand, problematic if consumers don't start shopping more.

MORE: Retail sales slowed significantly in April

Wal-Mart on Thursday said U.S. inventory grew 5.3% from a year ago, primarily due to new store openings and slower sales of weather-related categories like outdoor items.

Department-store operator Macy's this week reported inventories grew 4.7% from last year. Chief Financial Officer Karen Hoguet said that level was "a bit higher than we would have liked," though she said the increased stock included some key summer items.

Kohl's inventories climbed a more modest 0.5%, a level the company called "appropriate."

All three retailers reported sales at existing locations, a key metric known as same-store sales, declined in the first quarter. But encouragingly, executives at those companies said sales trends appeared to be improving.

MORE: Can America's middle class save more?

Macy's said year-to-date sales were "well into positive territory."

"While we aren't sure that all of the weakness in the quarter was weather related, we continue to believe that the underlying customer demand is enough to enable us to achieve our annual guidance," Hoguet said. Macy's estimates same-store sales this fiscal year will rise between 2.5% to 3%, implying a rebound from the first quarter.

Bill Simon, president of Wal-Mart's U.S. business, said a "solid start" to the spring season and a strong Easter holiday drove sales higher over the remaining 11 weeks of the quarter.

Kohl's Chief Executive and President Kevin Mansell said that the company didn't achieve its sales goal for the first quarter, but was encouraged "by the improvement in sales as the quarter progressed."

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