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Hudson’s Bay Co. reflected retailers’ pain on Thursday when it reported that sales for the fiscal first quarter are below expectations so far.

Fernando Morales/The Globe and Mail

It's a season of discontent among many North American retailers as their businesses feel the chill of cool weather and a choppy economy.

Spring merchandise ranging from patio furniture to shorts and bicycles is sitting on store shelves, failing to entice debt-ridden shoppers who are increasingly making purchases on a need-to-buy basis. Retailers are responding by cutting prices.

Hudson's Bay Co., which runs Hudson's Bay in Canada and Lord & Taylor in the U.S., reflected retailers' pain on Thursday when it reported that sales for the fiscal first quarter are below expectations so far. Slowing consumer spending is dampening gains from its ongoing transformation efforts.

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"We think we'll be fine but the weather isn't helping us," HBC chief executive Richard Baker said in an interview.

This year's unco-operative early spring temperatures come at a critical time in Canada as merchants face tough new competition from U.S. discounter Target Corp., which opened its first stores in this country in March. The sluggishness is in stark contrast to a year ago when retailers were basking in a mild March and early April and relatively healthy sales.

Retailers such as Hudson's Bay are betting that their overarching strategy and differentiated offerings – such as British-based Topshop stores within Hudson's Bay – will help pull them through.

In the U.S. on Thursday, 11 retailers reported an average 1.9-per-cent increase in March sales at stores open a year or more, excluding drug stores, said Thomson Reuters IBES. That missed Thomson Reuters' 2.2-per-cent estimate and was the weakest showing since September 2009, it said. Including drug stores, those sales rose just 1.5 per cent, also below its outlook of 1.8 per cent.

Even Costco Wholesale Corp., one of the most stellar retail performers, posted weaker-than-expected March sales, although Canada was one of its strongest divisions. Costco's overall same-store sales rose 4 per cent at outlets open at least a year, less than the 5.2-per-cent jump analysts expected.

TJX Cos., which runs Winners, Marshalls and HomeSense in this country, said same-store sales fell 2 per cent in March, deeper than the 1-per-cent drop analysts were projecting. They dropped 5 per cent in Canada. But business improved as the weather got warmer and April "is off to a good start," said executive officer Carol Meyrowitz.

Ken Perkins, president of researcher Retail Metrics in Swampscott, Ma., said sales should improve in April as consumers benefit from falling gas prices and tax refunds.

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In March, "the deck was stacked against both retailers and consumers alike," he said. "Wintry weather conditions persisted deep into March, depressing spring apparel, home and garden and seasonal merchandise sales."

An early Easter meant one less selling day in March compared with the same month in 2012 when retailers also had the advantage of highly favourable weather, he said. In addition, U.S. consumers are adjusting to lower take-home pay because of higher payroll taxes.

In Canada, first-quarter consumer spending rose 3.3 per cent but dropped steadily throughout the period – and declined in the quarter in some retail segments such as apparel, home furnishings, lawn and garden supplies, hardware, books and cameras, according to Moneris Solutions Corp. Business was brisker at pet, sporting goods and flower stores as well as fast food restaurants and grocers, said the country's largest processor of debit and credit card transactions.

"It certainly wasn't as strong in retail as it was in other segments – entertainment, hotels, restaurants," said Malcolm Fowler, vice-president of marketing at Moneris. Consumers may be heeding Ottawa's warnings to reduce debt, he added.

Evan Gold, a vice-president at weather consultancy Planalytics Inc. in Berwyn, Pa. said retailers selling seasonal items are feeling the chill on both sides of the border. "It's taking its toll on all types of seasonal businesses, particularly ones that spiked significantly last year."

At Hudson's Bay, Mr. Baker said the lower-than expected first-quarter sales are more pronounced at its U.S. stores, which also suffered from Hurricane Sandy last fall. The storm left it with excess merchandise to clear out at discounts. Now poor weather in much of the U.S. Northeast, where many Lord & Taylor stores are located, is driving weaker-than-expected sales in the first nine weeks of 2013.

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The results have been stronger in HBC stores in Canada, he added. "If the weather had been more co-operative, we'd be up a lot more. … Whether the sales come in April instead of March and whether Easter moves this way or that, the long-term direction that we're heading is the right direction."

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