If you’ve heard about the “Easter shift” and are curious what it means, it’s not referring to the final egg-painting session at a sweatshop run by a certain bunny.
Rather, it refers to the actual timing of the Easter holiday, which can make stock picking in the consumer sector trickier than grabbing a handful of jelly beans without getting any of that disgusting licorice flavor. When it falls in March like last year, the sales of all those goodies and spring clothes are counted in one quarter for many companies. When it lands in April like this year, another quarter gets credit for much of the bounty.
It’s not just the holiday itself, it’s the tendency for schools’ spring breaks to be clustered around Easter. Consider the case of Six Flags Entertainment Corp. (SIX:US) Chief Financial Officer John Duffey expects about 300,000 worth of rollercoaster riders will move from the first quarter to the second quarter, according to the Bloomberg Orange Book compilation of conference call remarks. Analysts on average expect (SIX:US) a 9 percent drop in sales and earnings per share when the theme park operator reports results on April 23.
For Kraft Foods Group Inc. (KRFT:US), about $150 million of “quite high margin revenue” will shift into the second quarter, according to comments from Chief Executive Officer Tony Vernon on a Feb. 13 conference call captured in the Orange Book.
While Easter is “by far our most significant selling period of the year,” Ann Inc. (ANN:US) CEO Katherine Krill told analysts on a March 14 call, the fiscal first quarter for the women’s apparel retailer includes April so no one is likely cursing the bunny there. Same thing at Pier 1, where the quarter goes till the end of May and CEO Alexander Smith says “Easter in April is always better than Easter in March, so that’s good.”
Bloomberg Industries analyst Poonam Goyal has been on the case and broke it down to which chains will end up with hard-boiled egg on their face, and which ones will benefit from an Easter that is only three weeks before Mother’s Day. Given the lousy start to the year weather-wise, the late holiday should on aggregate be a boon to chain stores by allowing for a longer period to sell spring duds. Still, Easter’s proximity to the big day for moms might hurt May sales, according to Goyal.
Kohl’s Corp. (KSS:US), J.C. Penney Co. and Stage Stores Inc. (SSI:US) generate more than 10 percent of sales from children’s clothing, so they’re among the most exposed, according to Goyal. Meanwhile Macy’s Inc. (M:US), Dollar Tree Inc. (DLTR:US) and Ascena Retail Group Inc. (ASNA:US), all with first quarters that include April, stand to benefit, according to the analyst.
All of this really begs the question, who gets to decide when Easter is anyway and why does it jump between quarters like this? It almost sounds like it was the work of some rogue quant trader of retail stocks. Rather, the date is always the Sunday following the full moon that falls on or after the spring equinox, according to About.com.
So the Easter shift isn’t one of those “extraordinary items” that companies can factor out of earnings. For better or worse, they’re stuck with it. Just like those lousy licorice jelly beans.
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