NEW YORK - Deep discounting of winter merchandise drew consumers into the nation's stores during January, offering many struggling retailers a brief respite from a sluggish sales trend.
But while analysts see the sales gains announced Thursday as encouraging, they don't believe the consumer is ready to splurge. Economic uncertainty continues to drive consumers into Wal-Mart Stores Inc. and other discounters, which again outperformed the rest of the retail industry during January.
Meanwhile, department stores, particularly May Department Stores Inc., and apparel chains including Gap Inc., are still struggling, although the sales declines for many weren't as bad this month as Wall Street expected.
"Consumers came out in response to the great values in the stores, but are they willing to pay regular price for spring (merchandise)? It is tough to say," said Richard Jaffe, an analyst at UBS Warburg.
"This may be a signal that the end of the recession is near. The weakness wasn't as bad in some areas as we have seen," said Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. "But January is not representative" of consumer spending trends because it is a time when merchants clear out inventory and make room for spring goods.
The bank's index measuring the sales of 72 stores rose 5.1 percent in January, better than the 3 percent Niemira projected. The gain was the strongest monthly showing since January 2000, when the index rose 5.7 percent.
The sales results came as the Labor Department reported that new claims for state unemployment insurance dropped by 15,000 last week to a seasonally adjusted 376,000. The decline for the work week ending Feb. 2 followed a revised 31,000 jump in claims the week before. Jobless claims slowly have been declining since peaking Oct. 20 at 507,000.
Still, as Niemira put it, "There is still a lot of negative news out there." Most notably, there haven't been any job gains, he said. "Until you see the job picture turning, it will still be choppy out there."
Niemira expects that sales at stores open at least a year, known as same-store sales, will be up about 2.5 percent to 3 percent during the next few months, more in line with the modest retail sales trend of 2001. Same-store sales are considered the best indicator of a retailer's health.
"Americans are not yet ready to go on spending sprees and buying binges, particularly at department stores," said Kurt Barnard, president of Barnard's Retail Trend Report, based in Montclair, N.J. "They are willing to spend -- if the prices are real bargains."
Wal-Mart posted an 8.3 percent gain in same-store sales, exceeding Wall Street projections. Analysts polled by Thomson Financial/First Call expected Wal-Mart to report a 6.2 percent gain. The company's total sales for the month were up 13.8 percent.
Costco Wholesale Corp. reported a solid 9 percent gain in same-store sales, beating Wall Street expectations for a 5.2 percent increase. Total sales were up 7 percent in January.
Another pleasant surprise came from J.C. Penney Co. Inc., which posted a 5.9 percent gain in same-store sales in its department store division. Thomson Financial/First Call expected an increase of 4.9 percent. Total sales were up 4.1 percent.
Apparel chains and department stores again struggled, but analysts believe the aggressive discounting, along with a concerted effort to get spring goods into the stores, helped spur sales.
The Limited Inc. posted same-store sales gains of 6 percent in January. Analysts polled by Thomson Financial/First Call expected a 2.4 percent decline.
Federated Department Stores Inc. posted an 8.8 percent decline in same-store sales, better than the 9.5 percent drop Wall Street analysts projected. Total sales were down 25.3 percent
There were still some disappointments. May Department Stores Co. saw a 10.7 drop in same-store sales, worse than what analysts expected. Total sales were down 7.2 percent.
Gap recorded a same-store sales drop of 16 percent, worse than the 13 percent decline that Wall Street analysts projected. Total sales were down 5 percent.
"Although merchandise margins met expectations, they were well below last year due to both lower markdown margins and higher sales at markdowns," said Heidi Kunz, chief financial officer in a statement.
Other selected January sales figures for leading retailers:
-- Dollar General Corp., same-store sales up 6.4 percent; total sales increased 17.3 percent.
-- Sears, Roebuck and Co., same-store domestic sales were down 3.4 percent; total sales declined 2.3 percent.
-- Target Corp., same-store sales were up 5.8 percent; total sales were up 13.5 percent.
Friday
January 10th, 2025
8:19AM
