Discounters continue to draw shoppers in February

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Posted 1:40PM on Thursday, March 7, 2002

NEW YORK - Unseasonably warm weather and new fashion trends helped spark early spring apparel sales during February and raised hopes that consumers might begin spending more freely and speed the economic recovery. However, as the nation's largest merchants reported their monthly sales Thursday, it remained clear that the overall retail business remains fragmented, with discounters, particularly Wal-Mart Stores Inc., achieving impressive gains, and department stores and apparel chains still struggling. Gap Inc. was again a notable disappointment, hurt by weak sales at its Gap and international divisions. "Consumers are responding to freshness in fashion, and that is a favorable sign," said Richard Jaffe, an analyst at UBS Warburg. But he warned, "It is hardly conclusive. Consumer behavior is spotty and inconsistent." "It is a much improved environment, but the pace is still uneven," said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. The bank's sales index of 77 stores posted a gain of 6.2 percent, better than the 5.5 percent increase Niemira anticipated. The February performance, led by an impressive performance by discounters, was the strongest since the pre-recessionary April 2000 period, he said. Apparel sales showed the first signs of life in months as consumers, motivated by warmer weather and new styles, did some early spring shopping, but generally at lower-priced stores. In particular, peasant blouses and clothes with ruffles and lace were among the top sellers. February is the second-least important month of the year for retailers, after January. Niemira and others said they will be carefully watching how merchants perform in March and April. Also comforting to the industry was a report by the Labor Department that showed new claims for unemployment insurance dipped slightly last week, continuing an overall slide this year that indicates companies are laying off fewer workers. And Federal Reserve Chairman Alan Greenspan offered his most optimistic assessment of the economy in more than a year, telling Congress Thursday the country is now recovering from the recession. But a still challenging job market continues to weigh heavily on consumers and make them bargain-conscious. "The pattern of consumer preference for low-priced stores continues as strong as ever, indicating that traditional department stores will have a rough year ahead," said Kurt Barnard, president of Barnard's Retail Trend Report, based in Montclair, N.J. Wal-Mart, the world's largest retailer, reported a better-than-expected 10.3 percent gain in sales at stores open at least a year, known as same-store sales. Analysts polled by Thomson Financial/First Call expected a 7.7 percent gain. Total sales were up 15.6 percent. Same-store sales are considered the best indicator of a retailer's performance. Wal-Mart, benefiting from the woes of Troy, Mich.-based Kmart Corp., which filed for Chapter 11 bankruptcy in January, said business was driven by mild spring weather and Valentine's Day. The retailer said it expects same-store sales to be up anywhere from 8 percent to 10 percent for March, fed by Easter, which falls on March 31. The company forsees same-store sale gains in the low-single digit range for April. Kmart is not reporting same-store sales, but will be filing monthly operating data with the U.S. bankruptcy court. It plans to release results at the end of month. Family Dollar Stores Inc. posted a better-than-expected 7.7 percent gain in same-store sales. Total sales were up 17.1 percent. Kohl's Corp. continued its winning streak, generating a same-stores sales gain of 14.4 percent, well exceeding Wall Street's expectations of a 5.4 percent increase. Total sales soared 31.9 percent. J.C. Penney & Co. Inc., which is undergoing a turnaround, reported a better-than expected same-store gain of 12.5 percent in its department store business, fed by strong apparel sales as the weather turned warmer, particularly in the Northeast. Total sales were up 3.3 percent. The Limited, Inc., which operates clothing stores including Limited, Express, Lerner New York and Henri Bendel, reported a better-than-expected sales gain of 2 percent. Analysts polled by Thomson Financial/First Call anticipated a decline of 2 percent. Total sales were up 5 percent for the month. On the other hand, most department stores and apparel retailers continued to struggle. In particular, Gap had a 17 percent same-stores sales decline, although the results matched Wall Street's modest expectations. Total sales were down 8 percent. Sears, Roebuck and Co. reported a 3.1 percent same-store sales decline in its domestic business. Total sales were up 1.2 percent. Saks Inc. posted a same-store sales decrease of 2.6 percent, slightly worse than analysts expected. Total sales were down 7.6 percent. But it said that the best-selling categories were women's apparel, accessories, outerwear and cosmetics. Other selected February sales figures for leading retailers: --May Department Stores Co., same-store sales down 2.7 percent; total sales gained 1 percent. --Target Corp., same-store sales gained 8.5 percent; total sales gained 16.7 percent.