For Nation’s Retailers, It’s Christmas in January
January, once considered a retail backwater of clearance sales and skimpy profits, is beginning to look a lot like Christmas.
In fact, some on Wall Street have begun calling the Dec. 26-through-Jan. 31 period the “fifth season” -- and the nation’s merchants would have been hard pressed to ring up better results to close out the 2003 holiday period.
January sales rose a better-than-expected 5.9% at stores open at least a year, Goldman, Sachs & Co. reported Thursday, as consumers redeemed holiday gift cards and snapped up winter clothes to battle frigid weather across much of the country. Goldman Sachs had forecast a year-over-year gain of 3.6%; in January 2002, sales rose a scant 1.1%.
Retailers of all stripes -- discounters, warehouse clubs, department and specialty apparel stores -- reported buoyant results. Limited Inc. said so-called same-store sales -- a key measure of growth -- surged 23% in January. San Francisco gadgeteer Sharper Image Corp. posted a 21% jump, and teen apparel merchant Pacific Sunwear of California Inc. saw same-store sales rise 12.4%.
Wal-Mart Stores Inc., the world’s biggest retailer, reported a 5.7% increase, well above a gain some analysts predicted would be closer to 4%.
Bloomingdale’s and Macy’s parent Federated Department Stores Inc., which expected sales to be flat, instead reported a 5.5% gain.
The stronger-than-anticipated results caused analysts and some retailers, including Federated and Abercrombie & Fitch Co., to raise their fourth-quarter earnings guidance.
“Wal-Mart was above plan, May, Federated, Penney’s -- pick your retailer,” said Michael Niemira, chief economist for the International Council of Shopping Centers. “I had expected that 2004 would have more stores participating in the pickup in consumer spending. I hadn’t expected to see that in January.”
Investors cheered the news. A Morgan Stanley retail stock index of 38 chain stores rose 2% on Thursday as the overall market rose only slightly.
Because retailers had kept a lid on inventories, the clearance-sale pickings were lean, meaning that many shoppers were willing to pay full price in January for new merchandise. That bodes well for fourth-quarter earnings, which for many retailers include sales through Jan. 31.
“Spring -- full-priced -- product is selling, reflecting easy comparisons and, quite possibly, pointing to an impending consumer recovery,” Lazard Freres & Co. analyst Todd Slater wrote Thursday in a note to clients.
The sales increases were particularly surprising because many on Wall Street expected retailers to suffer from the bad weather and Americans’ lingering worries about the economy.
But the weather turned out to be a boon. Department stores saw sales grow 4.8%; discount stores, 5.1% and specialty apparel sellers, 2.8%, Niemira said.
Warehouse club stores performed particularly well, as shoppers in the East stocked up in advance of cold weather and consumers in Southern California continued to look for alternatives to ongoing labor strife at the biggest supermarket chains.
The United Food and Commercial Workers union struck Safeway Inc.’s Vons and Pavilions stores Oct. 11. The next day, Albertsons Inc. and Ralphs, which is owned by Kroger Co., locked out their union workers.
Sales at Issaquah, Wash.-based Costco Wholesale Corp., which has about a third of its 309 U.S. stores in California, rose 13%.
San Francisco-based Gap Inc. also surprised Wall Street with a 3% sales gain, sending its stock up almost 9%, or $1.69, to $20.59 on the New York Stock Exchange. Some analysts had forecast a sales decline of 4% to 6% for the parent of Gap, Banana Republic and Old Navy.
Among the few poor performers last month was Foothill Ranch-based Wet Seal Inc., which reported a sales decline of 21.4%. The young women’s apparel retailer said its sales were negatively affected by the severe winter weather, which it said decreased store traffic.
Despite the sector’s overall strong showing in January, some experts questioned whether shoppers would maintain their January pace.
Economists at Retail Forward Inc. said Thursday that consumers remained cautious about spending. Larger-than-expected tax refunds could be offset by continued worries about jobs and wages, particularly in low- and middle-income households, they said.
In their surveys of consumers, Retail Forward analysts also found that Valentine’s Day might not give retailers much of a boost. More than twice as many households said they would spend less on Valentine’s Day this year as those that plan to spend more than they did last year, the analysts said.
(BEGIN TEXT OF INFOBOX) * Robust gains January same-store sales* rose for many retailers. A sampling:
Company Pctg. change
Limited +23.0% Costco Wholesale+13.0 Pacific Sunwear +12.4 Hot Topic +10.1 Nordstrom +8.7 J.C. Penney +6.4 Wal-Mart +5.7 Federated Dept. Stores +5.5 May Dept. Stores +5.3 Target +5.1 Sears +4.6 Ross Stores +4.0 Gap +3.0 KohlÕs +0.3 Wet Seal -21.4
*Sales from stores open at least a year. Reporting periods vary slightly.
Source: Company reports
