Gift Cards Give Retail Sales a Boost

Americans flocked to clearance sales and cashed in gift cards in January, giving retail sales an unexpected boost, according to a report issued Thursday.

Despite rough weather in parts of the nation, sales at stores open at least one year rose to $45.9 billion, up 3.6% compared with January 2004, based on the International Council of Shopping Centers’ tally of 72 chain stores. The council had anticipated that sales would climb 2.5%.

Some California companies turned in real surprises, with Gap Inc., the nation’s largest specialty apparel retailer, saying that same-store sales in January fell 7%, considerably more than the 0.5% drop predicted by a consensus of analysts polled by Thomson First Call.

On the flip side, beleaguered teen retailer Wet Seal Inc. logged an 8.2% sales gain, the first such increase in 2 1/2 years. And Brisbane, Calif.-based Bebe Stores Inc., which has recently been striking all the right fashion chords with young female shoppers, posted a 29.3% jump. Analysts said Bebe’s results were noteworthy because the chain’s stores offered few markdowns.

Of the retail chains tracked by Thomson First Call, the only one that outperformed Bebe in January was Bath & Body Works, a division of Columbus, Ohio-based Limited Brands Inc. that logged a 30% jump.

Same-store sales are a chief indicator of a retailer’s welfare because they include only stores open for at least 12 months. Although higher-than-expected sales can be encouraging, they often are prompted by steep discounts, which can erode profits.

January -- which generally accounts for only about 6% of a retailer’s annual sales -- is typically a clearance month: time to unload leftover holiday merchandise.

And retail executives are feeling pressured to keep prices low these days, according to a survey released Thursday by the National Retail Federation, the industry’s largest trade group.

An NRF index that indicates how much control retailers feel they have when it comes to pricing goods registered in January at 25, with 50 being average. That was slightly more than December’s 22.9 but well under the 41.7 logged in January 2004.

But with spring merchandise having begun to filter into stores in January, sales in the month can offer clues about how shoppers are responding to spring products, especially apparel. Beyond that, gift cards have made the month more important than it once was, said Marshal Cohen, chief analyst for market research firm NPD Group.

Of 81,000 people who responded to a recent NPD survey, 52% received gift cards this year -- and 68% of them redeemed them last month.

“That’s the first time it ever came close to passing over that 50% mark,” Cohen said. “Gift cards put January on the map.”

Some trends continued in January. Companies selling luxury goods continued to lead the pack, posting an 8.5% increase. Seattle-based Nordstrom Inc. and Neiman Marcus in Dallas posted better-than-expected results, rising 8.8% and 11.9%, respectively.

Discount stores rose 4.4% as a group, with Minneapolis-based Target Corp. logging a 9.4% increase and Wal-Mart Stores Inc. in Bentonville, Ark., rising 2.5% at its U.S. stores. Wal-Mart predicted that February same-store sales would rise 2% to 4%.

Sales at department stores edged up 0.7%.