Shoppers Extend Spree Into January

By Leslie Earnest

Feb. 3, 2006 12 AM PT

Times Staff Writer

Mild weather helped stretch retailers’ holiday shopping gains into January as consumers bearing gift cards snapped up bargains, giving major chains their strongest sales growth in seven months.

Sales at stores open at least a year rose 5.1% to $47.2 billion from a year earlier, the International Council of Shopping Centers said Thursday.

Gift cards are providing a “growing pool of money” that customers are dipping into every January, said Michael Niemira, chief economist for the group, which tallied results from 65 chains nationwide. About 40% of the gift cards purchased during the holidays are redeemed that month, he said.

Tying another bow on the season: It was the warmest January in 112 years, and that drew shoppers out of the house and into stores.

“Traffic was good; sales were good,” Niemira said. “And sales were particularly good at apparel specialty stores.”

Abercrombie & Fitch Co., for example, continued its roll in January. The Ohio-based parent of the Abercrombie & Fitch, abercrombie and Hollister chains logged a 33% gain.

Typically, the holiday season has been measured by sales in November and December. But January, though still the weakest month of the year for sales, has become increasingly important to stores as the popularity of gift cards has grown. Retailers can’t count gift cards as sales until they are redeemed.

By the traditional measure, holiday sales rose 3.6% year over year. That number rises to 4.1% when January is included.

Clearly, many retailers got a boost from the month: Thomson Financial, in a report also released Thursday, said 72% of the companies it monitored beat analysts’ sales expectations.

Wal-Mart Stores Inc. posted a 4.7% increase in so-called same-store sales, considered a key measure of a retailer’s health. That exceeded the 4.4% that was expected and was the company’s strongest showing since May 2004. Rival Target Corp.’s sales rose 5.2%.

Some California companies offered the biggest surprises.

Teen retailer Wet Seal Inc. of Foothill Ranch landed at the top of the heap for the 11th month in a row. It logged a 51.4% increase in same-store sales, more than double the 21.2% that analysts had been expecting. Trendy apparel seller Guess Inc. of Los Angeles also posted another strong month; its 31% increase was more than quadruple the anticipated 7.2%.

But January’s better-than-expected performance is not necessarily an indicator of what lies ahead for retailers in 2006, economist Niemira said. He cited continuing concern about gasoline prices and noted that consumption overall has outpaced wage growth for five years running.

“At some point,” he said, “either income growth has to grow faster to sustain that pace of consumption or consumption has to slow to be more aligned to the pace of income.”

Such concerns apparently haven’t fazed teenagers, who typically waste no time cashing in gift cards. As a group, retailers catering to that audience posted the strongest showing, rising 15.7%.

Anaheim-based Pacific Sunwear of California Inc., which sells many of the casual youth apparel brands made by Southern California companies such as Quiksilver Inc. and Volcom Inc., saw sales rise a better-than-expected 4.9%. Rival Zumiez Inc. of Everett, Wash., posted a 23.2% jump.

Gap Inc., the largest specialty apparel retailer, surprised analysts by nudging up 1% after 14 straight months of flat or declining same-store sales. Rising sales in its namesake division enabled the San Francisco-based retailer to overcome a 6% decline at its Banana Republic stores.

Warehouse stores such as Costco Wholesale Corp. and Wal-Mart’s Sam’s Club collectively turned in a strong performance, logging an 8.2% gain. Furniture chains posted an identical increase.

Department stores collectively rose 2.7%, and Seattle-based Nordstrom Inc. saw sales rise 6%, exceeding the 4.7% that analysts had anticipated.

Strong sales, however, don’t always fall to the bottom line. A clearer profit picture will begin to emerge as major retailers release fourth-quarter earning reports this month.

Certainly there were some laggards in January. Sales fell 13% at San Francisco-based Sharper Image Inc., which has been struggling to sell its air purifiers and massage chairs.

And the warmer weather didn’t do Wilsons the Leather Experts Inc. any favors. Its same-store sales slid 12.7%, more than the expected decline of 3.5%.

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It’s in the cards

Year-over-year percentage change in January sales at stores open at least a year

Company---% change

Wet Seal +51.4%

Guess +31.0%

Ross +9.0%

Nordstrom +6.0%

Target +5.2%

Pacific Sunwear +4.9%

Wal-Mart +4.7

J.C. Penney +2.5%