Retail sales fall again in January

The post-holiday blues hit the nation’s shopping centers last month, as hefty discounts couldn’t persuade enough consumers to come out of spending hibernation.

Retail sales at major chain stores in January fell 1.8% over the same period last year, with several apparel companies reporting declines of 20% or more, according to data compiled by Thomson Reuters and released Thursday.

Excluding discount giant Wal-Mart Stores Inc., which reported a healthy 2.1% increase, total retail sales fell 5.7%.

Rising unemployment and the deteriorating credit and housing markets continue to hammer consumer spending, despite ever-present bargains at retailers from discounters to luxury chains. The struggles that hit the industry late last year are expected to persist through at least the first half of 2009, retail experts said.


“Retailers simply don’t know how to plan in this environment,” said Michael Niemira, chief economist at the International Council of Shopping Centers. “One day may be good, but the next day is awful. That volatility and inconsistency make it very hard to understand where demand really is.”

The retail industry has posted year-over-year sales declines every month starting in October, Niemira said.

At the Glendale Galleria this week, Robert Cooke, 49, said he and his family had scaled back their expenses in recent months as they prepared to buy a house in Encino. These days, it’s all about buying basics such as groceries and gasoline, he said.

“Everything is a deal right now, and we’re still generally not buying,” said Cooke, a high school principal. “Truly, if we don’t need it right now, we’re not buying it.”


Retailers in all sectors suffered, though department stores and apparel chains fared the worst, according to Thomson Reuters’ tally of 35 major chain stores. Results are based on sales at stores open at least a year, called same-store sales and considered a key indicator of retail health.

Luxury retailer Saks Inc. posted a huge 23.7% decrease, compared with a 4.1% year-over-year increase in January 2008. Sales at San Francisco-based Gap Inc., parent of the Gap, Banana Republic and Old Navy brands, fell 23%.

“Anything that is more discretionary continues to struggle,” Niemira said. “Even the clearance in apparel and department stores -- even a lot of that performance had been ugly. We’re locked into an environment where the consumer is not spending other than on the essentials.”

Part of the retail weakness in January was attributable to less gift-card redemption, a result of fewer gift cards bought during the holidays, he said.


Several teen-oriented retailers reported double-digit declines, including American Eagle Outfitters Inc., with a 22% decrease; Abercrombie & Fitch Co., down 20%; and Wet Seal Inc., which reported a 14.7% drop.

Yet teen chain Aeropostale Inc. was one of the biggest surprises in January, reporting an 11% increase in sales.

The retailer’s strong results could be due to shoppers trading down from pricier chains; Aeropostale’s logo T-shirts, hoodies and jeans are traditionally less expensive than the merchandise found at similar stores.

The chain could also be benefiting from the refusal of Abercrombie, one of Aeropostale’s biggest competitors, to widely discount its merchandise, said Betty Chen, a specialty retail analyst at Wedbush Morgan Securities.


“We really feel that parents and teens are voting with their dollars,” said Chen, who noted that Aeropostale had added trendier styles to its merchandise mix recently. “Competitively, at full retail price points, Abercrombie is too expensive.”

Also on Thursday, Standard & Poor’s said it might cut the debt ratings on Macy’s Inc., J.C. Penney Co., Nordstrom Inc. and three other department store chains as the U.S. recession worsens.

Of course, there are still consumers who are spending as usual. Thomson Reuters noted that the 1.8% total drop in January sales was less than the expected 2.3% decrease.

Shopper Carol MacGregor, 49, said she had noticed the abundance of sale signs at malls lately and knew that many people were cutting back. But she hasn’t changed her habits, she said while browsing for a new belt at the Glendale Galleria this week.


“As far as I’m concerned, the economy isn’t affecting me that much,” she said. “Being single and not a homeowner, I’m still out there shopping.”