Sharp cuts in inventories took some of the sting out of stores’ dismal January performances, which followed the toughest retailing year in more than a generation.
Comparable-store sales results for the month posted Thursday showed that, as consumer spending continued at historically weak levels, stocks were being tightly managed, sometimes even at the expense of sales. Several stores noted that top-line performance was hurt by a lack of clearance merchandise after extensive promotions leading up to Christmas.
If there was a silver lining to the month, it was that expectations finally managed to fall into synchronization with reality. Most stores commenting on fourth-quarter earnings prospects either reaffirmed previous guidance or raised it to slightly above previously revised cautious levels.
And, in a reflection of the attrition sweeping through retailing, Gottschalks Inc., itself a recent victim of bankruptcy, reported that its 13.3 percent advance was at least partly attributable to the disappearance of competitors like the liquidated Mervyns.
“We believe the closure of other retailers in many of our core California markets benefited our top-line performance,” said Jim Famalette, chairman and chief executive officer. “Our stores in these locations realized sales gains greater than 15 percent for the month.”
Investors weren’t troubled by the generally double-digit downward path traveled by stores in the fourth quarter’s final month, sending the Standard & Poor’s Retail Index up 8.51 points, or 3.3 percent, to 269.99. The Dow Jones Industrial Average, the S&P 500 and Nasdaq Composite rose 1.3, 1.6 and 2.1 percent, respectively. The better-than-expected tone of retail reports also helped the stocks of a number of department store suppliers, including Liz Claiborne Inc., which was up 20.4 percent, and Jones Apparel Group Inc., up 12.9 percent.
In a return to winning form after a disappointing December, Wal-Mart Stores Inc. generated an increase that surpassed analysts’ expectations. Comparable-store sales in the discounter’s U.S. stores were up 2.1 percent, about a percentage point higher than expected. However, the world’s largest retailer said that, going forward, it would not provide monthly sales forecasts.
“For Wal-Mart, the low-income shoppers that withdrew in December came back in January,” said TNS Retail Forward senior economist Frank Badillo. Wal-Mart’s comps rose 1.7 percent in December, its poorest showing of the quarter.
Although sales remain down overall, Badillo said shoppers are “giving signs that they do not necessarily intend to cut still deeper into their retail spending.”
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