By  on February 3, 2006

NEW YORK — Consumers cheered retailers by snapping up full-priced spring clothes in January, but a cold snap ahead could chill sales over the next few weeks.

As balmy weather bathed much of the nation, most retailers basked in stronger-than-expected comp-store sales last month. Results were also bolstered by gift card redemptions. According to the International Council of Shopping Centers, January comps spiked 5.1 percent on average, the biggest monthly same-store sales increase since June.

Looking to this month, though, analysts are cautious. "Retailers are facing slightly more difficult year-over-year [sales] comparisons [in February] and the weather is unlikely to be as cooperative over the next two months as it was in January," Ken Perkins, an analyst with Retail Metrics LLC, wrote Thursday in a research report.

Weather forecasting service Planalytics Inc. expects an abrupt stop to the warmer-than-usual weather seen last month, saying in a report Thursday that "retailers will experience a sharp drop-off" in spring merchandise buying by consumers. It added, "those [retailers] with winter clearance will reap the benefits."

Target, for example, is expecting February comps to rise 2.5 to 4.5 percent, slightly below its typical guidance of 3 to 5 percent, and Wal-Mart expects comps to increase 2 to 4 percent. Federated expects February comps to decline by 0.5 to 1.5 percent.

Weather certainly played a key role last month, as retailers pushed spring merchandise onto shelves earlier than usual to spur full-price buying. Analysts said the above-normal temperatures — it was the warmest January in over 100 years, according to Planalytics — got shoppers out of the house, into the mall and buying spring clo thes. That helped most retailers to maintain decent margins and reiterate previously released earnings guidance.

Some, such as Federated Department Stores, Aéropostale Inc., Ross Stores Inc. and TJX Cos., upped forecasts for the fourth quarter as a result of the stronger-than-expected January. "Retailers racked up a terrific month, particularly relative to expectations," wrote Perkins.

The top performers in January included specialty stores, which posted an average comps increase of 9.4 percent. Leading gainers included Wet Seal with a 51.4 percent gain, Abercrombie & Fitch with a 33 percent increase and Guess with a 31 percent gain.The mass channel also outperformed expectations with an average gain of 4.7 percent in January, its best performance in almost two years.

Department stores had a 2.7 percent average gain for the month, as companies such as Nordstrom Inc. and The Neiman Marcus Group faced more challenging, year-over-year sales comparisons.

Craig Johnson, president of retail consultancy Customer Growth Partners LLC, said sales results from about 80 percent of retailers beat Wall Street expectations. He said that's "just more evidence that the experts continue to underestimate the resilience of the consumer economy. This isn't rocket science: as long as people have jobs, they'll buy things."

To be sure, consumers were feeling good in January. The Conference Board reported earlier this week that consumer confidence was at a two-and-a-half year high last month, propelled in part by a favorable view of the job market.

Among the 50 retailers tracked by WWD, 40 posted positive January same-store sales, while only five posted negative results. Three companies — Old Navy, Limited Brands Inc. and Cache Inc. — had flat results. Results for ShopKo and Goody's Family Clothing were not available.

The mass merchants, including Target Corp., TJX, Ross Stores, Retail Ventures Inc. and Wal-Mart's discount stores, each posted comps that rose at least 4 percent. The mass sector likely benefited from gift card redemptions.

"We believe that gift cards played not just a major role with the usual youth retailers like Abercrombie and J. Crew — where the ‘half-life' of a gift card in the hands of a teenager is measured in days not weeks — but even for retailers like Wal-Mart, where we estimate that its photo gift cards accounted for perhaps an incremental $2 billion in sales displaced past Christmas," Johnson said.

Indeed, according to results of a survey recently released by consultancy Accenture Ltd., 43 percent of people surveyed said they planned to use gift cards they received during the holiday within the first month of ownership.

Meanwhile, four out of five people surveyed said they gave or received gift cards during the holidays, and 66 percent of respondents both gave and received gift cards. Apparel was the top category for which gift cards were given.In the high-end segment, the leading gainers included Nordstrom, which posted a 6 percent comp-store gain, and Saks Inc.'s Saks Fifth Avenue division, which had a 3.7 percent increase that was aided by a four-day storewide clearance event. Neiman Marcus Group had a 4.1 percent January comp gain, and said strong categories in the month were women's contemporary sportswear and designer apparel.

From the specialists, Ann Taylor Stores Corp. saw comps soar in January to a better-than-expected 10.9 percent rise, led by strong sales from its Ann Taylor division.

Several specialty retailers upped fourth-quarter earnings-per-share guidance. After posting a 12.3 percent rise in comps, Aéropostale said it expects to earn 73 to 74 cents in the quarter, up from a prior estimate for 71 to 73 cents. Ross Stores, with a 9 percent comp gain, sees earnings at 48 to 49 cents, and TJX said fourth-quarter earnings should be above its prior forecast for 41 to 43 cents.

Gap Inc., which posted a much better-than-expected 1 percent increase in consolidated January comps, said results in its Gap brand were buoyed in part by spring product that was in stores earlier than usual. In women's, cable crew sweaters and nautical items performed well in the month.

The company said on a recorded call that thanks to an improvement in operating margins, full-year EPS is seen at $1.22 to $1.25, including a tax benefit, above a prior estimate for EPS at the high end of the $1.12 to $1.17 range; analysts' consensus is for $1.16.

In the discount channel, Wal-Mart Stores, which posted a 4 percent rise in January comps in its Wal-Mart stores division and a 4.7 percent total January comp in its U.S. stores, said on a recorded call that the month's consolidated result was "the highest monthly comparable-store sales increase in this fiscal year." The company cited its merchandise and operational initiatives geared at improving "the Wal-Mart customer experience" and making the stores "more relevant to a broader range of customers."

Target, with a 5.2 percent rise in its January comps, cited strong sales in electronics, women's apparel, household and personal care categories. The discounter also said that starting in the February reporting period, it would begin providing one mid-month same-store sales update, as opposed to weekly updates.Similarly, specialty retailer Charming Shoppes Inc., which posted an 8 percent January comp increase, said it would cease reporting monthly comps results and only provide quarterly comp-sales figures, effective in the February sales period.

In the moderate department store sector, J.C. Penney Co. and Dillard's Inc. led January, with respective 2.5 percent and 3 percent comp gains, compared with Kohl's Corp., which posted a weaker-than-anticipated 2 percent increase and Federated's slightly lower-than-expected 1 percent rise. Federated, however, sees fourth-quarter EPS from continuing operations reaching $2.60 to $2.65 — up from a prior estimate for $2.25 to $2.35 — now that it accounts for Lord & Taylor as a discontinued operation, given it announcement last month to divest the business. The consensus is for $2.39 a share in the quarter.

JANUARY SAME-STORE SALES
 
January
December
November
 
2006 % Change
2005 % Change
2005 % Change
2005 % Change
DEPARTMENT STORES
Bon-Ton
0.9
6.6
0.8
-0.9
Dillard's
3.0
3.0
1.0
1.0
Federated
1.0
-0.4
3.4
-3.4
Gottschalks
0.3
0.9
3.7
0.5
Kohl's
2.0
-1.6
4.6
-0.1
Neiman Marcus
4.1
12.2
8.6
4.0
Nordstrom
6.0
8.8
7.7
2.8
J.C. Penney
2.5
3.3
2.2
3.6
Saks Dept. Store Group
4.3
-0.9
1.8
2.3
Saks Fifth Ave. Enterprises
3.7
3.0
3.1
-2.3
Stage Stores
1.5
3.7
7.3
4.6
Average:
2.7
3.5
4.0
1.1
 
SPECIALTY CHAINS
Abercrombie & Fitch
33.0
17.0
29.0
23.0
Aeropostale
12.3
2.5
11.4
7.3
American Eagle
11.3
22.0
9.8
1.7
Ann Taylor
10.9
-3.6
1.5
12.9
Banana Republic
-6.0
7.0
-5.0
-5.0
Bebe
9.8
29.3
1.1
4.2
Buckle
3.0
8.6
-1.3
0.3
Cache
0.0
2.0
4.0
-1.0
Cato
6.0
4.0
-2.0
4.0
Charming Shoppes
8.0
-3.0
5.0
9.0
Chico's FAS
14.6
8.2
16.4
11.8
Christopher & Banks
-3.0
19.0
2.0
-3.0
Citi Trends
22.7
10.1
21.4
26.0
Claire's
9.0
7.0
4.0
5.0
CVS
5.4
34.2
7.3
7.0
Deb Shops
11.6
-0.1
4.5
NA
Dress Barn
16.0
1.0
8.0
10.0
Gap (U.S. stores)
3.0
-6.0
-10.0
-5.0
Goody's Family Clothing
NA
-3.4
-0.9
-4.8
Guess
31.0
4.4
17.5
15.8
Hot Topic
-0.7
-2.5
-6.2
0.0
Limited Brands
0.0
9.0
3.0
5.0
Mothers Work
3.9
-3.7
3.5
4.0
New York & Co.
0.6
1.2
10.9
12.9
Old Navy
0.0
-13.0
-10.0
-2.0
Pacific Sunwear
4.9
8.1
1.0
3.0
Talbots
0.8
13.4
1.1
3.3
United Retail
15.0
8.0
16.0
5.0
Walgreen
7.4
10.0
6.2
NA
Wet Seal
51.4
8.2
38.5
51.5
Wilsons
-12.7
-1.1
-7.7
-13.8
Zumiez
23.2
17.2
20.9
18.8
Average:
9.4
6.7
6.3
6.9
 
MASS MERCHANTS
 
Retail Ventures
5.6
2.9
3.2
4.7
Ross Stores
9.0
-1.0
6.0
5.0
ShopKo
NA
-1.7
NA
-3.9
Stein Mart
-0.4
13.1
-6.1
-3.6
Target
5.2
9.4
4.7
2.6
TJX Cos.
5.0
5.0
6.0
-1.0
Wal-Mart (discount stores)
4.0
3.2
1.9
3.8
Average:
4.7
4.4
2.6
1.1
 
Tally:
Up
40
36
39
33
Flat
3
0
0
1
Down
5
14
9
14
Total
48
50
48
48
Source: Company Reports

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