U.S. retailers reported surprisingly solid January revenue gains Thursday that swept away fears that snowstorms in much of the country had chilled sales.
The reports, which are being compared with a respectable January 2010, offer encouraging signs that consumer spending is maintaining the momentum of the strong holiday season.
Many retail chains, including Costco Wholesale Corp, Victoria's Secret parent Limited Brands and Macy's Inc., posted gains that beat Wall Street expectations.
Luxury merchants Nordstrom Inc. and Saks Inc. also were bright spots as the affluent, encouraged by the rallying stock market, continue to lead the spending recovery.
"The early going looks good, despite the multiple snowstorms," said Ken Perkins, president of RetailMetrics LLC, a retail research firm. "It's encouraging, and you're seeing other economic signs that things are turning around."
Among the notable stragglers was Target Corp., whose business was below expectations, particularly in the South and Northeast.
The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailers' health.
J.C. Penney Co. reported an unexpected revenue decline; officials blamed lower levels of winter clearance compared with last January, as well as bad weather.
January is the least important month of the year for retailers because they use the month to clear out winter goods to make room for spring merchandise. But it brightened fiscal fourth-quarter profit outlooks from Limited Brands, J.C. Penney and teen retailer Wet Seal Inc.
In recent weeks, analysts had ratcheted down expectations as a series of snowstorms in several parts of the country kept shoppers at home and chilled their appetite for spring clothing.
But while retailers noted in their reports that the snowy weather did curb some spending, underlying consumer strength remained strong, adding hopes for a sustainable economic recovery.
Consumer spending was the main reason the economy grew at an annual rate of 3.2 percent in the final three months of 2010, the Commerce Department said Friday. It was up from 2.6 percent the previous quarter and the best since the start of last year.
Costco had a 10 percent gain in revenue at stores opened at least a year; Analysts surveyed by Thomson Reuters expected an increase of 7 percent.
Target Corp. had a 1.7 percent increase in revenue at stores opened at least a year, slightly below the 1.9 percent gain that Wall Street projected.
Target CEO and Chairman Gregg Steinhafel said business was particularly weak in the South and Northeast, regions hit hard by snowstorms. But he noted that the chain's expansion into food and its 5 percent discount for those who pay with its credit or debit card should drive increases this year.
Among department stores, Macy's, powered by its focus on exclusive merchandise and by its moves to tailor merchandise to local markets, posted a 2.6 percent gain. That was better than the 2.1 percent estimate from Wall Street.
"While sales in January were restrained by the series of snowstorms that caused widespread store closing along the East Coast and in the Southeast U.S., we continued to benefit from the underlying strength of our business," Terry J. Lundgren, chairman, president and CEO, said in a statement.
Penney had a disappointing 1.2 percent decline; the company said that the best performing regions were the Southwest and Northwest, compared with the Northeast and Southeast regions where winter storms pummeled the area.
Nordstrom enjoyed a 4.8 percent gain, while Saks Inc., had a 4.4 percent increase.
Limited, fueled by its Victoria's Secret division, enjoyed a stellar 24 percent gain in revenue at stores opened at least a year and boosted its profit outlook for the fourth quarter. That was better than the increase of 6.7 percent that Wall Street expected.
Gap Inc. posted a 1 percent increase in revenue at stores opened at least a year, much better than the 3.1 percent decline that Wall Street expected.