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Retailers report mixed sales results in February

/ Source: The Associated Press

Retail sales slowed last month as the reappearance of winter weather after a warm January chilled consumers’ interest in spring apparel.

As the nation’s retailers reported their February results Thursday, the biggest winners included discounters and wholesale operators such as Wal-Mart Stores Inc., Target Corp., and Costco Wholesale Corp. Among the biggest disappointments were teen retailer Abercrombie & Fitch Co., Gap Inc., Talbots Inc. and Sharper Image Corp.

“Overall, it is disappointing for February,” said analyst Jharonne Martis at Thomson Financial. “It’s not that consumers have stopped shopping; it is just that they’re slowing down.”

Based on a tally of 59 retailers, 59 percent missed expectations, while 41 percent beat projections, according to Thomson Financial.

The International Council of Shopping Centers-UBS sales tally of 59 retailers rose 3.2 percent, in line with analysts’ expectations. The tally is based on sales at stores open at least a year, known as same-store sales. Same-store sales are considered the best indicator of a retailer’s health.

The tempered sales reports followed a surprisingly strong 5.0 percent same-store gain in January, when shoppers armed with holiday gift cards and inspired by mild weather shopped for clearance and spring merchandise.

Still, Michael P. Niemira, chief economist at the International Council of Shopping Centers, said February’s figures don’t signal a fundamental shift in consumer spending. In fact, the results from the combined January-February period are in line with last year’s performance. He and other analysts will be closely watching the combined March and April period, when the bulk of spring selling occurs, to determine if February was just a blip, or the beginning of a trend.

“That will be more telling of where the consumer is heading,” he said.

Still, there is plenty of reason for concern. After consumer confidence rose to a three and a half year high in January, consumers’ sentiment fell more than expected in February, hurt by concerns about the strength of the job market. Shoppers are also facing higher heating bills, a slowing housing market and rising interest rates.

“There’s definitely uncertainty and unease among consumers,” said Michelle Bogan, retail strategist at Kurt Salmon Associates, a global consulting firm. “And whenever that happens, the reaction is to be more conservative.”

Another worrisome issue is that consumers’ personal savings rate remained in the negative territory in January. That means Americans continue to spend beyond their after-tax incomes, which forced them to dip into savings or increase their borrowing.

Despite consumers’ concerns, government data issued Thursday pointed to continuing strength in the job market. The Labor Department said the number of people filing new claims for unemployment benefits rose slightly last week to 294,000, but because new benefit applications have been below 300,000 for the past seven weeks, it appears the economy continues to rebound from a sluggish fourth quarter.

While February is one of the least important months of the year, it’s critical for setting the mood for spring selling. Stores use the month to get an early read on what’s selling. Right now, early hits include capris, and for teens, cargo style capris and leggings paired with mini denim skirts, according to John Morris, a retail analyst at Harris Nesbitt.

Still, “There’s not a lot out there that’s new,” said Patricia Edwards, a portfolio manager and analyst at Wentworth, Hauser & Violich in Seattle.

Wal-Mart reported a 3.2 percent increase in same-store sales. The results from the world’s largest retailer were in line with the 3.1 percent estimate from analysts surveyed by Thomson Financial. However, the discounter said food sales continued to outplace demand for general merchandise, suggesting that shoppers are buying basics rather than trendy fashions.

Target had a 3.6 percent gain in same-store sales, better than analysts’ 3.2 percent estimate. Costco had a 7 percent same-store gain, above the 6.5 percent forecast. Nordstrom reported a 4.9 percent same-store increase, surpassing the 3.5 percent estimate.

Penney had a 2.3 percent increase in same-store sales in its department store division, better than analysts’ 1.2 percent projection.

Federated Department Stores Inc., which purchased May Department Store Co. last year, posted a 1 percent gain in same-store sales, better than the 0.9 percent decline expected from Wall Street. Same-store figures comprise only Macy’s and Bloomingdale’s locations.

Limited reported a 5 percent same-store sales gain, above the 3.8 percent forecast.

Gap, which has been struggling with coming up with the right merchandising mix, stumbled again, suffering an 11 percent drop in same-store sales, much worse than the 6.8 percent analysts expected.

Talbots said its same-store sales fell 6 percent, well below the 0.3 percent decline analysts expected. Arnold B. Zetcher, chairman, president and CEO, said in a statement sales results were “significantly impacted” by the major snowstorm in the Northeast in mid-February.

Many teen chains — whose performance has consistently beat Wall Street expectations — had disappointing results. Abercrombie & Fitch had a 5 percent gain in same-store sales, but the results were well below the 13.6 percent estimate. Aeropostale Inc. posted a same-store sales decrease of 5.4 percent; analysts had expected a 3.0 percent gain.

Sharper Image — which has lost its edge to other rivals in offering the latest high-tech gadgets — suffered a 31 percent drop in same-store sales, much worse than the 8.3 percent decline expected from Wall Street.