Top U.S. retail chains ended their fiscal year with better-than-expected January sales, but the current first quarter could be tougher if consumers overspent during the holiday season.
January same-store sales rose 3.3 percent based on a tally of 29 retailers compiled by Thomson Reuters, led by positive surprises from department store operator Nordstrom
Analysts were expecting sales at stores open at least one year to rise 2.5 percent. Sales rose in all categories except drugstores, which posted a 1.4 percent drop.
The results mark a rebound from a year ago, when sales fell 5.6 percent, and follow a bigger-than-expected 2.9 percent increase in December.
But the momentum will be hard to maintain as consumers return to watching their wallets and unemployment remains at 10 percent, industry experts cautioned. The Standard & Poor's Retail Index <.RLX> fell 2 percent.
The sustainability of January's retail results will depend entirely on the job market -- it won't hold if we stay at double-digit unemployment, said National Retail Federation Vice President Ellen Davis.
The number of U.S. workers filing for jobless benefits unexpectedly rose last week, the Labor Department said on Thursday.
January, the final month of the holiday quarter, accounts for the smallest portion of its sales.
But with retailers avoiding the drastic clearance discounts that hurt January sales a year ago and consumers cashing in on gift cards received in December, chains like Macy's Inc
However, Target Corp
The industry is still low and slow, said Brian Girouard, leader of Capgemini's global consumer products and retail sector. Consumers are spending lower than they were two years ago, and the recovery is quite slow.
Shares of Macy's, which operates the upscale Bloomingdale's department store chain, rose 2.8 percent, while Target fell 3.1 percent.
SIGNALS FOR SPRING
Retailers have had more than a year to reposition their business for the new normal, where shoppers buy less and focus on value. That is helping them protect profits, even if sales have not returned to levels seen before the recession.
The question now is whether retailers can entice consumers to spend on full-priced spring merchandise after luring them in with discounts during the holiday season.
January sales at TJX Cos Inc
TJX expects shoppers to remain focused on value and continue shopping at its chains even as the economy recovers.
Michael Niemira, chief economist for the International Council of Shopping Centers, said that while value was still a big driver of consumer demand, luxury was starting to come back.
Macy's CEO Terry Lundgren echoed those sentiments. Speaking on cable business channel CNBC, he said he was not expecting employment growth for 2010, but saw an improved environment in January.
Macy's January same-store sales rose 3.4 percent, beating estimates for a flat month as it raised its quarterly profit forecast [ID:nWNAB3034]. The retailer benefited from its strategy to tailor merchandise locally at its namesake stores and a strong performance at Bloomingdale's.
Warehouse club operators Costco Wholesale Corp
But teen apparel retailer Hot Topic
The company also said it expected fourth-quarter earnings to be at the low end of its previous outlook of 18 cents to 20 cents a share.
Sales at Hot Topic, which sells rock 'n' roll-inspired clothing as well as music and accessories, have weakened in the absence of new must-have products like its hugely popular Twilight merchandise.
(Reporting by Nicole Maestri in San Francisco, Michele Gershberg, Martinne Geller, Phil Wahba and Dhanya Skariachan in New York, Jessica Wohl in Chicago; Editing by Lisa Von Ahn and Matthew Lewis)