Some retailers' sales beat, but threats loom

By @ibtimes on

Several top retailers posted bigger-than-expected sales gains for February, a show of strength that could dissipate in March as a late Easter and rising gasoline prices take their toll.

Initial sales results confirmed recent consumer confidence data showing that the economy remains on solid footing despite the spike in gas prices.

Lingerie chain Victoria's Secret parent Limited Brands Inc and teen apparel retailer Wet Seal were among the early standouts.

Analysts expect the Thomson Reuters index of 25 retailers to show a 3.6 percent rise in sales last month at stores open at least one year. So far, seven of the 11 reporting have beaten expectations.

February got a boost from snowstorms in January that delayed some shopping trips and from higher consumer confidence, said Keith Jelinek, a director of consulting firm Alix Partners' retail practice.

But retailers should brace for challenges, he added.

When you look into March, it will be difficult for retailers, Jelinek said. Higher fuel prices will lead shoppers to consolidate trips, he said, meaning fewer impulse purchases, especially by lower-income shoppers.

Oil prices settled at their highest level since August 2008 on Wednesday.

Sahana Paramesh, who was shopping Wednesday afternoon at a Ross Stores Inc location in San Francisco, said higher gas prices were making her more careful with her spending.

I used to buy at dressbarn - they had cute little dresses for 30 or 40 dollars, but I just found dresses here for half the price, she said. I probably wouldn't have done that two years ago.

Another challenge for retailers this year is that Easter comes in late April, depriving them in March of the sales period when shoppers start buying clothing for warmer weather.

Most chains in the Thomson Reuters index will report same-store sales for February later on Thursday. That is the slowest month of the year for retailers, representing only about 7 percent of annual sales.

ENERGY FACTOR

Energy, including gas and electricity, accounted for 5.6 percent of total consumer spending in 2010, according to the U.S. Commerce Department.

But warehouse club operators Costco Wholesale Corp and BJ's Wholesale Inc , which sell gas at many of their stores, on Wednesday attributed their bigger-than-expected sales gains to higher fuel prices.

The Costco and BJ's results also show that many shoppers remain focused on bargains.

We didn't really see anything in February that said to us, 'Boy, consumers are out there and spending,' said John Long, a retail strategist at consulting firm Kurt Salmon.

Limited Brands' same-store sales rose 12 percent, while Wet Seal reported an unexpected increase.

Among other teen retailers, Hot Topic reported its 19th straight month of same-store sales declines, while Zumiez Inc came in well ahead of expectations.

The S&P Retail Index <.RLX> is up 1.3 percent since the last monthly sales reports, while the S&P 500 <.SPX> has risen 0.1 percent.

Teen apparel chains Abercrombie & Fitch , Aeropostale , and American Eagle Outfitters stopped reporting monthly sales, beginning in March. The world's largest retailer, Wal-Mart Stores Inc , has not been included since 2009.

(Additional reporting by Alexandria Sage in San Francisco; Editing by Lisa Von Ahn)

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