Unseasonably warm weather across the United States forced many retailers to offer deeper-than-usual discounts to clear out coats, sweaters and boots in January, pointing to tepid sales in the typically slow post-holiday month.
Analysts expect U.S. retailers to report a 2 percent rise in January same-store sales, compared with a year-earlier increase of 4.4 percent, according to Thomson Reuters data.
In this economy, nobody is going to buy unless there is a need for it, and the weather says, 'You don't need it,' said Scott Bernhardt, chief operating officer of Planalytics, which provides weather data for businesses.
It's apparel that's hit the most, said Bernhardt, who expects outerwear sales to have dropped 20 to 30 percent in January.
Retailers from Target Corp
Consumers usually pull back on spending in the first month of the year, after a shopping binge in November and December. This January, the slowdown was exacerbated by warmer-than-usual temperatures, which encouraged retailers to offer steeper discounts to clear inventory.
At many retailers, promotions kicked up from the 40 percent level in late December to as much as 60 to 70 percent off in January, Nomura analyst Paul Lejuez said.
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January represents the smallest sales month of the year, and is mostly dedicated to clearance of carryover holiday goods, prompting many analysts to downplay the effect it will have on the consumer-driven U.S. economy.
With weather still unfavorable and mall traffic weaker in January, we see retailers leaning on aggressive promotions to liquidate seasonal product, Goldman analyst Michelle Tan said.
Also, same-store sales reports capture only part of the retail economy. Wal-Mart Stores Inc
Deutsche Bank analyst Charles Grom said January only drives about 4 to 6 percent of annual sales. He is betting that warehouse club Costco Wholesale Corp
We believe the usual suspects at Costco - traffic, California, fresh foods, and International - continue to play out nicely, Grom said.
While many analysts expect Costco and luxury chain stores Nordstrom Inc
The retailer (Gap) struggles to retain customer attention amidst regular fashion and design misses, particularly in the key women's business, Wedbush analyst Betty Chen said.
One analyst provided a formula for success in January.
The winners in January were the players who began the month in solid inventory position, used the first week to clear out goods and aggressively rolled out new Spring items early to catch warmer weather and fashion driven traffic, Brean Murray analyst Eric Beder said.
(Reporting By Dhanya Skariachan; editing by Carol Bishopric)