Spring comes early for retailers; will it last?
Mild weather helped spur consumers to buy spring clothing in February, leading to broad sales gains at top U.S. chains, with even perennial laggard Gap Inc
Discounter Target Corp
But with gasoline near or above $4 a gallon in many parts of the country and with concerns that it might rise further, some retailers and analysts were cautious about whether February's strength is sustainable.
Gas prices are at the level that will curb consumption somewhat, said Joel Bines, managing director of consulting firm AlixPartners. Shoppers will end up consolidating trips.
Gap said sales at stores open at least a year had risen 4 percent in February, while analysts on average expected a 1.4 percent decline, according to Thomson Reuters data. The company, which is closing dozens of weak stores in its namesake chain, benefited from a surge in sales at its Banana Republic unit.
Shares of Gap were up 8.1 percent at $25.25 in midday trading.
On the whole, same-store sales rose 6.4 percent at the 18 chains that reported the February figures this week, ahead of analysts' estimates of a 4.8 percent gain and a year-earlier increase of 4.7 percent.
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Yet despite the shopping spree that lifted sales across the board, from off-price retailers like Ross Stores Inc
Companies are still being cautious because some of the gain in February was clearance of winter merchandise and spring merchandise (sales) pulled forward, said Morningstar analyst Paul Swinand. In fact, the same mild weather that boosted demand for spring clothes in February was blamed for hurting January sales of winter apparel.
Target, where same-store sales jumped 7 percent, stuck to its quarterly sales forecast despite a big February. Macy's said it expected increases to slow to between 3 percent and 3.5 percent in March and April.
The Standard & Poor's Retail Index <.RLX> was up 0.3 percent, lagging the 0.6 percent gain in the broader S&P 500 <.SPX> as the jury was still out on what the February results mean for earnings.
Any benefit from the robust spring sales could be outweighed by the damage from the deep discounts on winter clothing, Morningstar's Swinand said.
The International Council of Shopping Centers said it expected same-store sales to be up 3 percent to 4 percent in March and April. Retail analysts and executives look at March and April together because shifts in the Easter holiday can have a big impact on clothing sales.
GAS PRICES THREATEN
A closer look at the February numbers show that even though shoppers are in a better mood, they are still very sensitive to price, something that could hit sales later if gas prices keep rising.
Two of the biggest winners in February were TJX Cos Inc
Kohl's Corp
J.C. Penney Co Inc
In coming months, rising gas prices could put extra pressure on struggling retailers, especially those that do not offer enough merchandise to allow shoppers to buy items at one place.
As of Thursday, a gallon of gas in the United States cost $3.74, up 35 cents from a year ago, according to the American Automobile Association.
For now, some positive signs in the economy have trumped rising gasoline prices. The housing market appears to be stabilizing, and the unemployment rate fell to 8.3 percent in January from 9.1 percent in August. The University of Michigan's consumer confidence survey rose for the sixth straight month in February.
And the surging stock market, which this week hit its highest levels since May 2008, has been a boon for upscale chains like Saks and Nordstrom Inc
Limited, which also owns Bath & Body Works, said same-store sales had risen 8 percent last month, above the analysts' average forecast of 6.2 percent.
Home decoration and furniture chain Pier 1 Imports Inc
, which is not in the monthly sales index, said its same-store sales had risen 10.3 percent in the fourth quarter ended on February 25.
Drugstore chains Walgreen Co
(Reporting By Phil Wahba and Dhanya Skariachan in New York and Jessica Wohl and Nivedita Bhattacharjee in Chicago; Editing by Lisa Von Ahn)
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