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Retailers report strong gains for February

Thu, 03/04/2010 - 5:30am
ANNE D'INNOCENZIO - AP Retail Writer - Associated Press

Shoppers shrugged off the snow and worries about the economy to buy spring clothing and other items at the nation's malls, resulting in the strongest retail sales gain since November 2007, a month before the recession started.

The upbeat news also helped sooth fears among some economists that weak consumer spending might make the economic recovery short-lived.

A broad array of merchants, from luxury retailer Nordstrom to midbrow Macy's Inc. to discounter Target Corp., reported solid sales increases on Thursday that beat Wall Street analysts' estimates.

The overall 3.7 percent gain in February, according to the International Council of Shopping Centers's index of 31 merchants, came in the face of a decline in consumer confidence, high joblessness and tight credit.

It marked the third consecutive monthly sales increase for retailers, according to the ICSC.

According to a preliminary list from Thomson Reuters, 14 merchants saw their sales beat estimates. Only three missed expectations. The figures for sales at stores open at least a year are an important measure of retailers' health.

"I am surprised by the broader strength" in the figures, said Mike Niemira, chief economist at the ICSC, who had expected a 2 percent increase. "Everyone is participating in this gain. And that's a good sign for the retail sector and for the economy overall."

When the Great Recession began, shoppers had flocked to cheaper stores from their higher-priced rivals, but Thursday's figures offer more evidence that they're trading back up.

Still, while consumers are starting to spend a little more, the figures were boosted partly because sales in February 2009 were so awful.

In February 2009, retailers recorded a drop of 4.3 percent drop, according to the ICSC. That month, consumer confidence hit an all-time low. Moreover, February, sandwiched between post-holiday clearance and spring, is the second-least important month of the year for retailers after January. Analysts see combined data for March and April as a more accurate measure of consumer behavior

But Niemira and other analysts saw encouraging signs from February's reports, saying they were particularly surprised that shoppers were willing to buy shorts and other light clothing even as they trudged through the snow.

Niemira said he also expected midpriced clothing chains to enjoy a recovery later in the spring, and not be in toe with luxury chains.

Still, while discounters may be getting fewer new shoppers, many consumers are still fixated on price. Analysts still believe it won't be a smooth path to recovery, for retailers or the broader economy.

"The consumer spending recovery is going to be slow, long and gradual," Ken Perkins, president of RetailMetrics, a research firm.

Consumer confidence dove unexpectedly in February. And unemployment, 9.7 percent in January, is expected to increase to 9.8 percent in February. Economists say snowstorms could have inflated job losses by as much as 100,000. The Labor Department is to report job figures on Friday.

Thursday's figures show that while consumers were willing to buy clothing, their focus was still on necessities.

Target, the nation's second largest-discounter behind Wal-Mart Stores Inc., said February sales in stores open at least one year rose 2.4 percent as more customers came into stores and spent more compared with a year ago.

Analysts had expected a 1 percent increase. However, food and household essentials remained the biggest sellers, with furniture and clothing sales about flat with last year.

Rival Wal-Mart Stores Inc. stopped reporting sales results on a monthly basis last year.

Among department stores, Macy's topped expectations and said its sales at stores open at least a year would have gone higher if shoppers hadn't been disrupted by winter storms. The department store operator reported a 3.7 percent gain, above the 1.4 percent estimate.

CEO Terry J. Lundgren said sales at stores open at least a year would have been up about 5 percent without the snow.

J.C. Penney reported a 1.2 percent gain. Analysts had expected a 1.3 percent drop.

Upscale retailer Nordstrom recorded a 10.3 percent increase in sales.

Victoria's Secret parent Limited Brands, which raised their February sales outlook last week, enjoyed a 10 percent increase. Gap's sales rose 3 percent in February, beating analyst expectations. Sales in stores open at least one year were flat at namesake Gap stores, and were flat internationally. But Banana Republic's 5 percent gain exceeded the 6 percent increase at low-price Old Navy which had typically led the chain's performance.

Abercrombie & Fitch Co., which has struggled with customers defecting to other less-expensive chains, enjoyed a 5 percent sales in February on strength across all divisions; analysts expected a 6.9 percent drop.

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