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Confidence Back? Several Retailers Top Sales Forecasts

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Victoria's Secret parent Limited Brands and Costco Wholesale were among several U.S. chains on Thursday to report stronger-than-expected sales for February, when consumer confidence about an improving job market offset the impact of higher taxes.

After a difficult January, when shoppers first felt the effect of a payroll tax hike that lowered take-home pay by 2 percent, at least some retailers got a little relief last month.

Same-store sales at Gap rose 3 percent, topping estimates of 2 percent. The company had originally planned to report sales in the afternoon but released the numbers early after a vendor posted the results online. Its shares were briefly halted for pending news and traded higher once they resumed trading.

"By and large, the middle class is just shaking off the intractability in Washington and feeling better about shopping," said Joel Bines, managing director of consulting firm AlixPartners' retail practice.

Rising real estate values and the stock market have bolstered shoppers' willingness to spend, he added.

At the same time, several major retailers, including Target, Macy's, Nordstrom and Kohl's, , stopped reporting monthly sales this month, making the monthly figures a less significant indicator of economic health.

Also, February is the smallest month of the year for retail sales, falling between the holiday season and the spring, when many shoppers start replenishing their wardrobes.

Food, Gas and Lingerie

Warehouse club chain Costco reported a 6 percent increase in sales at stores open at least a year, helped by higher gasoline prices as well as strong sales of fresh food and consumer electronics. Wall Street analysts were expecting a 5.1 percent gain, according to Thomson Reuters I/B/E/S.

Limited's 3 percent same-store store sales increase also came in higher than expected. The Victoria's Secret lingerie chain led the gains, suggesting shoppers were still willing to spend on some nonessential items.

TJX Cos, whose Marshalls and T.J. Maxx stores have drawn shoppers looking for designer brands at big discounts, reported a better-than-expected 1 percent gain.

Sales would have been higher if not for snowstorms early in the February, the company said.

"Business trends picked up at the very end of the month," TJX Chief Executive Officer Carol Meyrowitz said in a statement.

Ross Stores, a TJX competitor, also said its business improved as February moved on. Delays in tax refunds hurt business earlier in the month, it said.

Rising Confidence

In total, 13 U.S. retailers are reporting February sales results this week.

Excluding drugstore chains Walgreen and Rite Aid, whose sales are heavily weighted toward prescription drugs, Wall Street analysts expect same-store sales increases at the other 11 retailers to average 3.3 percent.

While consumer confidence is on the rise — the Thomson Reuters/University of Michigan consumer sentiment index rose to 77.6 in February from 73.8 in January because of optimism about the job market — there are still signs of weakness.

Chains that cater to teenage shoppers, who have much less discretionary income, struggled last month. The Buckle and Zumiez both reported declines in comparable sales for February.

Abercrombie & Fitch and American Eagle Outfitters no longer report monthly sales but have said business will be slow this quarter, which began last month.

Hot Topic, another teen retailer, said on Thursday that it had accepted a $600 million takeover bid from private equity firm Sycamore Partners. Sycamore is paying a 30 percent premium over the company's closing stock price on Wednesday.

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