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Retailers Post Strong January Sales, Helped by Cold Weather

Frigid winter winds blew life into U.S. retailers' January sales as consumers snapped up cold weather clothes that were left on the shelves from the holiday season.

"Colder temperatures throughout the United States drove sales of cold weather-related items," said Eduardo Castro-Wright, U.S. president and chief executive for Wal-Mart Stores . The world's largest retailer confirmed on Thursday that sales at U.S. stores open at least a year rose a better-than-expected 2.2%.

Costco Wholesale, the largest U.S. warehouse club operator, reported a smaller-than-expected 2 percent rise in January same-store sales, saying sales were hurt as the five-week period included one day less due to the New Year holiday.

But redemption of gift cards helped spur industry-wide sales that topped analysts' expectations across a broad spectrum of retailers, including department stores and apparel makers.

Gap Posts Flat Sales

Even struggling retailer Gap managed to post flat sales at stores open at least a year in the four weeks ended Jan. 27, the first time in a year sales did not decline at the clothing retailer, whose chief executive left the company in January.

Federated Department Stores, parent of Macy's and Bloomingdale's, said gift cards, as well as cold weather, helped spur an 8.6% increase in same-store sales in January, which far outpaced is own forecast of a 1.5% to 3% increase. Federated also raised its fourth-quarter profit forecast.

Arctic weather hit much of the U.S. in January, with parts of the country seeing record or near-record cold, according to weather-tracking firm Planalytics.

That helped spur sales of winter clothing that had languished on store shelves during what Planalytics said was the warmest December in at least 10 years.

January, a month historically driven by clearance sales, has taken on greater importance in the past few years as gift cards rise in popularity. Deutsche Bank analyst William Dreher estimated in a research note that roughly 40 percent of gift card recipients redeemed those cards in January.

According to the National Retail Federation, $27.8 billion was spent on gift cards in November and December, up from its original estimate of $24.8 billion.

Other Retailers Beat Forecasts

Other retailers that beat expectations included Limited Brands, where apparel sales and sales at its Bath & Body Works business helped offset markdowns that hurt its Victoria's Secret brand. Limited posted an 11% increase in same-store sales, beating the average analyst forecast of 8.1% compiled in a Reuters survey.

Discounter Target saw a 5.1% increase, in line with its own expectations but ahead of the average analysts estimate.

J.C. Penney said January same-store sales rose 3.6%, in line with the expectations of analysts surveyed by Reuters. The retailer said sales were driven by strength in apparel.

Despite the frigid weather, some consumers even bought spring clothing. Teen retailer American Eagle Outfitters said popularity of early spring styles helped it post a 17% increase in same-store sales.

But some women's apparel retailers missed expectations in January. AnnTaylor Stores said same-store sales fell 10.2%, compared to the average analyst estimate of a 5.5% decline and Chico's FAS said same-store sales fell 3.5%, while analysts estimated a 1.5% decline.

The January sales period included five weeks for most retailers. But most retailers based their same-store sales comparison on a four-week period, to match the 2005 January sales period.

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