Retailers Posting Surprisingly Strong Sales in January
Fears that harsh winter storms would result in disappointing retail sales were overblown, as several retailers not only reported better-than-expected monthly sales reports, they also raised fourth-quarter earnings estimates.
On average, the retail sector reported same-store sales growth of 4.2 percent, according to Thomson Reuters. That far outpaced the average estimate of 2.7 percent, the group said.
The results showed that retailers have "great momentum coming out of the holidays," said Allison Paul, vice chairman and US Retail leader at Deloitte Consulting.
Consumers braved the snow, sleet and freezing rain, and headed to the stores to take advantage of gift cards they received during the holidays and the sales on winter merchandise.
According to Paul, bad weather gets the blame for some things, but it should also get credit for others.
"Sometimes it can drive business up," Paul said, citing consumers rushing to grocery, drugstores and mass merchants to pick up groceries and other items ahead of storms.
Among the notable surprises were Limited, Zumiez ,Wet Seal and Gap , which all reported sales at stores open at least 12 months that were higher than analysts' estimates. Limited and Wet Seal also raised their earnings forecasts for the latest fiscal quarter.
Limited , the parent of Victoria's Secret and Bath & Body Works, reported January sales surged 24 percent, adding to its recent streak of strong results. Analysts surveyed by Thomson Reuters were expected same-store sales to rise 6.7 percent.
Wall Street Strategies analyst Brian Sozzi said Zumiez benefited from "wear now, unique product in its stores for the snow-frolicking teen."
"This was counter to competitors in the mall, which had assortments that were prepared to deck teens out for spring break rather than the 'Day After Tomorrow' weather conditions," Sozzi said.
Warehouse clubstore Costco Wholesale also outpaced analysts' estimates, saying same-store sales rose 9 percent, ahead of the 6.1 percent average analyst estimate.
But there were some disappointments. Notably, Target said its business was below expectations, particularly in the South and Northeast.
The discount retailer said it expects the "economic environment to remain challenging." However, the company said it was starting to see its new grocery effort, dubbed PFresh, and its new RedCard Rewards program helping its traffic and sales.
Deloitte's Paul said she anticipates that one trend that has continued from last year is a bifurcation between consumers, with upper income consumers spending at a healthier pace than lower-income consumers.
"I think it's a tale of two consumers," she said.
Results at JW Nordstrom seemed to back this theory, with same-store sales up 4.8 percent in January, topping analysts' estimates of 2.8 percent. However, Saks, posted a same-store increase of 4.4 percent, a strong gain, but short of the 5.3 percent sales gain, analyst forecasted.
Although Macy's managed to top Wall Street's estimates, the department store still said its results were restrained by the numerous snowstorms that hit during the month.
"While sales in January were restrained by the series of snowstorms that caused widespread store closings along the East coast and in the Southeast US, we continued to benefit from the underlying strength of our business," said Terry Lundgren, Macy's CEO.
But rivals JCPenney and Kohl's both missed analysts' estimates. JCPenney said same-store sale fell 1.2 percent, helped by strong sales in the Southwest and Notheast.
Despite posting same-store sales growth below expectations, Kohl's said it was increasing its fiscal fourth-quarter earnings forecast.
One factor that helped Kohl's was the strength of its e-commerce business, where sales rose 60 percent from last year.
Kohl's now expects fourth-quarter earnings to be between $1.65 and $1.66 a share, up from its prior forecast of $1.62 to $1.66 a share.
January 2011 Same-Store Sales
|Retailers||January 2011 Estimates||January 2011 Actuals|
|Kohl's Department Store||2.4%||1.4%|
|Dillards Department Store||2.0%||6%|
|Saks Department Store||5.3%||8.4%|