Retailers reported mixed sales results in January, offering a signal that American consumers remain cautious amid a weak economic recovery.
January was expected to be a tough month for retailers, who were looking to move excess inventory left over after a busy holiday season. That effort may have been hurt by the third-warmest January in 50 years, which weakened demand for heavy jackets, sweaters and other cold-weather gear.
Those who were able to keep tight control over their inventory, fared well as shoppers came looking for bargains and to redeem gift cards they received during the holiday. However, for others, the discount of as much as 70 percent were needed to clear the shelves, and that cut into profit margins.
Target, Zumiez , Limited Brands and Costco all reported same-store sales far above analysts' estimates.
Target Chairman and CEO Gregg Steinhafel reported strong performance in both discretionary and on-discretionary categories.
"Sales trends were healthy throughout the month and across the country," Steinhafel said.
But there were several retailers that had sales that fell far short of what some were predicting as well. Among them was Macy's, which said sales at stores open at least 12 months rose 2.4 percent, short of the 3.5 percent estimate from Thomson Reuters. However, the company's shares were trading higher after the company raised its earnings forecast for its fiscal fourth quarter.
Macy's benefited from strong sales during the holiday, which more than made up for weaker-than-expected sales in January, which is the department store's smallest-volume month of the year.
But weaker-than-expected sales in January were more problematic for stores such as Abercrombie & Fitch and Ann, which both warned that their earnings would fall short of analysts' estimates. Those chains, which don't usually report same-store sales on a monthly basis, were among the retailers that had to put steep discounts on excess merchandise.
Still, when you look at the a revenue-weighted average of the retailers in the Thomson Reuters Same-Store Sales Index, same-store sales were up 4.2 percent, far above the 2.0 percent estimate, but a touch weaker than last year's gain in January of 4.8 percent. (The index does not reflect Walgreen results, which won't be reported until Friday.)
But there is some concern that consumers will keep watch over their spending. Retailers are likely to use events such as the upcoming Valentine's Day and President's Day holidays to promote products and try and drive traffic into the stores.
Goldman Sachs retail analyst Adrianne Shapira said that retailers that lagged during the holiday season came out strong in January with promotions, and some were successful in winning customers.
"The fact is you saw customers are still motivated by sales and what you're seeing is these event periods are very important," Shapira said. "The lulls are probably deeper."
A table of the results follows: