By ,
Published January 13, 2015
Retailers posted better than expected sales in February, signaling that the U.S. economy is rebounding from the recession, although discounters again ruled the market as thrifty consumers sought bargains on everyday essentials and Valentine's Day gifts.
Wal-Mart Stores Inc. (WMT), the world's largest retailer, led the discounters' charge. The company reported a hefty 10.3 percent rise in sales at stores open at least a year, exceeding its estimate of 6 percent to 8 percent growth.
Michael Niemira, vice president and senior economist at Bank of Tokyo-Mitsubishi, credited Wal-Mart for surprisingly strong February sales industrywide.
"But I think overall the story is one of an improvement in the retail industry, even among the weakest segments," he added.
For example, J.C. Penney Co. Inc. (JCP), which is in the midst of a turnaround effort, reported a 12.5 percent increase in sales at its department stores open at least one year due to strong demand for women's clothes.
Penney shares rose as much as 15 percent, while the broader retailing index gained as much as 1.4 percent.
Apparel retailers and department stores have suffered most from the economic slump that began in March 2001 as shoppers shifted their dollars to discount stores for cheaper clothes and everyday essentials like household cleaners and food.
The fortunes for these retailers were also hurt by the Sept. 11 attacks, which aggravated the recession and caused consumers to shy away from malls.
Niemira said the overall pickup in retailing is a signal of a turnaround in the broader economy. He said he thinks March will be an upbeat month as Easter leads shoppers into stores.
SIGNS OF RECOVERY
Since 2002 began there has been growing signs of a recovery as consumers, despite spending less, have kept cash registers ringing even after the attacks on New York and near Washington D.C.
One of the most impressive economic reports recently came from the private Institute for Supply Management, whose Purchasing Managers Index rose 54.7 in February from 49.9 in January.
The rise above the 50 mark indicated the manufacturing sector has finally emerged from an 18-month slump, raising hopes that corporate America may put the lid on further job cuts, in turn helping consumer confidence. Consumer spending accounts for about two-thirds of U.S. economic activity.
Analysts also said most retailers benefited from gross margin growth in February due to easier comparisons with 2001.
A number of retailers, particularly those that sell clothes, also cut down on post-holiday clearance merchandise, thus gaining from the sale of full-price spring lines due to unseasonably warmer weather in February.
According to Niemira's estimates, overall February same-store sales rose about 6 percent, beating his forecast of a 5.5 percent increase.
"These are very strong results," Robertson Stephens analyst Bill Dreher said. "They demonstrate that consumers are trading down to sharper price points and the discount stores are gaining share from nearly all sectors of retailing."
Wal-Mart said it anticipates same-store sales in March to rise by 8 percent to 10 percent. The company is grabbing customers from Kmart Corp. , whose bankruptcy restructuring could involve the closure of as many as 500 stores.
Target Corp. (TGT), a Wal-Mart rival, posted a better than expected 8.5 percent increase in same-store sales from its discount and department stores.
Value-priced retailer Kohl's Corp. (KSS) reported a 14.4 percent same-store sales rise and said it plans 70 new stores in this year.
MIXED RESULTS FOR APPAREL RETAILERS
On the apparel side, Intimate Brands Inc. (IBI), owner of the Victoria's Secret lingerie chain, said same-store sales climbed 1 percent, compared with some analysts' expectations of an 8 percent to 5 percent drop. The company said its sales got a lift from its hot-selling Valentine's Day Very Sexy Miracle bra and the Forget-Me-Not embroidered bra collections.
Intimate Brands' 84 percent owner, Limited Inc. (LTD), which operates stores under names including Express and Structure, posted a same-store sales rise of 2 percent.
Other retailers, nonetheless reported sales declines, which Cyber Business Credit LLC analyst Richard Hastings said pointed to existing company-specific problems like stocking up on fashions that do not help an "individual fashion statement or spark customer curiosity."
Gap Inc. (GPS), the No. 1 U.S. apparel chain, said its February same-store sales fell a sharper than expected 17 percent as its spring merchandise failed to entice shoppers even though it began discounting the clothes earlier than usual.
Federated Department Stores Inc. (FD), which operates Bloomingdale's and Macy's department stores, said same-store sales fell 2.8 percent, in line with its forecast.
May Department Stores Co. (MAY)'s same-store sales fell 2.7 percent, also in line with expectations.
Saks Inc. (SKS), parent of Saks Fifth Avenue luxury stores, had a same-store sales drop of 2.6 percent.
https://www.foxnews.com/story/retailers-post-improved-february-sales