Business

Retail looks up: January's sales better than expected

NEW YORK - The nation's retailers finally got their sales boost in January, as shoppers redeeming holiday gift cards and enticed by the belated arrival of frigid weather splurged on winter leftovers. Now stores are pondering how spring merchandise - from baby doll dresses to lightweight cashmere tops - will fare.

"With December generally weak, that left more (winter) goods to clear," said John Morris, a managing director at Wachovia Securities. "But that's tempering the outlook. Stores are not getting a clear read" on spring selling.

As retailers reported better-than-expected sales Thursday, winners crossed all segments including Limited Brands Inc., Nordstrom Inc., and Federated Department Stores Inc. Wal-Mart Stores Inc. beat Wall Street estimates, though its monthly gain was modest. Even Gap Inc., which has long struggled with disappointing sales, beat analysts' expectations. The merchant benefited in part from its success in clearing out its piles of winter leftovers, which became attractive when the weather turned cold.

The stragglers included Abercrombie & Fitch Co., AnnTaylor Stores Corp. and Chico's FAS Inc.

"Across the board, the numbers are decent," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass.

Thomson Financial's sales tally of 55 retailers rose 3.9 per-cent in January, beating the 3.1 percent estimate. The tally is based on same-store sales, or sales at stores open at least a year, which are the industry standard for measuring a retailer's health.

The solid performance in January was soothing as it follows a largely disappointing November-December period, which averaged a modest 2.9 percent same-store sales gain, according to Thomson Financial. The sales reports also provided some encouraging news about fourth-quarter earnings, as many stores at least backed their profit forecasts.

The retail fiscal year ends in late January, so companies will be reporting their fourth-quarter results later this month.

While January is the least important month of the retail calendar, its significance has grown over the past five years because of the impact of gift cards. Retailers don't include gift card sales in their monthly tallies until the cards are redeemed, and the bulk of cards given for the holidays are used in January.

The delayed arrival of winter weather had a mixed effect on business. It helped stores that sell snow blowers and shovels or that still had plenty of heavy boots and coats to clear out, but it hurt those that were heavily stocked with spring merchandise. The sooner that retailers know which spring trends are resonating with shoppers, the better prepared they'll be going forward.

Still, many stores protected themselves by bringing in some fresh, winter merchandise that can be worn now, a move that will help boost fourth-quarter profits, according to Richard Jaffe, an analyst at Stifel Nicolaus.

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