CHS Chicos FAS Inc

Retailers' February comparable sales are on track to have their best finish since September, boosted by Valentine's Day and Presidents' Day sales and warmer weather that gave shoppers motivation to buy new spring apparel, at full price.

February sales, due to be reported Thursday, likely rose 4.8%, above the year-earlier level of a 4% gain and the best increase since September, according to a survey of analysts by Thomson Reuters, which said the estimates point to "robust" demand because a 3% reading generally signals "health among U.S. consumers."

Expectations have turned higher. A separate survey by Retail Metrics showed February sales estimates have risen by 0.7 percentage point to a 3.5% increase from the start of the month.

In an encouraging sign, Costco Wholesale Corp. (COST) said Wednesday its February same-store sales rose 8%, topping Wall Street's expectations.

Still, analysts said the big question mark is how much of the retailers' sales were being driven at the cost of profit. Costco's quarterly margin, for instance, narrowed more than expected.

February's industry-wide demand was boosted by Valentine's Day sales, which the National Retail Federation said rose in the high-single-digit, as well as by promotions over the Presidents' Day holiday weekend, analysts said. Fresh spring merchandise, including colored skinny denim and clothes featuring bright color blocking or floral designs, also managed to spur shoppers to open their wallets, analysts said.

Consumers' shopping mood also has been lifted by a string of positive economic signals. While American Automobile Association Inc. data showed gas prices have risen 14% to $3.67 a gallon as of Saturday, consumer confidence has risen to its highest level in a year with more people feeling better about the job market. The Labor Department's most recent report showed the jobless rate fell to 8.3%, its lowest level in almost three years.

"Precipitously rising gas prices could prove to be a fly in the ointment as we move into the spring," said Ken Perkins, of Retail Metrics.

Discounter Target Corp. (TGT) said last week the pace of the company's sales has picked up and returned to a much stronger preholiday pace in February as it also saw stronger demand in so-called discretionary categories.

Women's apparel chain Chico's FAS Inc. (CHS) has said its February sales got off to a solid start and were running up 7%. T.J. Maxx parent TJX Cos. (TJX), meanwhile, raised its February sales forecast to a 7% gain from its previous projection of a low-single-digit rate. Victoria's Secret parent Limited Brands Inc.(LTD) also raised its February sales outlook to a range in the mid-to-high-single digit from a previous guidance of sales rising in the low-single digit.

"February is off to a good start," said Barclays Capital analyst Stacy Pak, adding the month historically averaged about 6% of annual sales.

Analysts said the arrival of Easter about two weeks earlier this year than last year also will help sustain the sales momentum into March, when many colleges also begin their spring breaks.

As consumer sentiment improves and demand picks up, aggressive promotions that were the hallmarks of most retailers' business models during the holiday season showed some signs of easing, analysts said.

"We noted diminishing clearance inventories throughout the month and believe that the majority of retailers began the quarter [and ended the month] with clean inventory positions," said Janney Capital Markets analyst Adrienne Tennant. While she still noted deeper year-over-year promotions thus far in the first quarter, they are "to a far less extent" than in the fourth quarter.

February is a transitional month between spring flows and remaining winter clearance items and represents about 25% to 30% of retailers' fiscal first-quarter sales, she said. "New full-price flows (are) commanding center stage throughout the mall," she said.

Among those retailers that report their February sales, discounters are forecast to post the biggest gain at 6.2%, Thomson Reuters data showed. In addition to Costco, Target is on track for a 5% gain. Apparel retailers excluding Gap Inc. (GPS) are expected to post a 5.8% increase while Gap is estimated to have a 1.4% decline. Discount giant Wal-Mart Stores Inc. (WMT) no longer reports monthly sales.

Gap's "aggressive promotions across all divisions underscores management's efforts to drive traffic and accelerate sales," said Stifel Nicolaus & Co. analyst Richard Jaffe. "We anticipate slightly negative (same-store sales) across all divisions, and a modest gain at Banana. During (the first quarter), we anticipate continued margin pressure as a result of the continued discounting and high product costs."

The department-store group is expected to ring in a 2.8% sales gain, led by the higher-end retailers Saks Inc. (SKS), Nordstrom Inc. (JWN) and Bloomingdale's parent Macy's Inc. (M).

J.C. Penney Co. (JCP), which has stopped reporting monthly sales, has said February sales were below its expectations as it transitions to a new pricing and promotional strategy.

-Andria Cheng; 415-439-6400; AskNewswires@dowjones.com

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