February Retail Sales On Track For Solid Gain
February 29 2012 - 1:14PM
Dow Jones News
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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