Reuters, Published February 06 2014
U.S. retailers' sales chilled by weather, low consumer confidenceJanuary was a tough end to the most competitive holiday season in years for U.S. retailers.
Retailers' sales results reported on Thursday showed shoppers continued to pinch pennies, seeking out bargains and paying fewer visits to stores in a month when consumers typically conclude their holiday shopping by redeeming gift cards.
Americans also were unnerved by slumping stock markets and impeded from shopping by an unusually cold and snowy January that, because of high heating bills, could hurt retail sales into the spring, analysts said.
"Consumers are being hit by a perfect storm of events," said Craig Johnson, president of advisory firm Customer Growth Partners.
Kohl's Corp on Thursday said sales in January were "significantly" lower than expected as shoppers stayed away, and the department store chain lowered its profit forecast. It reported a 2 percent decline in quarterly comparable sales - those online and at stores open at least a year - despite a good start to the holiday season.
Still, Kohl's shares rose 4.5 percent, in part because the sales shortfall came from having a low level of clearance inventory. Stifel Nicolaus analyst Richard Jaffe said in a note that this would help profit margin.
Experts said much of retailers' pain stemmed from the weather, and they took a brighter view of the rest of the year.
"We do believe the economy will look stronger this year as a whole," said Michael Niemira, chief economist of the International Council of Shopping Centers. "The employment picture is likely to look a lot better."
The Standard & Poor's Retail Index was up 2.1 percent on Thursday, besting that S&P 500's 1 percent gain. The retail index had been down more sharply so far in 2014 than the broader index, falling 9.3 percent through Wednesday.
Analysts expect a group of nine retailers that report comparable sales on a monthly basis to show a 2 percent rise for January, well below the 4.9 percent growth of a year earlier, according to Thomson Reuters. Gap Inc will report after markets close.
COST OF GAINS
Some chains managed to register sales gains, but those came either at the expense of rivals or profit margins.
Costco Wholesale Corp said its same-store sales rose 5 percent in January, with fresh food a popular item for its bargain-seeking members. That contrasted with a quarterly decline at rival Sam's Club, a unit of Wal-Mart Stores Inc, and Costco's shares rose 2.6 percent.
Victoria's Secret parent L Brands Inc posted a much bigger-than-expected jump of 9 percent in comparable sales, sending its shares up nearly 5 percent.
But L Brands also said its profit margin would be much lower after it stepped up discounts and extended sales events. The retailer expects only modest sales gains in February.
FOUL MOOD, FOUL WEATHER
The declining sales follow recent poor reports from many stores.
Baird analyst Mark Altschwager estimated that comparable sales at J.C. Penney Co Inc fell 3 percent last month. And last week, Wal-Mart said its profit for the fourth quarter ended Jan. 31 would come in at or slightly below its forecast.
Getting shoppers into stores was still a challenge for retailers. Walgreen Co managed to report a jump in comparable sales, but the drugstore chain's traffic fell 2.2 percent.
The consumer mood soured last month. The Thomson Reuters/University of Michigan's consumer sentiment index slipped to 81.2 in January from 82.5 in December. Confidence fell acutely among households with annual incomes below $75,000.
Also, the Dow Jones Industrial Index tumbled 5.3 percent in January, and the Standard & Poor's 500 slid 3.6 percent, their worst monthly percentage declines since May 2012.
The weather was unforgiving, with record cold and heavy snow last month in the Midwest and Northeast.
Cato Corp, a chain of low-priced clothing stores; Fred's Inc, which sells general merchandise; and Stein Mart Inc, an off-price clothing retailer, all blamed Mother Nature for declines in comparable sales.
Sterne Agee analyst Charles Grom said higher home heating bills could crimp consumer spending "well into April."
Clothing chains that cater to teens had another dismal month in January. The Buckle reported a 6.6 percent drop in comparable sales, while at Zumiez Inc, they fell 7.6 percent. Wet Seal Inc's comparable sales for the November-January quarter fell 16.5 percent, roughly twice the rate of decline a year earlier.