Retailers posted soft sales gains in February as increased
payroll taxes, delayed tax refunds and high gas prices caused
consumers to trim spending.
February sales at stores open at least a year rose 2% vs. a
year earlier, said Ken Perkins, president of Retail Metrics. The
results include drugstores. Analysts had expected a 2.5%
If you back out drugstores, which turned in negative
same-store sales for the month, comps were up 4.3%. That was
better than the 3.3% rise analysts forecast.
In the aggregate, the results for retailers that reported
Thursday came in worse than expected, Perkins said.
"But even though they missed, it could have been worse, given
the weather was unfavorable, and all the impediments they faced,"
he adds. "They were soft, but we should see a bit of a turn in
Retailers faced a number of head winds. On the macro front,
consumers were hit with rising gas prices, delayed tax refunds
and the payroll tax increase, which is hurting moderate-income
Americans. Consumers are also worried about the sequester and
persistent unemployment, Perkins says.
Perkins says his store checks showed some "buzz" at the stores
around Presidents Day weekend, but it was pretty soft for much of
the month, which was also hit with cooler weather than last year,
giving shoppers less incentive to go out and hit the stores. A
snowstorm in the Northeast during the month chilled spending.
The chill was so strong, the pickings for standouts were slim
even among the industry's strongest performers.Costco Wholesale (
) led the pack with a 6% pop in comps vs. a year earlier, sailing
past views for a 4.6% rise, as it benefited from higher gas
Costco's strong results had an "outsized impact" on the
overall index because so few retailers -- only 16 -- reported
Thursday after a number of chains stopped reporting monthly comps
starting in February, Perkins says.
A few specialty apparel retailers saw a solid month.
Victoria's Secret's parent,Limited Brands (
), saw same-store sales rise 3% vs. a year earlier, topping views
for a 2.8% gain.
) saw February same-store sales rise 3% vs. a year ago, ahead of
views. Its Old Navy global business led the way with a 6% rise in
comps for the month. Analysts forecast it would show a 2.3% rise
in comps vs. a year ago.
Gap Rises On News
Gap's shares rose close to 4% in midday trading after the
apparel giant inadvertently reported February results earlier
than expected. Off-price retail operators slowed the pace a bit
in February.Ross Stores (
) saw its comps slip 1%, well below the 1.3% rise forecast by
analysts. CEO Michael Balmuth attributes the decline mainly to
the delay in income tax refunds. But sales increased toward the
end of the month.
TJX Cos. (
) saw a 1% rise in February same-store sales, ahead of the 0.7%
rise analysts had forecast. CEO Carol Meyrowitz said business
trends picked up at the very end of the month, leading February
comps to come in higher than expected.
Both Ross and TJX were up against tough comparisons. Both saw
a 9% gain in February 2012 same-store sales.
Teen retailers had a tough month. Teen unemployment remains
high and there's not a lot of fashion buzz in the space, says
Perkins. Action sports retailerZumiez (ZUMZ) saw comps slide 8.9%
from a year earlier, well below the 1.3% drop analysts were
expecting. It was the biggest negative surprise of the month.
Teen apparel retailer Buckle (BKE) posted a 1.1% decline in
February comps, better than the 2.3% drop analysts had
Perkins says there's a bit of a "bifurcation" unfolding in
terms of consumer spending. The higher-income-level consumers,
who are benefiting from scoring gains in the stock market rally
and rising home values are spending at a more "robust" clip than
the moderate-income consumers, who may not be reaping the same
benefits and who have been disproportionately hurt by high gas
prices and the payroll tax increase.
Perkins says consumer confidence is improving among those
higher-net-worth individuals. But those consumers who are missing
out on the market rally and the rise in home values, and other
benefits remain very cautious about their outlooks, he adds. The
spending on the part of these consumers remains "deal oriented"
and driven by specific events such as back-to-school.
Michael Niemira, chief economist at the International Council
of Shopping Centers isn't reading too much into the February
The retailer "tone" in their own reporting was softer than the
numbers themselves, he says. He tallies comps rose 1.7% vs. a
year earlier, including drugstores. They rose 4.2% excluding
drugstores. Both tallies are much in line with last year's
average trends, he says.
Bad weather, the sequester and the payroll tax increase
"weighed on" the numbers, he adds. But he says the improving
housing market is helping to offset some of these drags. The
housing market, he adds, is the best leading indicator for retail
spending. And new and existing home prices remain strong as
housing continues on the recovery path.
Niemira expects March same-store sales to rise 3% to 4% vs. a
year earlier -- including drugstores -- due in part to the
earlier Easter holiday, which falls on March 31 this year vs.
April 8 in 2012. The calendar shift will push Easter sales into
March should turn out better than February for retailers,
Perkins adds, as tax refunds kick in, the weather warms up and
gas prices look to abate.
February's results showed a reduced pool of retailers
reporting monthly comps. Top retailers, includingMacy's
(M),Target (TGT),Kohl's (KSS) andNordstrom (JWN)stopped reporting
monthly comps starting in February.
"Because of the shrinking universe of monthly reporting firms,
we have to be more cautious about interpreting the numbers," said
Department stores won't be included in the tally or enough of
the broad breadth of the industry, he adds.