Macy's, Nordstrom, Lead Strong January Retail Sales


Retailers delivered strong January sales that sailed past views Thursday as consumers stepped up the pace post-holiday and snapped up winter clearance bargains.

Sales at stores open at least a year rose 4.5% vs. a year ago, says Ken Perkins, president of Retail Metrics. Analysts forecast a 2.8% rise. Fifty-five percent beat views, in line with the long-term average. It was the best monthly showing since September 2011 when retailers posted a 5.8% increase in same-store sales.

"It was an excellent start to the calendar year," said Perkins. "It suggests the consumer is feeling OK and probably got a psychological boost from the temporary resolution to the fiscal cliff at the beginning of the month."

The continued improvement in the consumer's net worth amid a rising stock market and gains in homes values made consumers feel better about their broader net worth, Perkins adds, and helped to temporarily offset the impact of rising gas prices and the payroll tax increase that took effect at the start of the year.

Payroll Tax Hike

"The worry going into the month was the payroll tax hike," adds Michael Niemira, chief economist at the International Council of Shopping Centers. "But as the dust settled, it was less of a factor and the bargains from the clearance of merchandise was more of a driver of sales."

A good majority of retailers beat views by a wide margin.Macy's ( M ),Nordstrom ( JWN ),Gap ( GPS ) andLimited Brands ( LTD )were standouts.

Department stores were the big winners as they lured shoppers with good deals on clearance goods and attractive new merchandise. The segment saw a robust 8.1% rise in same-store sales, the largest gain for the group since November 2007.

Giant department store operator Macy's saw an 11.7% pop in comps vs. a year earlier, more than double forecasts for a 5% gain.

"Our sales were driven by our strategy to flow-in more fresh fashion goods in December to better serve post-holiday shoppers seeking new and interesting merchandise," said Chief Executive Terry Lundgren in a press release reporting results.

High-end peer Nordstrom posted a 11.4% rise in comps vs. a year ago, also more than double views for a 5.6% gain in same-store sales.

The specialty apparel group delivered a 5.4% rise in same-store sales from a year earlier. Same-store sales at Victoria's Secret parentLimited Brands ( LTD ) were up 9% from a year earlier, well ahead of forecasts for a 3.4% rise. Gap saw comps rise 8% vs. a year earlier, double the forecast for a 4% increase.

Off-price retail operators saw solid gains.Ross Stores ( ROST )saw a 4% increase in comps vs. a year earlier, ahead of views for a 3.1% rise. It also raised 2012 fourth-quarter guidance.TJX (TJX) saw a 3% gain, in line with views. It also raised its earnings outlook for the fourth quarter and the year.

Costco Wholesale (COST) saw a 4% rise in same-store sales, slightly below views for a 4.1% gain.

Ross and TJX were among the five retailers that raised fourth-quarter guidance when they reported January comps, says Perkins. Analysts see a 9.4% rise in fourth-quarter profits for the industry overall, he adds.

Perkins says January sales got off to a strong start over the New Year's holiday weekend with retailers benefiting from two extra selling says vs. last year. Solid sales and traffic held up through the Martin Luther King holiday weekend. Cold weather towards the end of the month served as a catalyst for shoppers to scour the clearance racks for bargains on sweaters, coats and other winter apparel.

Niemira also calculates a 4.5% rise in January same-store sales vs. a year ago.

Extrapolating Too Much

But the month's showing was an "anomaly," with a number of one-time factors boosting the numbers.

"I wouldn't extrapolate too much from January," said Niemira. "It's the lowest volume month of the year. And it can be affected by weather and lots of special factors that get accentuated cause of the low volume."

Niemira expects the pace of same-store sales growth to slow to 2.75% to 3% in February.

Perkins says February will be a tough month as retailers face difficult comparisons vs. last year and go up against some severe weather.

But he expects retailers to see a "decent spring," in March and April as the weather improves and we see continued improvement in employment and in the housing market. Still, adds Niemira, as the year progresses we will continue to see the fiscal drag from the payroll tax increase. And higher food prices is another head wind that could cut into consumer spending.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: GPS , JWN , LTD , M , ROST

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