Retail sales sluggish in Feb.

Buyers' uncertainty aids discount stores, hurts high-end shops

March 09, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Retail sales grew at an expected slow pace in February, as U.S. consumers continued tightening spending amid a weakening economy.

Sales at the nation's biggest chain stores rose, on average, 2.8 percent for the month, when retailers typically clear out winter merchandise, a Bank of Tokyo-Mitsubishi index showed.

The gain fell short of a much healthier increase of 6 percent in February 1999, before consumer confidence began to ebb because of higher fuel costs and a plunging stock market.

"It's a continuation of what we've seen, cautiousness on the part of the shopper," said Kurt Barnard, president of Barnard's Retail Trend Report. "They are a little uncertain about the future and deep in debt with credit cards."

Retailers that carry household goods, food and clothing at low prices benefited as consumers looked for bargains. Shoppers favored discount stores and shunned traditional department stores and many apparel specialty stores.

"Shoppers are now bargain hunters out of necessity, favoring stores that offer low prices, good quality and large assortments, but they insist on the incentive of low price," Barnard said.

The Bank of Tokyo index showed sales down an average 3.4 percent at U.S. apparel chains and an average 1.2 percent at department stores, but up an average 3.7 percent at discount stores.

Wal-Mart Stores Inc., the world's largest retailer, saw sales rise 4.3 percent, which helped boost the overall U.S. retail sales average toward the upper end of forecasts.

Sales rose at the other major discount mass merchants as well, by 3.3 percent at Kmart Corp. and by 1.5 percent at Target Corp.

"The gains were much more concentrated in a few retailers and a few segments," said Michael P. Niemira, a vice president of the Bank of Tokyo Mitsubishi. "There were a lot more declines on a comparable stores basis than anytime since July 1996."

About half the retailers in the bank's index posted declines.

"We have notched lower since December and continue at this new slower pace," he said, attributing that to the underlying slowdown in the economy. "Discretionary purchasing power continues to get weaker given higher energy prices."

Only the high levels of consumer credit - some $700 billion worth - is sustaining the growth of consumer spending, he said.

Sales fell at Federated Department Stores Inc. by 1.6 percent and at May Department Stores Co. by 1.1 percent.

Along with announcing sales results, May said it has reached an agreement to buy 13 former Wards department stores and hopes to reopen most of them in 2002. May operates stores under the Lord & Taylor, Hecht's, Foley's, Robinsons-May, Kaufmanns and Famous-Barr banners.

Sales fell 2 percent - below expectations -at Sears, Roebuck and Co.

"The impact of the slowing economy was felt across both our hard lines [non-apparel] and soft lines [apparel] businesses," said Alan J. Lacy, Sears' chairman and chief executive officer. He said the department stores had increases in jewelry, footwear and home electronics, but those gains were offset by decreases across other categories.

Sales were flat at The Limited Inc., a specialty apparel retailer, and dipped at Gap Inc. by 11 percent, with Gap's Old Navy division down by at least 17 percent.

"Business has remained challenging in February across each of our brands," said Heidi Kunz, Gap's chief financial officer, said.

AnnTaylor Stores Corp., which had a 6.1 percent sales decrease, said it struggled with getting the right product mix and assortment. But the retailer saw a jump in sales, of 12.2 percent, at its Ann Taylor Loft Stores.

"We are pleased with our Loft client's response to our early spring offering," which includes relaxed business apparel, said J. Patrick Spainhour, AnnTaylor's chairman.

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