Mild weather, gift cards make Jan. delightful for retailers

Sales climbed 5.1%, but consumer anxiety over cost of food, gas could slow spending

February 03, 2006|By SUSAN DIESENHOUSE | SUSAN DIESENHOUSE,CHICAGO TRIBUNE

Retailers ranging from discounter Target Corp. to upscale Nordstrom Inc. reported vibrant January sales yesterday, as they benefited from consumers eager to venture out in exceptionally mild weather to use gift cards they received during the holidays.

The International Council of Shopping Centers reported that same-store sales rose 5.1 percent compared with January 2004, based on a survey of 65 retailers. That's the best performance since June 2005. Same-store sales, or sales at stores open at least a year, are considered the best indicator of a retailer's health.

A wide range of merchants reported increases and beat estimates. Target and Wal-Mart Stores Inc. said sales rose 5.2 percent and 4.7 percent, respectively. Sales increased 33 percent at Abercrombie & Fitch Co., 9 percent at Costco Wholesale Corp., 6 percent at Nordstrom and 2.5 percent at J.C. Penney Co. Inc.

Kohl's Corp. was one of the few stragglers, missing forecasts with a 2 percent gain. But Federated Department Stores Inc., owner of Macy's, Bloomingdale's and Hecht's, said sales increased 1 percent, in line with estimates, and raised its fiscal fourth-quarter earnings guidance.

15% of purchases

Stores received a big lift from the use of gift cards, which now account for about 15 percent of holiday purchases, said Carl Tannenbaum, chief economist at LaSalle Bank in Chicago.

"A lot of what boosted January sales was consumers redeeming gift cards," he said.

Another factor was exceptionally warm weather in much of the country that encouraged shoppers to hit the stores. But these early winter sales aren't necessarily a harbinger for the rest of the year, economists warned.

"January is not a bellwether month," said Michael Niemira, chief economist for the shopping center council in New York.

This year, Niemira expects same-store sales to grow only about 3 percent because consumers are spending much more than they're earning.

"Overall consumption is outpacing income growth, and unless we see improvement in employment, that cannot be sustained," Niemira said.

At this point in the business cycle, net payroll growth of about 275,000 jobs a month is expected, he said, but average growth in 2005 was far lower, at about 168,000 a month.

Consumers may be buoyant now, but they sense that the good times won't last, according to a report this week from the Conference Board, a private New York-based research group.

Although shoppers' confidence in January was the highest since June 2002, that sentiment "has not translated into optimism about the near-term future," said Lynn Franco, director of the board's consumer research center. "In fact, the gap between consumers' assessment of current conditions and their expectations remains wide."

Wary consumers

Consumers are wary with good reason, said Conference Board economist Ken Goldstein, because economic growth is likely to slow to 2.7 percent this year and in 2007 from 3.6 percent in 2005.

"Consumers see prices for things like food and fuel rising, but wages aren't growing as in the past," he said.

Susan Diesenhouse writes for the Chicago Tribune.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.