UPDATE 2-U.S. retailers' sales beat forecasts, but worries remain

Thu Feb 7, 2013 11:59am EST

* Same-store sales index up 5 percent vs. estimates of 3.1
percent gain
    * January sales at Macy's, Target, Costco exceed Wall Street
views
    * Kohl's beats but does not raise profit forecast
    * Ann warns on quarterly sales; shares drop
    * S&P Retail index down 1 percent; S&P 500 down 0.8 percent


    By Phil Wahba
    Feb 7 (Reuters) - Many top U.S. retailers reported strong
January sales on Thursday after offering merchandise and deals
that drew in shoppers in spite of higher payroll taxes.
    But shares of many retailers fell as investors worried that
the sales owed too much to margin-sapping discounts and that the
tax hit to take-home pay would hurt spending in coming months.
    Macy's Inc, whose shares rose 0.4 percent, was an
exception. Its sales at stores open at least a year jumped 11.7
percent, in part because it got new merchandise into stores
quickly. The results easily beat Wall Street forecasts, and the
department store chain raised its profit forecast.
    In contrast, Kohl's Corp, reported a 13.3 percent
jump, but that came in large part from clearing out merchandise
at a discount ahead of spring. The department store operator
left its profit outlook unchanged, and its shares fell 1.8
percent.
    "January sales don't give you much of a sense what's
coming," said Dan Hess, chief executive of Merchant Forecast,
which provides financial research on the retail sector. "How
much of it was clearance; how much of it was new merchandise?"
    Besides Macy's, low-priced retailers TJX Cos Inc and
Ross Stores Inc as well as teen chain Zumiez Inc
 raised their outlooks. Department store operator Stage
Stores Inc, said it would hit or beat the high end of
its earlier estimate.
    Overall, same-store sales rose 5 percent in January across
20 retailers, according to Thomson Reuters I/B/E/S. That was
above both analysts' estimates of a 3.1 percent increase and the
year-earlier 2.8 percent gain.
    Gap Inc's sales came in slightly above Wall Street
forecasts, as the company's affordable Old Navy chain offered
colored denims, coats and dresses that were a hit with shoppers.
But Janney Capital Markets said in a note that investors would
view Gap's modest profit estimate for the fourth quarter ended
on Feb. 2 as "not good enough." The company's shares were down
4.5 percent.
    Costco Wholesale Corp, Target Corp and
Victoria's Secret parent Limited Brands Inc also
reported stronger-than-expected January sales.
    Analysts said a number of factors gave January an artificial
boost: Unusually cold weather mid-month in big parts of the
country helped clear out winter merchandise, and a long weekend
before New Year's Day helped. January is also a low-volume
month, so the numbers are less important than, say, those for
November and December.
    The International Council of Shopping Centers said it
expects February same-store sales to rise 2.8 percent to 3
percent.
    The Standard & Poor's Retail Index was down 1
percent in midday trading, compared with a 0.8 percent decline
for the broad S&P 500.
   
        
    LITTLE TAX EFFECT, SO FAR
    The mood of U.S. consumers improved in January after a deal
in Washington at the start of the month averted the country
going over the "fiscal cliff" that could have raised taxes
significantly, a survey released last week showed. 
    At the same time, the take-home pay of millions of Americans
fell in January because of a 2-percentage-point increase in
payroll taxes.
    That higher tax could pinch shoppers in coming months as
relief about the "fiscal cliff" gives way to the reality of
smaller paychecks.
    "The amount of money that is being taken out (from the tax
increase) is a real amount of money, and you may see more
paycheck-to-paycheck cycles," said Kurt Kendall, a retail
strategist at consulting firm Kurt Salmon.
    Cato Corp, a specialty retailer offering low-price
fashion, reported a 12 percent drop in same-store sales and
pinned part of the blame on the payroll tax.
    Target CEO Gregg Steinhafel said in a statement that
customers are showing "discipline in the face of a slow economic
recovery and new pressures," including payroll tax increases.
    In that environment, retailers have little room for error.
    Ann Inc said the brightly colored clothes it sold at
its Loft chain failed to catch on with shoppers, and its sales
estimate for the fourth quarter ended on Jan. 31 disappointed
Wall Street, sending its shares down 7 percent.
    Department store operator Bon-Ton Stores Inc and
teen chains Buckle Inc and Wet Seal Inc also
reported disappointing sales.
    At the higher end, Nordstrom Inc reported an 11.4
percent jump in same-store sales, probably buoyed by a stock
market run-up.
    "The stock market has also helped - it frees higher-end
individuals to go shopping," said David Bassuk, head of
AlixPartners' global retail practice.  
    The same-store sales retail index offers only a glimpse of
retail spending as major chains like Wal-Mart Stores Inc
, Sears Holdings Corp and Best Buy Co Inc
 do not report monthly sales.