U.S. retailers' sales chilled by weather, low consumer confidence

Thu Feb 6, 2014 5:09pm EST

A woman carries bags of purchases though Times Square in New York, December 23, 2013. REUTERS/Carlo Allegri

A woman carries bags of purchases though Times Square in New York, December 23, 2013.

Credit: Reuters/Carlo Allegri

(Reuters) - January was a tough end to the most competitive holiday season for U.S. retailers since the 2007-2009 recession.

Retail sales figures reported on Thursday showed shoppers continue to pinch pennies, seeking out bargains and paying fewer visits to stores in a month when consumers typically wrap up their holiday shopping and redeem gift cards.

But economists voiced optimism that American shoppers would shake off their doldrums later this year, buoyed by stronger job and economic growth.

The National Retail Federation predicted that sales would rise 4.1 percent in 2014, outpacing 2013's 3.7 percent growth last year.

"2014 could finally be the year the recovery gets some traction," said NRF Chief Economist Jack Kleinhenz. Still, he noted, consumers are "still very careful" in their spending.

The Standard & Poor's Retail Index .SPXRT rose 2.3 percent, beating the S&P 500's .SPX 1.2 percent gain.

Last month, Americans were unnerved by slumping stock markets and impeded from shopping by an unusually cold and snowy January that, because of high heating bills, could hurt retail sales into the spring, analysts said.

A group of nine retailers that report comparable monthly sales posted a 3.6 percent rise for January, below the 4.9 percent pace a year earlier, according to Thomson Reuters.

Some chains managed to register sales gains, but those came either at the expense of rivals or profit margins.

Costco Wholesale Corp (COST.O) said its same-store sales rose 5 percent in January, with fresh food a popular item for its bargain-seeking members. That contrasted with a quarterly decline at rival Sam's Club, a unit of Wal-Mart Stores Inc (WMT.N). Costco's shares rose 3.4 percent.

Victoria's Secret parent L Brands Inc (LB.N) posted a much bigger-than-expected jump of 9 percent in comparable sales, sending its shares up more than 4 percent.

But L Brands also said its profit margin would be much lower after it stepped up discounts and extended sales events. The retailer expects only modest sales gains in February.

Gap Inc (GPS.N) reported a better than expected 1 percent increase, with its low-price Old Navy stores helping it overcome a 10 percent decline at its Banana Republic chains.

FOUL WEATHER, FOUL MOOD

The consumer mood soured last month. The Thomson Reuters/University of Michigan's consumer sentiment index slipped to 81.2 in January from 82.5 in December. Confidence fell acutely among households with annual incomes below $75,000.

Also, the Dow Jones Industrial Index .DJI tumbled 5.3 percent in January, its worst monthly decline since May 2012.

Kohl's Corp (KSS.N), which is not in the Thomson Reuters tally, said sales in January were "significantly" lower than expected as shoppers stayed away, and the department store chain lowered its profit forecast.

It reported a 2 percent decline in quarterly comparable sales - those online and at stores open at least a year - despite a good start to the holiday season.

Still, Kohl's shares rose 3.5 percent, in part because the sales shortfall came from having a low level of clearance inventory. Stifel Nicolaus analyst Richard Jaffe said in a note that this would help profit margin.

Other stores have also posted poor reports of late.

Baird analyst Mark Altschwager estimated that comparable sales at J.C. Penney Co Inc (JCP.N) fell 3 percent last month. And last week, Wal-Mart said its profit for the fourth quarter ended January 31 would come in at or slightly below its forecast.

Getting shoppers into stores was still a challenge. Walgreen Co (WAG.N) managed to report a jump in comparable sales, but the drugstore chain's traffic fell 2.2 percent.

The weather was unforgiving, with record cold and heavy snow last month in the Midwest and Northeast.

Cato Corp (CATO.N), a chain of low-priced clothing stores; Fred's Inc (FRED.O), which sells general merchandise; and Stein Mart Inc (SMRT.O), an off-price clothing retailer, all blamed Mother Nature for declines in comparable sales.

Sterne Agee analyst Charles Grom said higher home heating bills could crimp consumer spending "well into April."

(Reporting by Phil Wahba; Editing by Lisa Von Ahn and Andrew Hay)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
brotherkenny4 wrote:
Perhaps the “consumers”, whoever they are, are going into a fiscally responsible mode where they pay down debt and save for the future instead of buying numerous unneeded, designed to fail, imported, plastic fume emmitting things that will end up in a landfill. Nah, just kidding, they probably just maxed out their credit cards at Christmas. That’s a little easier to do now after the housing/banking debacle as many people qualify for less credit.

Feb 07, 2014 9:25am EST  --  Report as abuse
bobinmo wrote:
The reason middle class is spending less is simple math. Look at how we’re getting hit with higher health insurance costs, energy costs and pretty much everything we need day to day. Logical people don’t act like our government that spends with wild atonement. We actually live within our means. These new numbers have now become our new normal as we try and adjust to ever our ever decreasing standard of living. Keeping our debt down is our primary concern and goal these days.

Feb 07, 2014 10:40am EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.