Tags: Retail Sales

Gas-Price Fears Tarnish Retailers' Solid Gains

Thursday, 03 Mar 2011 10:04 AM

Retailers reported solid revenue gains for February, extending the strong spending momentum seen during the holiday season as the economy recovery takes hold.

Worries are growing, however, that rising gas prices could sap shoppers' spending on other items.

Among major retailers reporting their monthly results Thursday, Limited Brands Inc. and Macy's Inc. reported gains that beat Wall Street expectations. Target Corp. announced an increase slightly below analysts' projections.

On Wednesday, Costco Corp. reported a revenue gain above forecasts.

The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer's health.

"We're seeing a continued roll-off from the holidays," said Laura Gurski, a partner at A. T. Kearney. "There's disposable income out there. But it's going to be a long spring." Low-income shoppers are already feeling pinched by inflation for food and gasoline, she noted, and that's only going to trickle up to middle-income consumers.

February started slowly because snowstorms kept some shoppers home, but weather improved throughout the month, helping to perk up sales of spring clothing.

The improving economy is also making shoppers feel better about spending. Consumer confidence in February rose to its highest point in more than three years, according to the Conference Board. On Wednesday, payroll processor ADP said private employers added 217,000 jobs last month, well above the 180,000 analysts had predicted. That raised hopes that the government's employment report Friday could show a decrease in the unemployment rate.

Economists worry that rising prices for gas and other household costs will cause shoppers, particularly the low- to middle-income brackets, to pull back. The national average is now at $3.427 per gallon. Prices will reach $3.50 to $3.75 by spring, some analysts say.

Meanwhile, many retailers, including Macy's, Kohl's and J.C. Penney, say that they're raising prices on clothing as they grapple with soaring costs of raw materials, particularly cotton.

Target officials last week told investors that it wasn't depending on a major jolt from the economy to spur consumer spending and instead is relying more on two initiatives to attract shoppers: a 5 percent discount for shoppers paying with their credit or debit cards and its expansion of food. It's unclear how well that's working: The discounter posted a 1.8 percent increase in revenue at stores opened at least a year for February. That was below the 2.2 percent estimate from Thomson Reuters.

Macy's reported a 5.8 percent increase in revenue at stores opened at least a year, and company officials said that consumer reaction to spring clothing has been encouraging. Analysts had expected a 3.7 percent gain.

Limited Brands posted a 12 percent gain, helped by strong sales at its Bath and Body Works and Victoria's Secret stores. Analysts polled by Thomson Reuters had expected slower growth of 8.5 percent.

Costco on Wednesday reported a 7 percent gain, above the 6.7 percent estimate.

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Retailers reported solid revenue gains for February, extending the strong spending momentum seen during the holiday season as the economy recovery takes hold.Worries are growing, however, that rising gas prices could sap shoppers' spending on other items.Among major...
Retail Sales
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2011-04-03
Thursday, 03 Mar 2011 10:04 AM
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