American shoppers braved February’s chill to hand retailers surprisingly strong sales gains, extending the momentum from a strong holiday season and providing evidence of a strengthening economic recovery.
Worries are growing, however, that rising gas prices could sap shoppers’ spending in the spring.
Among major retailers reporting February results Thursday, Columbus, Ohio-based Limited Brands Inc., J.C. Penney Co. and Cincinnati-based Macy’s Inc. reported gains that beat Wall Street expectations. Luxury retailers including Saks Inc. saw sales surge as the affluent kept spending.
There were only a few stragglers. Target Corp. announced an increase slightly below analysts’ projections. And Gap reported a bigger-than-expected drop.
Stronger sales from a diverse group of retailers showed that a broader range of shoppers are benefiting from the economic recovery, says Michael P. Niemira, chief economist at the International Shopping Centers.
The ICSC said that its index of 28 retailers rose 4.2% for February compared with the same month last year, well above the trade group’s projections for a 2.5% to 3% increase. The gain, which builds on a 3.7% increase last February, follows a revised 4.7% increase in January and the best holiday season since 2006.
The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer’s health.
“There’s disposable income out there,” said Laura Gurski, a partner at A.T. Kearney. But with rising prices for food and gas, “it’s going to be a long spring,” she said. Low-income shoppers are already feeling the pinch, she noted, and that’s only going to trickle up to middle-income consumers.
The improving economy is also making American shoppers feel better about spending. Consumer confidence in February rose to its highest point in more than three years, according to the Conference Board.
Signs are increasing that the job market is improving as well. The Labor Department said Thursday that the number of people requesting unemployment benefits last week plunged to a nearly three-year low, bolstering the likelihood that companies will increase hiring this year. Applications are now at their lowest level since May 2008.
Among department stores, Macy’s, J.C. Penney Co. and Kohl’s Corp all exceeded estimates. Macy’s reported a 5.8% increase in revenue at stores open at least a year, and Terry J. Lundgren, chairman, president and CEO said in a release that shopper reaction to spring clothing has been “encouraging.” Analysts had expected a 3.7% gain.
At J.C. Penney, the figure rose 6.4%, exceeding the 4.2% estimate. Kohl’s enjoyed a 5% gain, better than the 4.1% increase projected by Wall Street.
Saks’ revenue at stores open at least a year surged 15.3%, well past the 4.9% estimate.
Gap Inc. struggled. The clothing retailer’s figures were down 3%, dragged down by declines at Gap stores, Banana Republic and Old Navy. Analysts had expected a 0.9% dip.
