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Retailers report sales declines in February

March 06, 2009|Andrea Chang

Better-than-expected retail sales in February gave the nation's retailers a much-needed reprieve, but analysts Thursday cautioned that an industry recovery was still months away.

Sales at major chain stores last month were down 0.1% over the same month in 2008, according to the International Council of Shopping Centers, which had been expecting a drop of 1% to 2%.

"Over the last four months, you notice a pattern of increasingly less weakness as a whole," said Michael Niemira, chief economist of the shopping center group. "That's encouraging on the surface, but there's not enough support information from the economy to say it's a sustainable trend."

The industry's slight improvement was helped by mild weather across the nation, less discounting, tighter inventory control and a strong performance by Wal-Mart Stores Inc., he said. The world's biggest retailer reported a 5.1% sales increase over the same month last year, better than the 2.4% estimate analysts had predicted.

Still, several chains, particularly higher-end sellers such as Saks Inc. and Nordstrom Inc., continued to see dramatic cutbacks in consumer spending.

Analysts are worried that prolonged problems in the job, credit and housing markets could mean further trouble for the retail sector in the months ahead. Many retailers have recently announced plans to lay off workers, reduce inventory and close stores.

"It seems a very difficult time to see any catalyst to increase consumer spending," said Ken Perkins, president of research company Retail Metrics Inc. "These things are so deep-seated and they're going to take time to work through."

The February results were "a nice bit of light in what has been a dark retail tunnel," Perkins said. "Unfortunately, it's not our sense that this signals any kind of a turnaround for the retailers."

A few chains bucked the trend with healthy sales, including Aeropostale Inc., which reported an 11% gain, and Hot Topic Inc., which saw sales rise 10.8%.

Results are based on sales at stores open at least a year, known as same-store sales and considered a barometer of a retailer's health.

Sales at Hot Topic, based in City of Industry and known for selling music- and pop culture-inspired clothing and accessories, have received a boost from teens who have flocked to the chain to buy merchandise related to the hit "Twilight" franchise.

At Hot Topic in the Glendale Galleria on Wednesday, Mary Mouser, 12, browsed for "Twilight"-related merchandise with her sister, Frannie, 11. The two girls have bought T-shirts, bracelets, necklaces and posters from the store in recent months, spending more than $100 total.

"I've read the whole series four times and seen the movie 14 times," said Mary, a seventh-grader from Burbank. "That's why we're here. We always come straight for the 'Twilight' stuff."

Despite small gains here and there, February still saw some huge declines.

Abercrombie & Fitch Co., known as a casual-but-elite lifestyle brand for young adults, reported that sales plummeted 30% over the same month last year. The teen retailer has resisted significant price slashing in an effort to protect its carefully crafted brand image and has seen some of the worst sales results in recent months.

"We made the commitment to be a full-price retailer in the spring and we did exactly that in February," said Eric Cerny, Abercrombie's manager of investor relations, in an interview Thursday. "We don't intend to run the business down 30%. We don't like the number any more than anyone else, but we will react to that."

Luxury retailers again fared poorly. Sales at Saks dropped 26%, and Nordstrom reported that sales fell 15.4%. Both chains missed expectations.

"Luxury retail is like a retail wasteland out there right now," said Britt Beemer, chairman of consumer behavior firm America's Research Group. "I would not be surprised if, when this recession is over with, half of luxury retail sales will be gone. They may come back in five or 10 years, but it's going to be a long time because this consumer is not going to feel good until they see a significant amount of their investments restored."

Despite working in the retail sector as a graphic designer, shopper Sarah Layland said she had cut back on shopping trips to Nordstrom and other upscale chains lately. Now she shops more at Target, where she was picking out a belt at a store in Glendale on Wednesday.

"I actually went to Nordstrom Rack for the first time in like a year," Layland, 25, said. "It just seems so crazy to spend $50 on a T-shirt now."

For many consumers, spending money continues to be based on necessity.

"Everyone is running every single purchase through their filter of, 'Do I need it or not?' " Perkins of Retail Metrics said. "That doesn't look to turn around any time soon."




Thawing out?

Year-over-year percentage change in February sales at stores open at least a year

*--* Company Change Aeropostale +11.0% Hot Topic +10.8 Wal-Mart, excluding gas +5.1 Ross +1.0 Kohl's -1.6 Costco Wholesale -3.0 Target -4.1 Wet Seal -6.6 American Eagle -7.0 Limited -7.0 Macy's -8.5 J.C. Penney -8.8 American Apparel -9.0 Gap -12.0 Nordstrom -15.4 Saks -26.0 Abercrombie & Fitch -30.0 *--*

Sources: Thomson Reuters, International Council of Shopping Centers

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