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Retail sales climb a robust 4.7% in February from a year earlier

The increase beats analysts' expectations of a 3.4% rise. Discounters, teen retailers and apparel sellers all post sales increases.

March 02, 2012|By Shan Li, Los Angeles Times

Shoppers hit the malls in February with their wallets open and handed retailers a robust start to the spring season amid another sign of a recovering economy.

Strong retail sales and other good news about unemployment claims and consumer spending helped push the stock market up Thursday, with the Dow Jones industrial average rising 28 points to 12,980 points. Retail analysts were upbeat about the coming months but cautioned that soaring gasoline prices could potentially damp consumer spending.

"February was obviously very encouraging," said Sherif Mityas, a partner in the retail practice at consulting firm A.T. Kearney Inc. "The retailers got some great tail winds coming out of January with really great weather, they put new merchandise on the shelf, and consumer confidence is up because jobs are up. When you put all those together, it makes for a good month."

Major chain stores posted a healthy 4.7% sales increase in February compared with the same month a year earlier, beating analysts' expectations of a 3.4% rise, according to Thomson Reuters. Discounters, teen retailers and apparel sellers all posted sales increases.

At Westfield Century City in Los Angeles on Wednesday, shopper Christopher Tobin was eagerly hunting for trendy pieces to spice up his wardrobe. The stylist from Hollywood Hills said that after cutting back his spending last year, he was comfortable splurging again on some luxury items.

"Business has picked up, and I'm OK spending on things that I want," Tobin said, showing off a leather Escada handbag he bought last week for nearly $1,000. "I'm definitely browsing for spring items and cool trends, and if there's something that's great, I'll get it."

Recent signs that the job market is perking up have spurred people to spend more freely, analysts said. People applying for unemployment benefits dropped last week to the lowest level in four years, the Labor Department said Thursday. The Commerce Department reported that consumer spending increased 0.2% and incomes rose 0.3% in January.

Industry watchers say that unseasonably warm weather also drove shoppers to start spring shopping earlier than normal, and that this momentum is likely to carry into the coming months if good news about the economy continues.

"There were no snowstorms keeping people at home," said Judith Russell, editor of the Robin Report, a retail industry publication. "People are also more comfortable with buying items at full price."

Top performers were a mixture of high- and low-end stores. Teen retailer the Buckle led the way with a 14.8% surge, and action-sports chain Zumiez Inc. posted a 14.2% jump. Luxury retailer Nordstrom Inc. reported a 10.2% rise. Off-price chains TJX Cos. and Ross both reported increases of 9%. Buoyed by Valentine's Day giving, Limited Brands, parent company of Victoria's Secret and Bath and Body Works, saw sales rise 8%.

After months of lackluster sales, retail giant Gap Inc. pulled off one of the most surprising results with a 4% sales bump, led by a 12% surge at its Banana Republic stores.

"Customers responded well to our spring product," Gap Chief Executive Glenn Murphy said in a statement.

Other retailers did not fare as well. Teen clothier Wet Seal said sales fell 5.8%, while struggling Kohl's Corp. reported a 0.8% drop. All told, about 80% of retailers beat expectations, according to Thomson Reuters' tally of 18 retailers.

Results are based on sales at stores open at least a year, which are considered an important measure of a retailer's health because they exclude the effect of store openings and closings.

Although analysts predict that healthy levels of consumer spending will continue into the spring, some worry that high gas prices may burn away extra cash that people might otherwise have for shopping.

"A big spike in gas prices takes a lot out of our weekly budget," said Russell of the Robin Report. "It's more psychological than anything else, that shock of seeing what it costs to fill up the car. It's got to come from somewhere, so people think 'Maybe I won't buy a new pair of jeans, or maybe I'll wait a few months.'"

Russell said the tipping point, at least in the past, was $4 a gallon. "Around $3.25, there is a big shift to stay closer to home to shop instead of going the distance to the mall," she said. "At close to $4, we saw wallets snapping shut."

The surge in gas prices has already convinced David Ramirez of West Los Angeles that he should cut down on his shopping. At Westfield Century City, the college student and part-time valet plunked down $10 for a ramen lunch but opted not to buy anything else.

"I really need some pants and shoes, but I really can't afford" to buy them, said Ramirez, 21. "I was out of work for a long time and just found a job a few months ago. Then I got gas a few days ago, and now I definitely can't afford it."

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