Costco, Limited Report Better-Than-Expected January Sales

Retail Reuters

A handful of U.S. retailers, including Costco Wholesale Corp and Limited Brands Inc, beat Wall Street's expectations for January sales, but analysts are not so optimistic about department store chains and apparel chains that have yet to report on Thursday.

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In fact, Abercrombie & Fitch Co said sales for the fourth quarter ended in January were below its expectations and that it had to cut prices to clear out merchandise. It forecast earnings for the quarter below analysts' expectations, and its shares fell 13.5 percent in premarket trading.

Discounts at many apparel chains climbed to as much as 70 percent in January from the 40 percent level in late December as the retailers tried to clear their shelves off winter goods, Nomura analyst Paul Lejuez noted earlier this week.

In particular, the Abercrombie & Fitch and Old Navy chains struggled to clear their shelves of outerwear, Lejuez noted.

The third-warmest January in 50 years was particularly cruel to department stores and apparel retailers, especially the ones that did not roll out spring items early to catch warmer-weather and fashion-driven traffic.

As to the early January winners, Costco's better-than-expected 8 percent rise in same-store sales was helped by strong sales of food, small appliances and men's apparel. The warehouse club's comparable gasoline sales rose 15 percent, as members came to its pumps more often as prices rose.

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Driving Limited's performance was Victoria's Secret, a brand that has resonated well with shoppers regardless of the vagaries of the economy or weather. Limited's same-store sales rose 9 percent in January, while analysts expected only a 2.7 percent rise.

"Those are each sort of unique scenarios," said Ken Perkins, president of research firm Retail Metrics.

Overall, January numbers should also reflect a pullback in spending by consumers after their shopping binge in November and December.

Analysts are expecting sales at stores open at least a year to show a rise of 2 percent in January, compared with a year-earlier increase of 4.8 percent, according to Thomson Reuters data.

"Need-based purchases of cold weather apparel or snow removal items were difficult to find in January," said Scott Bernhardt, chief operating officer of Planalytics, which provides weather data for businesses.

Nonseasonal products accounted for most January purchases and gift card redemptions, he added.

The smallest sales month of the year, January is mostly dedicated to clearance of carryover holiday goods, prompting many analysts to downplay the effect it will have on the consumer-driven U.S. economy.

Also, same-store sales reports capture only part of the retail economy. Wal-Mart Stores Inc and other major retailers such as Best Buy Co Inc and Amazon.com do not report monthly results.

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