Retail sales post strongest gains since late 2007
AP Retail Writer
NEW YORK (AP) – Shoppers returned to the nation’s malls last month, buying a surprising amount of spring clothing and other items and helping stores post the strongest retail sales since November 2007, a month before the recession began.
The better-than-expected 3.7 percent gain reported Thursday showed that Americans are still thrifty, but they are letting go of some of the frugality brought on by the economic downturn. And many are willing to spend for certain higher-end goods.
Consumers “are now starting to go back to where they had typically shopped” before the recession, said Michael Niemira, chief economist at the International Council of Shopping Centers, who expected a 2 percent gain. “I’m surprised by the broad strength.”
But, he added, there’s still uncertainty about whether such a robust pace can be sustained, particularly later this year when the sales figures are being compared with more stabilized spending patterns.
The February sales report was the third consecutive monthly increase, according to the ICSC. The monthly index excludes Wal-Mart Stores Inc., which stopped reporting monthly sales last year.
Shoppers shrugged off snowstorms and worries about the economy to visit a broad array of merchants, from luxury retailer Nordstrom to middlebrow Macy’s Inc. to discounter Target Corp., which all reported solid sales increases that beat Wall Street analysts’ estimates.
The figures are based on sales at stores open at least a year and are considered a key indicator of a retailer’s health.
Stores in malls, which had seen sales plunge as their customers traded down to cheaper options, are starting to bring shoppers back by offering lower-priced or exclusive items.
Saks Fifth Avenue, for example, is expanding its exclusive merchandise offerings, putting more emphasis on lower prices and expanding its discount Off Fifth chain.
Selia Black, 26, was at the Manhattan Mall in New York on Thursday to find a birthday gift for her sister. She splurged on a $178 jacket at full price at Bebe. A year ago, she would have been scouring for a present that was deeply discounted, she said.
“I’m easing up a little bit, but not totally,” said the Brooklyn woman. She does not work, but her husband is a security guard.
Black says the recession has made her switch from Macy’s to discounters such as Marshall’s, and she planned to keep shopping at discount stores even when the economy recovers.
“You always get the deals,” she said. “But this is something special.”
Dennis Jacobe, chief economist at Gallup, believes shoppers’ thriftiness may have thawed a bit, as shoppers who have jobs are buying a little more. But, he said, frugality has not gone away, based on Gallup’s polls.
“We are in a new normal of spending,” he said. He cited Gallup surveys taken Feb. 1 to Feb. 3 in which 57 percent of consumers polled said they are spending less. One-third of those surveyed said curtailed spending will be their normal pattern.
Another factor that helped the monthly sales figures look so strong was that February 2009 figures were so awful. Jacobe says spending levels are still well below 2008.
February, sandwiched between post-holiday clearance and spring, is the second-least important month of the year for retailers after January. Analysts see combined data for March and April as a more accurate measure of consumer behavior.
Still, the fact that shoppers were buying full-priced spring clothing was a pleasant surprise in the face of a sharp drop in the monthly Consumer Confidence Index.
Economists pointed to factors that depressed shoppers’ mood last month but did not seem to affect spending: gridlock in Congress over the jobs bill and a dive in the stock market related to worries about Greece’s national debt – not to mention repeated winter storms that buried much of the country in heavy snow.
Most economists say companies need to start hiring significantly in order for spending to keep improving. Unemployment stood at 9.7 percent in January and was expected to increase to 9.8 percent in February. The Labor Department was to report new job figures Friday.
In other encouraging signs for the economy, the Labor Department reported Thursday that new claims for jobless benefits fell last week, reflecting that layoffs may be easing as the economy slowly recovers. Factory orders also rose in January, according to the Commerce Department.
Shoppers are buying food at Wal-Mart and picking up discounted designer clothing at TJ Maxx, but trading up to stores such as Macy’s and Kohl’s for exclusive merchandise, said Craig Johnson, president of retail consultancy Customer Growth Partners.
Target, the nation’s second-largest discounter behind Wal-Mart Stores Inc., said February sales in stores open at least a year rose 2.4 percent as it attracted more customers and more spending per customer. But food and household essentials remained the biggest sellers, with furniture and clothing sales about flat with last year.
Gap, where sales had been led by low-price Old Navy, is starting to see a recovery across all its brands, including upscale Banana Republic, where sales were hurt when the financial meltdown escalated. Sales at namesake Gap stores were flat, but Banana Republic posted a 6 percent gain and Old Navy’s business improved by 5 percent.