- The Washington Times - Thursday, March 2, 2006

NEW YORK (AP) — The reappearance of winter weather stalled retail sales growth last month, leaving merchants and industry analysts wondering whether the consumers who shopped gleefully in January now are retrenching amid higher energy prices and interest rates.

As retailers reported their February results yesterday, the biggest winners included discounters and wholesale operators such as Wal-Mart Stores Inc., Target Corp., and Costco Wholesale Corp. Among those falling short of expectations were teen retailer Abercrombie & Fitch Co., Gap Inc. and Talbots Inc.

Talbots said its same-store sales fell 6 percent, well below the 0.3 percent decline that analysts expected. Chairman Arnold B. Zetcher said sales were “significantly impacted” by the mid-February snowstorm in the Northeast.

“Overall, it is disappointing for February,” said analyst Jharonne Martis at Thomson Financial. “It’s not that consumers have stopped shopping; it is just that they’re slowing down.”

Based on a tally of 59 retailers, 59 percent missed expectations, while 41 percent beat projections, according to Thomson Financial.

The International Council of Shopping Centers-UBS sales tally of 59 retailers rose 3.2 percent, in line with forecasts. The tally is based on sales at stores open at least a year. These same-store sales are considered the best indicator of a retailer’s health.

The tempered sales reports came after a surprisingly strong 5 percent gain in the ICSC-UBS tally in January, when shoppers armed with holiday gift cards and inspired by mild weather shopped for clearance and spring merchandise.

Analysts do not think that the downshift in sales growth signals a fundamental change in consumer spending yet, but they will be closely watching the combined March and April period, when the bulk of spring selling occurs, to determine the overall trend.

Still, there are plenty of reasons for concern. After consumer confidence rose to a 31/2-year high in January, consumer sentiment fell more than expected last month, hurt by concerns about the strength of the job market. Shoppers also are facing higher heating bills, a slowing housing market and rising interest rates.

“There’s definitely uncertainty and unease among consumers,” said Michelle Bogan, retail strategist at Kurt Salmon Associates, a global consulting firm. “And whenever that happens, the reaction is to be more conservative.”

Another worrisome issue is that consumers’ personal savings rate were again in the negative in January. That means Americans continue to spend beyond their after-tax incomes, which forced them to dip into savings or increase their borrowing.

February is a critical month for retailers to set the mood for spring selling. Stores use the month to get a sense of what is selling. Right now, early hits include capris, and for teens, cargo-style capris and leggings paired with minidenim skirts, said John Morris, a retail analyst at Harris Nesbitt.

Many teen chains — whose performance consistently have beat Wall Street expectations — had disappointing results. Abercrombie & Fitch posted a 5 percent gain in same-store sales, well below the 13.6 percent estimate. Aeropostale Inc. reported a same-store sales decrease of 5.4 percent; analysts expected a 3 percent gain.

Gap, which has been struggling to come up with the right merchandising mix, stumbled again, seeing an 11 percent drop in same-store sales, much worse than the 6.9 percent drop that analysts expected.

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