- The Washington Times - Friday, February 8, 2002

NEW YORK (AP) Deep discounting of winter merchandise lured consumers into the nation's stores during January, offering struggling retailers a brief respite from a sluggish sales trend.

But consumsers may not ready to splurge economic uncertainty continues to drive customers into Wal-Mart Stores Inc., wholesale clubs and other moderate-price stores, which again outperformed the rest of the retail industry during January.

Meanwhile, department stores, particularly May Department Stores Inc., and apparel chains including Gap Inc., are still struggling, although the sales declines for many weren't as deep as Wall Street expected.

"This may be a signal that the end of the recession is near. The weakness wasn't as bad in some areas as we have seen," said Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd.

But, he cautioned, January is not representative" of consumer spending trends because it is a time when merchants clear out inventory and make room for spring goods.

The bank's index measuring the sales of 72 stores rose 5.1 percent in January, better than the 3 percent Mr. Niemira projected. The gain was the strongest monthly showing since January 2000, when the index rose 5.7 percent.

Other analysts were also wary.

"Consumers came out in response to the great values in the stores, but are they willing to pay regular price for spring [merchandise]? It is tough to say," said Richard Jaffe, an analyst at UBS Warburg.

The January results came as the Labor Department yesterday reported new claims for state unemployment insurance dropped by 15,000 last week to a seasonally adjusted 376,000. The decline for the workweek ending Feb. 2 followed a revised 31,000 jump in claims the previous week. Jobless claims slowly have been declining since peaking Oct. 20 at 507,000.

Still, as Mr. Niemira put it, "There is still a lot of negative news out there."

Most notably, there haven't been any job gains, he said. "Until you see the job picture turning, it will still be choppy out there."

Mr. Niemira expects sales at stores open at least a year, known as same-store sales, to be up about 2.5 percent to 3 percent during the next few months, more in line with the modest retail-sales trend of 2001. Same-store sales are considered the best indicator of a retailer's health.

"Americans are not yet ready to go on spending sprees and buying binges, particularly at department stores," said Kurt Barnard, president of Barnard's Retail Trend Report, based in Montclair, N.J. "They are willing to spend if the prices are real bargains."

Wal-Mart posted an 8.3 percent gain in same-store sales, exceeding its own projections and Wall Street estimates.

Analysts polled by Thomson Financial/First Call expected Wal-Mart to report a 6.2 percent gain.

The company, which announced fiscal 2001 sales of $219 billion, also secured its place as the world's largest company, supplanting oil giant ExxonMobil Corp. Last month, ExxonMobil announced 2001 revenue of $212.9 billion.

Analysts believe Wal-Mart and its rival Target Corp. will continue to profit from the problems of Kmart Corp., which filed for bankruptcy Jan. 22 and is expected to close several hundred stores. The discounter did not report January sales, but will be reporting monthly operating statements with the bankruptcy court starting at the end of March.

Target reported a better-than-expected 5.8 percent gain in same-store sales for January.

Another pleasant surprise came from J.C. Penney Co. Inc., which posted a better-than-expected 5.9 percent gain in same-store sales in its department store division.

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