January sales good, not great

NEW YORK (CNNMoney.com) -- Colder temperatures, post-Christmas clearance sales and gift card redemptions helped retailers post decent sales last month but the gains were much weaker than a year earlier.

"Retailers are up against much stronger numbers from last year," said Ken Perkins, president of sales tracker Retail Metrics. "So overall sales gains will be moderate, in line with the slowing trend that we've been seeing since last May."

Among discounters, same-store sales at Wal-Mart rose 2.2 percent and jumped 5.1 percent at Target, topping forecasts by Wall Street analysts. Department store chains were clear winners and luxury chains had a stellar month. But clothing chains were a decidedly mixed bag.

Thomson Financial, which tracks numbers from 56 retail chains, estimated that same-store sales, or sales at stores open at least a year, rose 3.9 percent in January versus a 4.9 percent gain in January 2006.

According to the firm, 63 percent of the retailers beat analysts' forecasts while 33 percent missed and 3 percent met their estimates.

Michael Niemira, chief economist with the International Council of Shopping Centers, said he's always cautious of overplaying January trends.

"January is the lowest sales volume month of the year. In other words, a little goes a long way," Niemira said. "On the surface, sales increases can look a lot better than they actually are."

Still, January has become an increasingly important month for merchants because of gift card redemptions. Retailers record revenue from gift cards sales when the cards are redeemed, not when they are purchased.

The National Retail Federation (NRF) estimated that holiday-related gift card sales totaled $24.81 billion this past season, up 34 percent from 2005, noting consumers on average put more money on the cards.

But Perkins said he was concerned that not many retailers cited a sales boost last month from gift card redemptions. "As more people are receiving two or more cards as gifts, they're unlikely to redeem all those cards in January," he said. Moreover, with many cards no longer having expiration dates, consumers are holding on to their cards longer.

Still, the net effect of gift cards is positive for retailers, he said.

Weather woes continue to plague clothing sellers.

Sales of cold weather gear like coats and sweaters had suffered with much warmer-than-normal average temperatures at the start of the season. As a result, some nervous retailers quickly transitioned their merchandise to spring wear about a month earlier than usual.

But then frigid temperatures returned in mid-January, hitting these merchants with a double whammy.

Said Perkins, "Not only did apparel sellers lose early winter sales but now their spring inventory is suffering too."

Among those hit, January sales at struggling apparel seller Gap Inc. (Charts) were flat versus the previous year.

Women's clothing seller Chico's (Charts) fared worse last month, posting a 3.5 percent same-store sales decline. Teen clothier Abercrombie & Fitch (Charts) posted a 6 percent drop in sales. Sales at Ann Taylor tumbled 10.2 percent.

Elsewhere, Costco (Charts), the No. 1 warehouse club operator, posted January same-store sales that rose 2 percent, missing analysts' forecasts for a 3.2 percent gain.

Wal-Mart (Charts), the world's largest retailer, said January same-store sales rose 2.2 percent, which would be better than analysts' expectations of a 1.8 percent increase. Comp-store sales for the year rose just 2 percent.

Overall, for the five weeks ended Feb. 2, total sales rose 10.7 percent to $31.6 billion. Wal-Mart said HDTVs, laptop and desktop computers, grocery and pharmacy items sold well last month, while customers bought less clothing and home-related products.

For February, the retailer expects comparable sales to increase of 1 to 2 percent.

Sales at Wal-Mart's rival Target Corp. rose a strong 5.1 percent, beating estimates for a 4.6 percent increase, according to First Call.

Elsewhere, Limited Brands (Charts), which owns Victoria's Secret and Bath & Body Works chains, logged a strong 11 percent same-store sales gain.

Department stores also had a good month. J.C. Penney (Charts) sales rose 3.6 percent. The mid-priced retailer next week will unveil what it called a "new brand positioning" for the company.

Kohl's posted a solid 8.7 percent sales gain, while high-end chain Nordstrom (Charts) saw same-store sales jump 11 percent.

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