Retail weathers storms

  • Article by: DAVID PHELPS , Star Tribune
  • Updated: February 3, 2011 - 9:41 PM

Most large retailers posted strong sales growth in January, despite blizzards on the East Coast and rainstorms in the West.

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Raffi Ginsberg and her son Tzvi checked out some fresh produce last week at Target in St. Louis Park. Most large retailers who reported January results Thursday showed strong year-over-year gains.

Photo: Richard Tsong-Taatarii, Star Tribune

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Retailers weathered a stormy January and posted stronger-than-expected sales as experts wondered aloud if the new data signify a sustainable trend in one part of the economy that has remained largely lackluster: consumer spending.

A key measure of retailers' health, same-store sales, rose 4.8 percent last month, according to the International Council of Shopping Centers (ICSC).

"The consumer's confidence and mood has markedly improved," said David Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas. "We saw that through the holidays and now it carried into the new year. The economy has stabilized and has a direction and is building momentum."

However, the performance picture dimmed a bit for Target, which recorded a 1.7 percent year-over-year increase in January sales.

Target Chairman and CEO Gregg Steinhafel called the results "below expectations," particularly in portions of the South and Northeast.

The Minneapolis-based retailer said its drive to open mini-grocery areas in existing Target stores and its 5 percent discount for customers using Target charge cards were driving new sales.

"While we expect the economic environment to remain challenging, we expect these two initiatives to drive even more meaningful increases in Target's fiscal 2011 comparable-store sales," Steinhafel said.

Target said sales were strongest in its grocery and health care compartments and weakest in apparel and jewelry.

"Target surprised me," said Brennan. "They should be doing better."

Comparable store sales were up 9 percent at Costco as shoppers looked for value. The Limited was up 24 percent while Nordstrom rose 4.8 percent and Saks increased 4.4 percent. Kohl's was up 1.4 percent. Neiman Marcus jumped 9.8 percent but J.C. Penney was down 1.2 percent.

Brennan said he was impressed by the performance of Neiman Marcus, Nordstrom and Saks in the current economic environment.

"I think this tells us the well-off consumer is back in the market and is willing to spend more," he said.

Love Goel, CEO of the retail private equity firm GVG Capital Group in Minnetonka, said he and his partners had expected weaker results given West Coast rainstorms and East Coast blizzards during January.

"These results were far more positive than anyone expected," Goel said. "You wonder what would have happened if it hadn't snowed."

Goel credited the buying surge to pent-up demand from shoppers who've experienced three years of high unemployment, a distressed housing market and a financial meltdown on Wall Street that only recently has improved.

"At some point, people need to have new sweaters, new suits, new shoes. Those are products they need to have," Goel said. "But demand is not up across the board. Target and Best Buy have been challenged because electronics got hit. People are much more value-conscious and much more item-conscious."

Goel said 2011 could become known as "the rebound of the consumer."

David Phelps • 612-673-7269

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