Consumers ringing up confidence

  • Article by: SUZANNE ZIEGLER , Star Tribune
  • Updated: March 4, 2010 - 10:00 PM

Shoppers shook off the economy and bad weather to push sales last month to best showing in two years.

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Shoppers showed signs of “upscaling,” or returning to stores they frequented before the recession began, analysts said. Shoppers at the Mall of America on Thursday headed toward Nordstrom, which posted a whopping 10.3 percent increase in February sales over last year.

Photo: Jeff Wheeler, Star Tribune

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Shoppers are finally beginning to exhale.

Retailers posted their strongest sales gain in February in more than two years -- since just before the recession hit.

Strong sales ran across the store spectrum, from upscale Nordstrom to discounter Target.

It is the third month of sales gains, but blew past estimates of Wall Street, economists and even the stores themselves. Retail spending accounts for 70 percent of the U.S. economy, so any sign of life from shoppers, even in a relatively slow month such as February, gets an outsized response.

"The degree of strength was clearly unexpected," said Mike Niemira, chief economist at the International Council of Shopping Centers (ICSC) in New York. "It's from the luxury to the discounters with a fair amount of improvement in the middle market as well. It does build confidence that the recovery -- retail and economic -- is here to stay."

The group was expecting a 2 percent gain in sales, but the actual result was a much healthier 3.7 percent, the best monthly showing since November 2007.

Shoppers flocked to stores, despite the backdrop of heavy snowstorms on the East Coast, a big drop in consumer confidence last month and continued high rates of unemployment. Experts chalked the bump up to strong Presidents' Day weekend promotions, pent-up demand and consumers loosening up a bit -- even to the point of going back to their pre-recession stores.

Niemira called it "upscaling" -- customers returning to stores they're accustomed to shopping at. Throughout the recession, many downscaled.

"Maybe some of the dollars lost to some of the Dollar Stores or places like that start to move up. Maybe not to the luxury retailers but up the chain," he said.

Britt Beemer of America's Research Group said his organization saw shopping levels across the country go up between 16 and 28 percent on Presidents' Day weekend because consumers jumped on the plentiful bargains.

"We had more people who got their income tax refunds in February," he said. "People were saying they were going to spend them because they've been sacrificing all year long.

While the numbers look good and indicate a retail and economic recovery, Niemira said that no one is out of the woods yet. And while consumers are starting to spend a little more, the figures were up partly because sales in February 2009 were so abysmal.

"Consumers are starting to step back into a spending mode because there was a lot of pent-up demand during the recession. Now we're starting to see that [demand] met a bit but we still have a long way to go."

The Mall of America in Bloomington also has seen shoppers getting out. Customer traffic so far this year is up 6.6 percent and sales are up 6 percent over last year, said spokesman Dan Jasper.

"The Saturdays feel like the holiday shopping season," he said. "Heavy traffic is coming into all parking areas and I noticed anecdotally that people are carrying a lot of bags. It feels like we may have turned the corner."

Jasper partly attributed the increases to a holiday promotion -- two free wristbands for its indoor amusement park for each $250 spent -- that keeps on giving. The mall gave out 52,526 wristbands -- about 20,000 more than the previous year -- which customers had to redeem before Feb. 28.

"It has two goals: to drive additional holiday traffic to the mall and to bring shoppers back in the slower months of January and February," Jasper said.

In downtown Minneapolis Thursday, many shoppers were interested in deals. "I just got a winter coat for $55," said Laura Kennedy, a graphic designer from St. Paul who called herself a bargain shopper. "I've always been like that,"

Susan Wiger of Brainerd was in town for a teachers conference with two friends. "We're having fun doing clearance shopping," she said. "I just feel better if I don't splurge."

The ICSC figures out Thursday are considered to be an important indicator of how retailers are faring because it excludes sales at stores that open or close during the year. It was the third consecutive month that sales were up.

Upscale department store Nordstrom posted a 10.3 percent gain, mid-level chain Macy's was up 3.7 percent and discounter Target posted a 2.4 percent gain, all blowing past Wall Street analysts' expectations. Analysts had expected Target to post a 1 percent improvement in so-called same-store sales.

The only category that dropped: drugstores. The teen segment showed a 4.4 percent gain; luxury was up 7.7 percent.

Target Corp. called its results "modestly above our expectations." It reported an increase in average transaction sizes and a bump in sales of food and household essentials. Apparel sales were flat, and sales of home goods were down.

Macy's spokesman Jim Sluzewski credited its results to a program that tailors store inventory to its community and keeps track of items that shoppers were unable to find. Macy's has also worked at driving online customers into the store and vice versa.

"For every dollar spent online, they spend $5.77 in a local store within the next 10 days," he said. "That's a very powerful combination."

The Associated Press contributed to this report.

Suzanne Ziegler • 612-673-1707

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