NEW YORK — U.S. retailers reported solid revenue gains for February, extending the strong spending momentum seen during the holiday season as the economic recovery takes hold.
Worries are growing, however, that rising gas prices could sap shoppers’ spending on other items.
Among major retailers reporting their monthly results Thursday, Limited Brands Inc., J.C. Penney Co. and Macy’s Inc. reported gains that beat Wall Street expectations. Luxury retailers including Saks Inc. saw sales surge as the affluent kept spending.
There were a few stragglers. Target Corp. announced an increase slightly below analysts’ projections. And Gap reported a bigger-than-expected drop.
The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer’s health.
“We’re seeing a continued roll-off from the holidays,” said Laura Gurski, a partner at A. T. Kearney. “There’s disposable income out there. But it’s going to be a long spring.” Low-income shoppers are already feeling pinched by rising prices for food and gasoline, she noted, and that’s only going to trickle up to middle-income consumers.
February started slowly because snowstorms kept some shoppers home, but weather improved throughout the month, helping to perk up sales of spring clothing. Cato Corp. and discounter Fred’s Inc. both said they saw customer counts and sales pick up as shoppers began spending income tax refunds.
The improving economy is also making shoppers feel better about spending. Consumer confidence in February rose to its highest point in more than three years, according to the Conference Board. On Wednesday, payroll processor ADP said private employers added 217,000 jobs last month, well above the 180,000 analysts had predicted. That raised hopes that the government’s employment report Friday could show a decrease in the unemployment rate.
Economists worry that rising prices for gas and other household costs will cause shoppers, particularly the low- to middle-income brackets, to pull back. The national average is now at $3.427 per gallon (90 cents a liter). Prices will reach $3.50 to $3.75 by spring, some analysts say.
Meanwhile, many retailers, including Macy’s, Kohl’s and J.C. Penney, say that they’re raising prices on clothing as they grapple with soaring costs of raw materials, particularly cotton.
March should be particularly difficult because Easter, which is on April 24, is three weeks later than last year. That calendar quirk is expected to shift pre-Easter sales of goods like candy and children’s dresses from March to April, depressing business this month. That’s why analysts look at the two months combined to get a more accurate reading of spring selling.
Target officials last week told investors that it wasn’t depending on a major jolt from the economy to spur consumer spending and instead is relying more on two initiatives to attract shoppers: a 5 percent discount for shoppers paying with their credit or debit cards and its expansion of food. It’s unclear how well that’s working. The discounter posted a 1.8 percent increase in revenue at stores opened at least a year for February. That was below the 2.2 percent estimate from Thomson Reuters.
Target predicts it will see a mid-to upper single digit percentage decline in March, followed by mid-teens increase in April. Combined, Target expects a low-single-digit gain.
Among department stores, Macy’s reported a 5.8 percent increase in revenue at stores opened at least a year, and company officials said that consumer reaction to spring clothing has been encouraging. Analysts had expected a 3.7 percent gain.
J.C. Penney Co. said its revenue at stores opened at least a year rose 6.4 percent, exceeding the 4.2 percent estimate. Kohl’s Corp. enjoyed a 5 percent gain, better than the 4.1 percent increase projected by Wall Street.
Saks’ revenue at stores opened at least a year surged 15.3 percent, well past the 4.9 percent estimate.
Limited Brands posted a 12 percent gain, helped by strong sales at its Bath and Body Works and Victoria’s Secret stores. Analysts polled by Thomson Reuters had expected slower growth of 8.5 percent.
Gap Inc. struggled during the month. The clothing retailer’s figures were down 3 percent, dragged down by declines in all three divisions, its namesake brand, Banana Republic and Old Navy. Analysts had expected a 0.9 percent dip.
Costco on Wednesday reported a 7 percent gain, above the 6.7 percent estimate.