Retailers Show Mixed January Sales; Macy's, Costco Standouts

Retailers are off to a mixed start as they post January same-store sales, with Macy's Inc. (M), Costco Wholesale Corp. (COST) and Abercrombie & Fitch Co. (ANF) standouts as they beat expectations and offered upbeat outlooks.

About two dozen retailers have been heard from with just about half beating expectations, including Macy's, which said its restructuring, including catering more to local tastes, is paying off, prompting the retailer to lift fourth quarter earnings expectations. Costco said higher gasoline prices and strengthening foreign currencies had a positive impact on January's comparable sales. And Abercrombie & Fitch, the teen retailer that has struggled the most during the recession, posted growth of 8% for January same-store sales, when analysts expected a 8.4% drop.

Limited Inc. (LTD) and Children's Place Retail Stores Inc. (PLC) also beat projections, with Children's Place saying it will no longer post monthly same-store sales.

All told, retailers tracked by Thomson Reuters are expected to post a 2.5% rise in January same-store sales, after a 2.9% gain in December and a 5.7% drop in January 2009.

Hot Topic Inc. (HOTT), Fred's Inc. (FRED) and Buckle Inc. (BKE) have missed expectations. Buckle had been a big winner among retailers for most of last year. But the teen retailer posted a January same-store sales drop of 1.2%, when a 4.1% rise was expected. The decline for Buckle was the first since Thomson Reuters began tracking the company in 2006, and came after a double digit percentage gain in January 2009.

A couple of retailers are feeling good enough to say they are in inventory rebuilding mode, after the industry slashed merchandise for a good part of 2009. Wet Seal Inc. (WTSLA), which raised its fourth-quarter earnings estimate to 8 cents to 9 cents a share from 6 cents to 7 cents a share after its 3.7% January same-store sales drop was in line with expectations, noted inventory per square foot was up 12% as it finished the fourth quarter.

Most retailers' fourth quarter closes at the end of January, with sales for the month accounting for about 5% to 7% for mass merchants, including discounters, and department stores like Macy's. January is generally their lightest sales month in terms of volume.

"I think we're seeing that customers came out after Christmas and stayed out a bit," said Janet Hoffman, global managing director for retail at Accenture PLC (ACN), a management consulting firm. "Retailers are doing a significantly better job at managing inventory so the markdown frenzy we saw last year isn't occurring," which will help profitability.

As for upping inventory now, "it's an optimistic approach and I don't think many major retailers will begin going that route soon," Hoffman said.

Many retailers that missed expectations are using the weather and the still-wobbly economy as a good part of their reason. Fred's said that its miss can be attributed from "multiple ice and snowstorms blanketing the majority of our stores in the Southeast" and double-digit unemployment.

Retail stocks are mixed premarket, with Macy's ahead 4.9% to $17.03, Abercrombie & Fitch Co. up 9% to $34.83 while Buckle was down 2.4% to $31.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

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