2nd UPDATE: Retailers Beat Estimates On Feb Same-Store Sales

The economy appears to be thawing for retailers as one of the worst Februarys weatherwise didn't keep shoppers from stores and allowed the best same-store-sales showing since November 2007, the month before the recesion offically began.

Comparable-store sales rose 4%, when 2.9% was predicted for the 28 retailers that report through Thomson Reuters. The showing marks half a year of straight gains after 12 monthly declines. Retailers have been struggling since being caught off-guard by a consumer-led recession that began in December 2007 and tore into sales, soon leading to declines.

"It's really looking good," said Erin Armendiger, managing director of the Baker Retailing Initiavive at the Wharton School. "Retailers like to blame the weather, but this time it really did temper operations."

This was the best same-store sales showing for the month of February since 2005, Thomson Reuters said.

But while stores did close, especially in the Northeast, sales were promising nonetheless, "which suggests we would have done even better," Armendiger said.

Sales at Macy's Inc. (M) rose 3.7%, ahead of a 1.6% projection. Terry Lundgren, chief executive officer of Macy's, said that without "a series of winter storms that affected store operations in some of our largest markets during key selling periods of the month," February same-store sales would have been up by about 5%.

Consumers especially hit the mall: In addition to Macy's, Dillard's Inc. (DDS) and Aeropostale Inc. (ARO) beat projections. Higher-end teen retailer Abercrombie & Fitch Co. (ANF), which has been loath to discount but has taken some steps in that direction, posted its second consecutive same-store sales gain, at 5%, after 20 monthly consecutive declines.

With most retailers reporting, 82% beat expectations as they kept Christmas inventories low, cleared items without too much markdown and moved spring merchandise in.

Gap Inc. (GPS) posted comparable-store sales of 3%, ahead of Wall Street's projection. Gap's Old Navy stores reported North American sales rose 6%. Employees at Old Navy on Thursday morning were placing $5 and less banners for family springwear, hoping the combination of pent-up demand and very low prices will prove a draw for summer.

While the consumer in general appears to be spending more at stores, they are making fewer large-ticket trips and were up against easy year-ago comparisons.

More important, observers said, will be how March shapes up because it is a longer month and will include more spending related to Easter this year. Easter falls April 4, earlier than last year.

"A particularly soft March would not bode well for retailers already grappling with high unemployment and a weak job market," said Ken Perkins, research analyst at RetailMetrics.

Nonetheless, February proved to be a healthy month for many retailers. Surprisingly strong sales came from teen retailer Zumiez Inc. (ZUMZ), which reported same-store sales growth of 11% in February, compared with Wall Street's projection of 1.2% growth and last year's 13% slide.

In contrast, fellow teen retailer Hot Topic Inc. (HOTT) reported a 7% decrease in same-store sales but still surpassed the average Street estimate for a 13% decline.

Also strong was Limited Brands Inc. (LTD), which reported a 10% increase in February same-store sales, benefiting from strong Valentine's Day-related sales at its Victoria Secret division, where same-store sales rose 10%. Limited's total sales rose to $600.1 million from $547.8 million a year ago.

On the weak side was Destination Maternity Corp. (DEST), which reported a 9.3% drop in February same-store sales, and apparel and accessory store Stage Stores Inc. (SSI), which saw same-store sales slide 3.9%.

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

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