January Retail Sales Up, Inventories Down

The 2001 retail space odyssey got underway in earnest in January, with retailers in almost all categories posting strong sales numbers despite a holiday season so bad that it led to store closings and layoffs at some of the biggest companies. In fact, the Lehman Brothers index of same-store sales rose by 3.9 percent in January, a vast improvement over December’s 0.1 percent drop. Those January numbers, however, were generally tallied from deeply discounted apparel and other merchandise that retailers were eager to move out as they cleared away burdensome inventories left over from their dismal holiday. In that climate, the discounters did particularly well, with Wal-Mart and Kmart reporting 6.0 percent and 4.3 percent same-store sales increases, respectively, over last January. Specialty retailers’ results were more mixed: the January numbers brought more good news for Pacific Sunwear and Talbots, which continued to successfully resist the general downtrend; The Limited and Neiman Marcus posted strong same-store sales numbers too, but both The Gap and Ann Taylor’s comp-store numbers were in the negative double digits. Overall then, the sales and discounts—unusually steep even for this month of traditional after-Christmas clearances—did get customers back into stores and malls. By all accounts consumers were buying carefully; their confidence in the U.S. economy’s near-term prospects were low, while their credit-card and energy bills remained high. That means the results of January’s retail activity will not necessarily translate into good news for many retailers’ quarterly bottom lines. The cost of those drastically lower prices will most likely turn out to be lower profits down the line.January did succeed in its other traditional purpose though: freeing up rack and warehouse space for Spring lines. The big questions for the apparel industry going into the new season are the following: Will the Federal Reserve Bank’s two interest-rate cuts in January reinvigorate the economy? Will consumers’ outlooks brighten along with warmer weather? And once those sale signs come down, will the customers come back? —Louis Chunovic

* Department stores only.

** A note of caution about the January 2001 figures: For accounting purposes that occur only every five or six years, many retailers reported on the basis of a 5-week month, while some reported on the basis of a 4-week month, and others reported for both the 4-week and the 5-week periods.Also, some retailers’ comp-store numbers compare a 5-week January 2001 to a 4-week January 2000. Therefore, direct comparisons are more difficult and some comp-store increases may be somewhat inflated.