Retail Starts Off the Year 2005 Right
Winter storms raged through much of the United States during January, but the outlook for retail sales was surprisingly sunny.
January is historically a quiet retail month devoted to the clearance sales that make way for crucial Spring markets, but consumers were in the mood to shop after the first of the year. Apparel sales rose 2.2 percent compared with the same time in 2004, according to the New York–based International Conference of Shopping Centers (ICSC). Luxury sales leaped 8.6 percent, and department-store sales rose 1.0 percent.
The strong sales were driven in part by the heavy use of Holiday gift cards, according to Michael Niemira, chief economist for the ICSC, which found that more than 30 percent of cards were redeemed during the month. But one question remains: Will cash registers continue to ring now that much of the gift-card shopping is a memory?
Niemira forecast a moderate 3 percent growth for 2005, stating that the quality of this growth will depend on the labor market.
“If there’s improvement in the labor market, we’ll have broader growth in retail,” he said. “We won’t be dependent on growth in the junior and luxury markets.”
Most of January’s winners were companies that already had been on a winning streak. Brisbane, Calif.–based Bebe Stores Inc. earned double-digit comparable sales through much of 2004 and reported a stellar January same-store sales increase of 29.3 percent.
The most surprising winner was long-troubled The Wet Seal Inc. The Foothill Ranch, Calif.–based retailer had spent much of the past few years reeling from double-digit losses. But in January, the company reported an 8.2 percent increase in same-store sales, its first positive statement since 2002. Wet Seal’s good news was proof that the company’s new merchandising strategy is working, said the company’s recently hired chief executive officer, Joel Waller.
But many analysts were not quite ready to give Wet Seal a clean bill of health. Retail analyst Liz Pierce of Sanders Morris Harris Group Inc. forecast that Wet Seal will earn positive single-digit comparative- store sales in February. But, according to a Feb. 4 research note, she refuses to raise her stock recommendation of this company above “hold” because the retailer has not yet detailed any plans to make 2005 successful.
—Andrew Asch
