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January sales provide reason for optimism

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NEW YORK — The weather outside was frightful, but sales inside were — if not delightful — encouraging.

The weather outside was frightful, but sales inside were — if not delightful — encouraging.

Retailers posted solid volume in January, sustaining the momentum from the fourth quarter of 2010 despite frequent snow, sleet and freezing rain over much of the country.

"Shoppers are slowly becoming less cautious about their spending, and that appears to be borne out by January’s same-store sales results, especially when you factor out the negative impact of bad weather," said Kantar Retail senior economist Frank Badillo.

The results were led by stronger than average results at food, drug and mass retailers and apparel and accessory stores, Kantar reported. Lagging were department stores.

Michael McNamara, vice president of research and analysis for MasterCard Advisors SpendingPulse, said a combination of increasing consumer demand and strong pricing drove sales. "Although less robust, the trends we observed were similar to those recorded in the fourth quarter of 2010. Most sectors continued to post positive year-over-year results during the month despite consumers taking a pause in spending and repeated snow storms affecting the East Coast."

McNamara noted that negative and positive factors influenced sales, saying the continuing high unemployment rate and the rising price of fuel countered advances in consumer confidence and improvement in the financial markets. "With gasoline prices up about 14% over prices a year ago, that means less disposable income in consumers’ wallets," he pointed out. "They are more likely to consolidate trips to the mall and shop closer to home."

Same-store sales at Target Corp. edged up 1.7% — below expectations, particularly in portions of the South and the Northeast, said chairman, president and chief executive Gregg Steinhafel.

Consumables and H&BAs were the discounter’s strongest sellers. Meanwhile, volume of clothing, furniture and electronics was relatively soft.

"Our PFresh remodel program continues to drive incremental traffic and sales, and our new REDcard Rewards 5% savings program continues to perform as expected," commented Steinhafel. "While we expect the economic environment to remain challenging, we expect these two initiatives to drive even more meaningful increases in Target’s fiscal 2011 comparable-store sales."

In the drug channel Walgreen Co. rang up a 6.1% same-store sales gain. Comparable-store front-end sales increased 4.5%, with customer traffic in comparable stores advancing 2.4%, while basket size rose 2.1%.

Same-store pharmacy sales increased 6.9%, despite being negatively impacted by 2.9 percentage points by generic drug introductions. Pharmacy sales accounted for slightly less than two-thirds of total sales for the month.

Costco Wholesale Corp.’s same-store sales jumped 9%, easily beating Wall Street’s forecast of 6.1%. Factoring out higher gasoline prices and stronger foreign currencies, same-store sales climbed 6%, with U.S. volume up 4% and international results rising 14%.

The warehouse club operator’s total sales climbed 12% to $6.3 billion in January, benefiting in part from sales from a Mexican joint venture.


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