Warmer-than-usual weather sent more confident consumers off to the malls in February in just the right frame of mind to snap up full-priced spring merchandise. That surge in shopping activity led to US retailers posting a 6.4% increase in same-store sales last month, according to the Thomson Reuters Same Store Sales Index. That 6.4% advance was higher than the final SSS estimate of 4.8%, although it doesn’t include the SSS for the Drug Stores group, scheduled to report their February data this week.

Same-store sales gains in February also topped last February’s 4.7% gain in SSS as the warmer weather drove demand for spring merchandise, a trend that likely means retailers will also see an increase in margins. Even rising gasoline prices didn’t deter consumers from opening up their wallets and going shopping. An additional encouraging sign came from the economic data: the latest consumer confidence data in the US shows that the job market is improving slowly but steadily. All this added up to great news for companies in the index, 81.3% of which reported better-than-expected SSS in February. As the chart below demonstrates, that is considerably higher than the historic average.

Not surprisingly, the retailers that posted the strongest SSS results were those that also beat analysts’ estimates by the widest margins. The biggest SSS surprise came from Zumiez, which reported a 14.2% SSS, almost three times the final estimate of 5.1%. Moreover, based on its proprietary StarMine SmartEstimate score, Zumiez is likely to post earnings for the first quarter of 2012 that are higher than the current consensus estimate (See Exhibit 2).
 

Analysts polled by Thomson Reuters expected Gap to post another decline in SSS in February, of 1.4%. But even this struggling retailer benefited from the overall trend, instead reporting a healthy gain of 4% in SSS for the month, its strongest showing since April 2011, when Easter-related sales gave it a boost. This past month, Gap – which has been a drag on the apparel sector for months – got a lift from high demand for its colored jeans. Other companies with impressive gains in SSS, include The Buckle, JW Nordstrom, TJX Companies and Ross Stores. Ross Stores and TJX Companies posted the strongest results in the sector, with a 9.0% increase in SSS, thanks to favorable weather. Limited Brands followed, with an 8.0% advance in SSS, even more impressive given its tough year-earlier comparison. (It had reported a remarkable 12% surge in SSS for February 2011.) The Victoria’s Secret division of Limited Brands reported SSS jumped 10%, well above the forecast 8.6% increase, thanks to strong sales of Valentine’s Day merchandise. That gave Limited Brands a boost.

Excluding Gap, the Apparel sector was the index’s strongest performer last month, reporting SSS jumped 8.0%, well above the final estimate of 5.9%. Adding Gap’s results to the mix (the retailer is heavily weighted in the sector) dimmed the group’s luster somewhat: the average SSS increase dropped slightly to 6.9%. That’s still significantly better than the 3.7% gain analysts had been expecting, however Ross Stores and TJX Companies posted the strongest results in the sector, with a 9.0% increase in SSS, thanks to favorable weather.

Only three retailers missed analysts’ SSS expectations. Although its SSS result was the weakest in our retail universe, teen retailer Wet Seal struggled less than analysts had anticipated. The retailer’s SSS fell 5.8% in February, a significantly better performance than the 9.0% decline in SSS that analysts had predicted. The group as a whole saw SSS increase 6.9% in February, well above the final call by analysts that SSS would remain unchanged. As noted, Zumiez was the star not only of its group, but among retailers as a whole, but other retailers, such as The Buckle, also fared better than expected. The Buckle posted a gain of 14.8% in SSS, beating analysts’ forecasts of a 5.8% advance.

The Discount recorded a 7.4% jump in SSS in February, well above the final estimate of a 6.3% advance. (Exhibit 3) Within that group, Costco beat expectations, posting a robust 8.0% advance in SSS that matched its 8% increase in SSS in February 2011. Target also fared better than expected, reporting a gain in SSS of 7.0%, compared to analysts’ estimates of 5.2%. The retailer said it beat expectations due to stronger-than-expected customer traffic combined with a healthy increase in the average transaction size. The weakest member of this group was Fred’s, which missed analysts’ expectations of a 0.2% advance in SSS, instead posting a decline of 0.7%. In a press release, the company pinned the blame on “advertising circular timing and calendar and holiday shifts.”

The retailers in the Department Store sector of the index posted a 3.8% advance in SSS for February, above analysts’ final estimate of 2.8%. Luxury retailers JW Nordstrom and Saks posted the strongest February sales results in the group, with SSS gains of 10.2% and 6.6%, respectively. JW Nordstrom posted the strongest sales gain, thanks to a shoe clearance event. Macy’s reported that its SSS advanced 4.6%, beating analysts’ forecasts of 3.5%. Meanwhile, Kohl’s reported a 0.8% slump in SSS, a decline from the flat estimate analysts had forecast.

One of the weakest SSS performances in the retail universe tracked by the Thomson Reuters Same Store Sales Index universe came from Cato Corp, which saw SSS fall 5%.

Easter falls on April 8 this year, two weeks earlier than it did in 2011, which will have the effect of shifting Easter-related sales into March. Retailers have already advised analysts and investors that March’s results will show strong gains in SSS over year-earlier levels, only to see those comps weaken in April, as a result of this Easter pattern. Consequently, it will be essential to average the results of these two months to get a smoother representation of how the Easter months fared and really understand what trends are taking shape.

Macy’s and Ross Stores are a few of the retailers that provided guidance for the Easter months. In its February sales press release, Macy’s said it expects SSS in its combined March-April period “to be up by approximately 3 percent to 3.5 percent,” with March sales expected to be more robust than those in April. Still, rising consumer confidence fueled by lower unemployment rates, combined with a tax break, could continue to support the monthly gains in SSS of 3% to 5% that were recorded throughout 2011 once again throughout the rest of 2012.

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