Retailers struggle through dismal January

By Aarthi Sivaraman

But some modestly bright spots appeared in the sector -- warehouse club operators like BJ's Wholesale Club and Costco Wholesale Corp and clothing chains like Gap Inc and AnnTaylor Stores Corp -- on results that beat conservative Wall Street estimates.

"Believe it or not, a majority of retailers, 57 percent, beat very low expectations," Perkins wrote in a note.

Wal-Mart said gift-card redemptions were not as brisk as it expected, as consumers held on to their gift cards longer than they usually do. Those who redeemed the gift cards, used them for necessities like food and other consumables, instead of higher margin discretionary items, the company said.

Target Corp , the No. 2 U.S. discount retailer posted a drop in same-store sales deeper than its own forecast and that of Wall Street.

January's sales data follow a disappointing holiday season for retailers amid mounting fears that the U.S. economy could be tipping into recession, as consumers faced with higher fuel and food costs and a crumbling housing market cut back on spending.

Cutbacks were widespread in January, hitting even higher-end retailers like Nordstrom Inc , whose same-store sales fell a worse-than-expected 6.6 percent. Rival Neiman Marcus, which operates the Bergdorf Goodman stores, said same-store sales rose 3.3 percent, but noted that the increase was helped by an end-of-season sale.

Still, several retailers managed to claw their way to sales that topped Wall Street expectations.

Warehouse retailers Costco and BJ's also reported better-than-expected January sales, as more consumers chose to spend as little as possible to buy essential items like food and fill up gas tanks. Costco cited strength in its deli, candy, small appliance and automotive businesses.

Higher-end retailer Saks Inc also beat analysts' estimates with a 4.1 percent increase in same-store sales, but it also warned that its consumers were becoming increasingly bargain-hungry.

"I don't think the green I'm seeing on the screen today suggests we're in the clear at all," said analyst Joseph Beaulieu, referring to higher retail stock prices. "I just think it shows that every few days investors are reminded that the world isn't really ending."

But rivals American Eagle Outfitters Inc and Hot Topic Inc said same-store sales fell 7 percent and 3.6 percent, respectively. Still, those companies stood by their fourth-quarter profit forecasts.