January retail sales are suffering from more than the usual post-holiday blues.

Retail observers are expecting disappointment on Thursday, when major retailers report January sales. After December sales fell short of expectations, poor weather during January dampened hopes of a strong end to the fiscal year.

The International Council of Shopping Centers' weekly tally showed sales dropped week-over-week throughout January, even as sales remained higher than the same time in 2010. The ICSC revised its estimate for January sales to between 1.5% and 2% growth, after dropping the previous estimate to 2% from 2.5% a week ago.

"Downright Awful Weather"


The main culprit was the weather, said Chief Economist MIchael Niemira, who noted there was 60% more snowfall across the country in January than last year -- as much as 266% in the Northwestern states.

The weather just put a damper on what was already a weak trend, say experts. Shoppers continue to hold off on non-essential purchases after spending during the early holiday sales in November, they say.

"Weather in January has been downright awful for most of the country, giving retailers the perfect excuse for what we expect to be rather disappointing [comparable sales] results on Thursday," said Rob Samuels, managing director of Phoenix Partners. In a report to investors, he noted "new spring product is not moving." He forecast department stores and discounters would do better in January than teen apparel retailers. He singled out Zumiez (ZUMZ) as one apparel merchant that should see noticeable increases, while Aeropostale (ARO), American Eagle Outfitters (AEO), Gap (GPS) and Hot Topic (HOTT) will see lower comparable sales (for stores open at least a year).

Nonexistent Sales Momentum

Even before the bad weather, sales momentum going into January "was virtually nonexistent," noted Brian Sozzi, retail analyst at Wall Street Strategies. He noted most retailers had missed their December estimates for comparable sales and quickly marked down new merchandise in January -- a sign of unsteady demand and reluctant consumers, he said.

Don't expect retailers to offer much perspective on their first-quarter sales when they begin reporting fourth-quarter earnings later this month, warned Sozzi, who noted few merchants clarified their fourth-quarter guidance when they reported December results. He recommended shorting Gap and American Eagle ahead of the January sales numbers.

The lack of guidance is going to weigh on retail stocks, said Samuels. "The group will likely remain under pressure until we get some more clarity," he said. He forecast the merchants will be focused on protecting profit margins instead of raising sales.

Inflation a Bigger Concern

But the experts note January is considered a weak sales month, anyway, so they are taking the sales forecasts with a grain of salt. The bigger worry is inflation and pressure on prices brought on by rising costs, they say.

The rising costs may not be all bad news, if they force merchants and manufactures to create more enticing products, noted Samuels. Most experts have noted consumers were not excited by the stocks in stores and there were no must-haves on holiday shopping lists, so shoppers were easily turned off by prices.

"In the current environment, we hear far too little about product innovation," Samuels wrote. "The winners in the space will continue to be those companies that can continue to give the consumer newness and a reason to shop."


Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Investment Strategies

What's your investing game plan?

View Course »

Add a Comment

*0 / 3000 Character Maximum

39 Comments

Filter by:
dterraman

by all means blame it on the weather

February 03 2011 at 6:10 AM Report abuse rate up rate down Reply
artinary

Retail sale shave been weak without the freeze. Products are sucky, prices are high, and quality and professionalism is at the bottom of the barrel. They need to stop making exuses for their own failures.

February 03 2011 at 2:56 AM Report abuse rate up rate down Reply
jfromulus

it is not the storms that are causing weak sales morons how about higher freaking gas prices and corporate greed by raising prices retail items

February 03 2011 at 2:06 AM Report abuse +2 rate up rate down Reply
Ronald Malozi

All the hype and hysteria about the high Christmas sales was a bunch of lies.

February 03 2011 at 2:00 AM Report abuse +3 rate up rate down Reply
oftenwrong2012

Has anybody done a look or a study on the 700+ corps and companys that recieved a waiver from the healthcare bill and the rest of us that havent and have to cut back and save for the implintation of the law and job growth compared to these two sets of haves to do and Obama buddies?

February 03 2011 at 1:02 AM Report abuse +2 rate up rate down Reply
1 reply to oftenwrong2012's comment
annie56091

A high percentage of the waivers went to Unions. Look it up.

February 03 2011 at 2:13 AM Report abuse -1 rate up rate down Reply
danceshorses

All my money is going for heating costs Not only am I using more fuel for heating my home the price per unit is also climbing. May have to borrow just to heat the home. Shopping? only bare essentials till the weather warms. Cost of gasoline will also limit shopping.

February 02 2011 at 11:20 PM Report abuse +7 rate up rate down Reply
Michael

Maybe it was the sun in the shopper's eyes too. You forgot that one.

February 02 2011 at 8:41 PM Report abuse rate up rate down Reply
deruwid9

People not having jobs is the real reason.

February 02 2011 at 7:45 PM Report abuse +10 rate up rate down Reply
Steve

I work in retail in the mid atlantic. All I can say is NO S@#T SHERLOCK. Yes, weather does affect business, regardless of what the corporate exec's like to think. It amazes me when I read these articles that someone actually gets paid to report the obvious.

February 02 2011 at 7:39 PM Report abuse -1 rate up rate down Reply
1 reply to Steve's comment
Abby

I agree Steve. It's pretty hard to get excited about going shopping during single digit temperatures and Level 3 snow emergencies where you risk a massive fine if caught driving and not being "essential personnel."

February 02 2011 at 10:05 PM Report abuse rate up rate down Reply
almagayle50

There's etailing. The reason sales are so awful is that there is no money.

February 02 2011 at 7:26 PM Report abuse +3 rate up rate down Reply