Report - Deep discounting helped boost January sales

NEW YORK -- Deep discounting lured consumers into the nation's stores last month, offering struggling retailers a brief respite from a sluggish sales trend.

But while analysts said they see the sales gains announced Thursday as encouraging, they don't believe consumers are ready to splurge.

Discounters, like Wal-Mart Stores Inc., wholesale clubs and other moderate-price stores continued to outperform the rest of the retail industry in January. Department stores and apparel chains still struggled, though most sales declines weren't as deep as Wall Street expected, with the notable exceptions of May Department Stores Inc. and Gap Inc.

"This may be a signal that the end of the recession is near. The weakness wasn't as bad in some areas as we have seen," said Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. But he cautioned that January is not representative of spending trends because it is a time when merchants clear out inventory to make room for spring goods.

The bank's index measuring the sales of 80 stores rose 5.1 percent in January, better than the 3 percent Niemira had projected.

The gain was the strongest monthly showing since January 2000, when the index rose 5.7 percent.

"Consumers came out in response to the great values in the stores, but are they willing to pay regular price for spring? It is tough to say," said Richard Jaffe, an analyst at UBS Warburg.

Jobless declines

The January results came as the Labor Department reported that new claims for state unemployment insurance dropped by 15,000 last week to a seasonally adjusted 376,000. Jobless claims slowly have been declining since peaking Oct. 20 at 507,000.

"There is still a lot of negative news out there," Niemira said. Most notably, there haven't been any job gains, he said.

Niemira expects sales at stores open at least a year, known as a same-store sales, to be up about 2.5 percent to 3 percent during the next few months, more in line with the retail sales trend of 2001. Same-store sales are considered the best indicator of a retailer's health.

Wal-Mart, which posted an 8.3 percent gain in same-store sales, beat Wall Street estimates of a 6.2 percent gain. Rival Target Corp. reported a better-than-expected 5.8 percent gain.

Analysts believe the two will continue to profit from the problems of Kmart Corp., which filed for bankruptcy Jan. 22.

Kmart did not report January sales, but will be reporting monthly operating statements with the bankruptcy court.

J.C. Penney Co. Inc. also posted a better-than-expected 5.9 percent gain in same-store sales in its department store division.