A strong economy and price-slashing on after-Christmas goods prompted heavy consumer spending at major chain stores in January, boosting sales well above expectations.
In a month known for clearances, retail sales surged compared with January a year ago for discounters and specialty stores that performed well last year and for department store chains that have struggled against their lower-priced competitors.
Wal-Mart Stores Inc. saw its biggest monthly gain since May, posting a 10.3 percent increase. Sales jumped 8.5 percent at Kmart Corp. and 9.6 percent at Dayton Hudson Corp. -- which runs department stores as well as the fast-growing Target chain. Specialty chains the Limited Inc. and the Gap Inc. saw hefty increases of 11 percent and 15 percent, respectively.
Sales rose 7.3 percent at Federated Department Stores Inc. The operator of Macy's and Bloomingdale's had seen its monthly sales decline during three consecutive months last fall.
Other chains -- among them American Eagle Outfitters -- continued to display an ability to adapt to the tastes of teen-agers and cater to a large group with part-time jobs and disposable cash, analysts said.
"The month of January showed the continuation of a pattern we have been witnessing for over a half-year now, that is shining performance by discount department stores," said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "We also see that when the prices are low and there are deep markdowns, conventional department stores also can shine."
An industrywide tally of 85 chain stores by Bank of Tokyo-Mitsubishi Ltd. showed increases averaged 8.3 percent, the strongest year-over-year sales gain since April, said Michael P. Niemira, vice president. Niemira had predicted a 6.5 percent increase.
"It was definitely better than we expected," said Kelly Armstrong, an equity retail analyst with First Union Capital Markets in Richmond, Va. "The economy in general is strong, consumer confidence is up for the third month in a row after the dip it had following the Asian crisis, the unemployment rate is high and interest rates are low."
The sales gains, which measure stores open at least a year and exclude new stores, were notable given the surge of holiday shopping via the Internet, Armstrong said. Companies such as the Gap and Wal-Mart turned in solid store increases despite growing numbers of consumers shopping on their Web sites.
Strong January sales should lead to improved profit margins for many chains over the next several months as retailers reduce post-holiday inventory levels, Armstrong said.
Retailers that struggled the most were moderately priced department stores such as J. C. Penney Co. Inc., where sales fell 0.1 percent last month, and Sears, Roebuck and Co., where sales inched up 2.6 percent. At J. C. Penney, catalog sales grew by 14.3 percent.
At Sears, some categories performed better than others, said Arthur C. Martinez, chairman and chief executive officer. "Soft-good results included strong sales of women's ready to wear -- spurred by double-digit increases in sportswear and special sizes -- as well as intimate apparel, cosmetics and fragrances."
At Macy's parent company, Federated, some of the improvements could be attributed to a shift in promotions, with home merchandise going on sale the last weekend of January rather than this month, said James M. Zimmerman, chairman and chief executive officer of Federated.
Circuit City Stores Inc. exceeded expectations and increased same-store sales by 8 percent, the chain said.
Last month's performance reflects strength in all major product categories, including personal computers, consumer electronics and major appliances, said Richard L. Sharp, chairman and chief executive officer.
"The results were achieved against the toughest prior-year comparison we have faced in this fiscal year," Sharp said.