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Winter chills February retail sales

After a strong showing in January, sales growth slows. Florida prime-season activity

Compiled from staff and wire reports
Published March 3, 2006

is off to a slow start.

NEW YORK - The reappearance of winter weather stalled retail sales growth last month, leaving merchants and industry analysts wondering whether the consumers who shopped gleefully in January are retrenching amid higher energy prices and interest rates.

As retailers reported their February results Thursday, the biggest winners included discounters and wholesale operators such as Wal-Mart Stores Inc., Target Corp. and Costco Wholesale Corp. Among those falling short of expectations were teen retailer Abercrombie & Fitch Co., Gap Inc., Talbots Inc. and Sharper Image Corp.

"It is disappointing for February," said analyst Jharonne Martis at Thomson Financial. "It's not that consumers have stopped shopping; it is just that they're slowing down."

The weather up north also put a damper on Florida retailers' performance. That's because the tourist industry's big winter season got off to a late start thanks to chilly weather here and an unusually warm January. Many Tampa Bay retailers rely on a big boost from the peak tourist season population bulge, which this year started building a few weeks later because Easter falls later on the calendar.

"So far we're off to a decent but a mediocre start," said Gary Renfrow, president and co-owner of the Alden Beach Resort in St. Pete Beach. "March looks real good, but April is still filling in."

"In the end, I think it will be fine because the season will be longer this winter," said Walter Klages, president of Research Data Services Inc., which tracks tourism for several Florida counties.

Based on a national tally of 59 retailers, 59 percent missed expectations, while 41 percent beat projections, according to Thomson Financial.

The International Council of Shopping Centers-UBS sales tally of 59 retailers rose 3.2 percent, in line with forecasts. The tally is based on sales at stores open at least a year, known as same-store sales. Same-store sales are considered the best indicator of a retailer's health.

The tempered sales reports followed a surprisingly strong 5 percent gain in the ICSC-UBS tally in January, when shoppers armed with holiday gift cards and inspired by mild weather shopped for clearance and spring merchandise.

Martis and others don't think the downshift in sales growth signals a fundamental change in consumer spending, but they'll be closely watching the combined March and April period, when the bulk of spring selling occurs, to determine the overall trend.

Still, there are plenty of reasons for concern. After consumer confidence rose to a 31/2-year high in January, consumers' sentiment fell more than expected in February, hurt by concerns about the strength of the job market. Shoppers are facing higher heating bills, a slowing housing market and rising interest rates.

"There's definitely uncertainty and unease among consumers," said Michelle Bogan, retail strategist at Kurt Salmon Associates, a global consulting firm. "And whenever that happens, the reaction is to be more conservative."

Another worrisome issue is that consumers' personal savings rate were again in the negative in January. That means Americans continue to spend beyond their after-tax incomes, which forced them to dip into savings or increase their borrowing.

Despite consumers' concerns, government data issued Thursday pointed to continuing strength in the job market. The Labor Department said the number of people filing new claims for unemployment benefits rose slightly last week to 294,000, but because new benefit applications have been below 300,000 for the past seven weeks, it appears the economy continues to rebound from a sluggish fourth quarter.

While February is the second least important month behind January for merchants, it's critical for setting the mood for spring selling. Stores use the month to get a read on what's selling. Early hits include capris, and for teens, cargo style capris and leggings paired with mini denim skirts, said John Morris, a retail analyst at Harris Nesbitt.

"There's not a lot out there that's new," said Patricia Edwards, a portfolio manager and analyst at Wentworth, Hauser & Violich in Seattle. This spring, stores are showing a lot of beige and white clothing, a stark difference from the brightly colored palette on selling floors a year ago. Edwards wonders how such subdued colors will fare.

Times staff writer Mark Albright contributed to this report, which contains information from the Associated Press.

[Last modified March 3, 2006, 02:15:34]

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