Blog: Leonie BarrieUS retail sales see underlying uncertainty

Leonie Barrie | 20 February 2012

January sales for many US retailers built on the momentum of a strong holiday shopping season, with gift card redemptions, discounting and promotions helping to drive sales during the month, according to figures released last week.

Data from the US Commerce Department showed total sales edged up 0.4% in January from the month before, and were 5.8% higher than the same month last year. Sales at clothing stores were flat with December, but 5.3% higher year-on-year.

Despite growth in consumer spending in what is traditionally a slow sales month, commentators warn this will only be sustained by improvements in key economic indicators, such as housing and employment.

For apparel giant VF Corporation, new acquisition Timberland helped lift its fourth quarter profit by 34% - and is slated to contribute $1bn in revenue growth during 2012. But slowing growth in the eurozone markets and the impact of high product costs on gross margins may lead to some cooling of profitability in the early months of the current year.

T-shirt and underwear maker HanesBrands says its decision to raise prices three times over the past year in response to rising input costs "worked well" in its core business, and that retailers "have come to appreciate that price increases are driving their comp sales and profitability." The company, which has just reported a 25% jump in full-year profit, said it continues to earn new shelf space at retail.

But fashion retailer Abercrombie & Fitch saw its fourth quarter savaged by a perfect storm of all-time-high cotton costs, unusually warm weather both in the US and in Europe, and a highly aggressive promotional environment.

And apparel maker Perry Ellis is reviewing its brand portfolio and streamlining its operations to "eliminate less productive overhead," after warning that increased discounting is likely to hurt its fourth quarter and full year profits. The company expects to report an increase in revenues, but this momentum will be eroded by retailers requesting later deliveries of goods, and an increase in markdowns.

Meanwhile, US department store retailer JC Penney Co and luxury marketer Ralph Lauren Corp have decided to end a five-year agreement to sell the exclusive American Living lifestyle line. The collection, which is designed by Ralph Lauren and sold through JC Penney stores, will finish after the spring/summer shipments.


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