Posted on: Friday, February 6, 2004

Gift cards boost January retail sales

By Lorrie Grant
USA Today

The improving economy, redemption of gift cards, aggressive discounting and even Mother Nature chipped in to give retailers their strongest percentage growth in four months in January.

The month is routinely the leanest sales period of the year for retailers, who are mainly selling holiday leftovers at discount prices to clear space for the spring merchandise.

But a confluence of factors unleashed pent-up shopper demand for discretionary products. For instance, frigid weather across most of the country drove sales of winter apparel and outerwear.

Sales at stores open at least a year in January surged 6 percent, according to industry sales trackers Redbook and the International Council of Shopping Centers. That compares with a feeble 1 percent sales growth in the month a year ago. The last time sales rose so sharply was in September, when back-to-school purchases led to a 6 percent gain.

Merchants, who had been conservative about inventory levels of holiday goods, were forceful about clearing leftovers.

"Mailings, e-mail promotions and aggressive pricing helped retailers get rid of merchandise," says George Whalin, president of Retail Management Consultants.

Sales also were boosted by gift cards, typically redeemed in January, which were among the hottest holiday gifts. Gift cards count as sales not when they are bought but when they are redeemed.

"Many sales were in January, and gift-card redeemers were in stores while clearance prices were promoted," says Dave Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas in St. Paul, Minn.

The sales growth was broad, even lifting some categories that had lagged, such as department stores. Their 5 percent spike was the biggest monthly leap since 1998, according to Redbook. Apparel specialty stores gained 6 percent, discount stores rose 6 percent, and warehouse clubs rocketed 11 percent.

Department stores were the biggest surprise, given their average monthly sales decline of 1 percent in the past year. Sales at Federated Department Stores, operator of the Macy's and Bloomingdale's chains, rose 5.5 percent versus a loss of 1.2 percent last January.