Gap, Target Top Analyst Estimates

Thursday morning saw Gap GPS and Target TGT post February same-store sales that topped the analyst's estimates. This is partly down to the fact that a winter that did not get anything like as cold as one would normally expect resulted in a boost in the purchases of spring clothing. The scarfs, big coats and fur-lined boots that were bought in November stayed in the closet for the majority of the winter, as temperatures stayed comfortable throughout, so early trips for spring clothing helped boost profits for GPS and TGT. According to Bloomberg, Gap saw sales climb 4%. This means that the largest apparel chain in America beat the average projection for a 1.4% drop from analysts surveyed by Retail Metrics. Meanwhile, Target posted a 7% same-store sales gain, which beat the 5% estimate. These are just two of the U.S. retailers who benefitted because they had the foresight to roll out new merchandise with the unseasonably warm weather encouraging consumers to start the spring shopping early. December and January saw the warmest temperature for those months in six years. The San Francisco-based GPS saw a rise of 9.3% to $25.54 on Thursday morning in New York. Earler on, the shares had climbed to $26, which is the highest price for Gap since May 2010. TGT, meanwhile, fell 0.4% to $56.46. Moving outside of those two stores, Nortstrom JWN saw a rise of 10%, beating the estimates for a 5.6% gain. JWN then slid 0.7% to $53.27. Meanwhile, TJX Cos, the operator of T.J. Max, rose 9%, beating the analyst's 7% projection, then standing still at $36.59. The downside, obviously, is that so many people have their spring clothes now, the expected spring boom will not be as explosive as analysts would normally expect. Alison Paul, retail sector leader at Deloitte LLP in Chicago, told Bloomberg, “There is concern about gas prices, and it won't be long before people are hesitant to make multiple trips to go shopping. With prices showing no signs of abating, consumers are going to start to feel challenged.” Kohl's KSS saw sales fall 0.8%, which is a bigger drop for the department store than the 0.2% estimate. Following the release of those numbers, shares slid 0.9% to $49.26. On Thursday, Jefferies released a research report that said that GPS's solid February comp of +4% shows us that the company's product strategies are working, the economic backdrop is improving and, importantly, the consumer is shopping at all brands of GPS. “Old Navy SSS was up 5%, turning positive after over six months, with easy compares ahead here as well. This is an important data point as the brand had been struggling and was expected to weigh on the stock in the near term. Clearly management is doing a great job correcting the merchandise and pricing here, and we expect to see continued improvement.” Morgan Stanley said that it expects a positive reaction from TGT shares as Target's 7% February same store sales growth exceeded even the most bullish speculation after last week's pronouncement that comps were running over 4%. “The upside appears to be apparel-driven and likely benefited from better weather vs. year-ago. The debate now will be whether sales were merely pulled forward from other periods. Management maintained its guidance for a 4% comp in 1Q (vs. 2012 comp guidance for 3%).”