UPDATE: Grim January For Most Retailers, Same-Store Sales Show

By William Spain

CHICAGO (Dow Jones) -- Most U.S. retailers, including Gap Inc., Target Corp. and Macy's Inc., reported weak January same-store sales Thursday as soaring unemployment and the deepest recession in three decades led consumers to retrench even as Wal-Mart Stores Inc. bounced back with a gain for the month.

The number of new claims for state unemployment benefits surged to their highest level since 1982, according to official data released Thursday, a further sign that the U.S. labor market is deteriorating at a rapid rate. Initial jobless claims rose 35,000 to a seasonally adjusted 626,000 in the week ended Jan. 31, the Labor Department reported. This put the number at the highest level in 26 years.

Meanwhile, the four-week average of new claims rose by 39,000 to 582,250. The four-week average draws the attention of economists and investors because it smoothes out distortions caused by bad weather, strikes or the timing of holidays. It is now at the highest level since Dec. 4, 1982.

Wal-Mart (WMT) said January same-store sales -- those at outlets open at least a year -- rose 1.5%, or 2.1% excluding fuel, while total sales were up 1.8% to $27.7 billion.

That was ahead of the average estimate of analysts polled by Thomson Reuters calling for 1.1% same-store sales growth. Bentonville, Ark.-based Wal-Mart also said it will now provide performance targets four times a year, rather than each month.

"We believe this guidance is a more appropriate measure for our investors, particularly in volatile times when consumer swings are more difficult to predict," Wal-Mart said in its sales report. "This is more consistent with the long-term view we take on our business."

Looking ahead, Wal-Mart expects U.S. same-store sales without fuel during the period from January 31 through May 1 to increase by between 1% and 3%.

Discount rival Target (TGT) posted a 3.3% drop in January same-store sales, not as dire as the 5.5% decrease that had been projected, while total sales for the period ticked up 0.8% to $4.14 billion. The company added that it expects to report fourth-quarter earnings that are "somewhat lower" than analysts' consensus estimate of 86 cents a share, citing pressure from holiday markdowns and the impact of recent job cuts.

Things were not so good at the more upscale Macy's (M), the department-store operator whose January same-store sales fell 4.5%. Still, the consensus view had been for a monthly decrease of 6.3%.

Total sales for the four weeks ended Jan. 31 fell 4.7% to $1.213 billion.

That means that total sales for the company's full fiscal year were $24.9 billion, down 5.4%, while same-store sales slipped 4.6%. Macy's recently announced a raft of layoffs to deal with the downturn while also promising to focus on a "localization" program to drive sales.

"Given the poor macro-economic environment, [the company] continues to manage its business conservatively to ensure inventory, expenses and capital expenditures are aligned with sales assumptions for 2009," Macy's said in a statement.

"The company ended the year with approximately 7.4% lower inventory on a comparable-store basis and believes its assortments are well-positioned to deliver value and newness going into the spring season," the company said.

Even worse further down the retail food chain

Meanwhile, Gap Inc. (GPS) reported a whopping 23% drop in January same-store sales -- worse than the expected 15.4% drop. Net sales generated by the apparel retailer fell 19% on the month to $757 million.

Still, Gap said that it now expects earnings for fiscal 2008 to come in at $1.32 to $1.33 a share, as opposed to management's prior view of $1.27 to $1.30 a share, largely on the back of cost cuts.

At Dillard's (DDS), same-store sales fell 12%, double the pace analysts had expected, while total sales decreased 13% to $376 million. Ladies' apparel and accessories, along with juniors' and children's apparel, ranked among the weakest categories.

For J.C. Penney (JCP), same-store sales fell 16.4% -- nearly five percentage points worse than the analyst consensus -- while January's total sales slumped 15.5% to $983 million. The department-store operator said it now expects earnings for the fourth quarter to be in a range of 90 cents to 93 cents per a share, at the low end of its previous forecast of 90 cents to $1.05 a share

And teen-wear retailer Abercrombie & Fitch (ANF) also took it in the neck, albeit not as badly as had been expected. Same-store sales fell 20% last month, better than the 26.8% expected decline, while total sales fell 13% to $191.5 million.