Economic Optimism Falls To 1-Year Low As Jobs Lag Growth and Bargain-Seeking Shoppers, Cost Control Help Discounter Thrive

The gauge dropped 1.4 points from February to 45.4, the lowest since March 2009 and just 1 point above the level in December 2007, when the recession began. Readings below 50 signal pessimism. The six-month outlook sank 2.3 points to 46.4, also a year low.

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The economy grew at a 5.9% annual rate in Q4, largely on companies paring inventories at a slower pace. But many economists expect Q1 growth to slow amid a raft of weaker-than-expected data and tight credit. Meanwhile, job losses have continued.

“You’re having a situation where the economic horizon is not very clear,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD’s polling partner.

Yet Americans keep spending despite the gloom. February same-store sales climbed 4.1% vs. a year earlier, the best in more than two years even amid heavy snowstorms. The S&P Retail Index has risen to its highest level since November 2007. [Read the full article]

With consumers still in bargain-hunting mode, Big Lots was able to increase sales at stores open two years or more by a very healthy 5.1%. That easily blew through the chain’s own guidance of 3.5% to 4.5%. New store additions swelled total sales growth to 7.1%.

A strong sales burst the last three weeks of January helped the chain top its own guidance, CEO Steve Fishman said in announcing results. Management also pointed to a good sales start to the new quarter in February. This, despite winter storms in many parts of the country.

Aided by a broad range of internal economies, Big Lots posted improved margins and earnings in the fourth quarter. Excluding one-time items, income from continuing operations came in at $1.31 per share, up from $1.00 a year ago.

Along with the dollar stores and other discounters, Big Lots has benefited from changing consumer shopping habits. “There is a shift in market share towards more value-focused retailers,” Champine said. [Read the full article]

Sales at the upscale chain rose 19% the best gain in nine quarters in the fiscal Q4 to $460.6 million. Analysts had expected $443.1 million. Sales at stores open at least a year climbed 17%.

And J. Crew did not have to offer the deep discounts and promotions that it did a year ago to clean out stock. Gross margins soared to 43.9% from 27.6% a year ago.

Clothing retailer J. Crew easily beat expectations as sales rose 19% in fiscal Q4 to $460.6 million.

“When you have the right product, and inventories are lean, you can get close to full price,” said Needham Co. analyst Christine Chen after seeing the numbers.

Quarterly profit was 61 cents a share, reversing last year’s 22-cent loss, when consumers were putting away their credit cards and staying home.

J. Crew beat Wall Street EPS forecasts of 46 cents by 33%. But that’s nothing unusual. It’s trounced views by 16%, 93%, 220% and 19% in the last four quarters. [Read the full article]

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