Not-so-Merry Christmas for retailers

NEW YORK (AP) – December retail sales were so dismal that even mighty Wal-Mart fell short, making it all but certain it was the worst holiday season in four decades.

The malaise cut through practically all areas from kitchen gadget stores to apparel retailers as shoppers, grappling with tightening credit and rising layoffs, focused on smaller purchases and the deepest discounts.

Among the many that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, and Limited Brands Inc. But the biggest surprise came from Wal-Mart, the world's largest retailer, which posted sales below Wall Street estimates and cut its fourth-quarter earnings outlook.

"This suggests that the lower income group is feeling the pinch more than we thought and this is clearly reflected in the lower-than-expected numbers at Wal-Mart," said Ken Perkins, president of research company RetailMetrics LLC. "I think it says the economy is in more dire straits than we thought."

Macy's sales at stores opened for more than a year, or same-store sales, dropped 4 percent. Combining November and December, sales fell 7.5 percent, the retailer said. Macy's also announced it was closing 11 stores it said were underperforming at a cost of $65 million to be charged to fourth-quarter results.

Wal-Mart's December same-store sales rose 1.7 percent, including a 1.9 percent rise at Walmart U.S. and a 0.1 percent rise at warehouse operator Sam's Club. Total sales for the five weeks ended Jan. 1 edged down 0.1 percent to $46.51 billion from $46.57 billion last year.

Analysts polled by Thomson Reuters, on average, had expected a rise of 2.8 percent and Wal-Mart had predicted a rise between 1 percent and 3 percent.

Wal-Mart also said it now expects earnings from continuing operations in the fourth quarter to be 91 cents to 94 cents per share, down from the previous forecast for $1.03 to $1.07 per share. Analysts expect earnings of $1.06 per share.