A Dismal December

Holiday season weakest since at least 1969, retailers report

NEW YORK (AP) — Retailers reported dismal sales figures for December on Thursday as even Wal-Mart Stores Inc., one of the bright spots in the industry, finally buckled under the pressures of the deteriorating economy.

As the figures confirmed fears that the holiday season was the weakest since at least 1969, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.

The deep discounts that began well before the official start of the holiday season spurred a number of merchants to cut their earnings outlooks, fueling more concerns about the health of the industry.

Among the many retailers that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, luxury retailer Saks Inc., Gap Inc., and central Ohio retail companies Abercrombie & Fitch Co. and Limited Brands Inc. But the biggest surprise came from Wal-Mart, the world’s largest retailer, which posted a smaller sales gain than what Wall Street expected 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.”

The International Council of Shopping Centers-Goldman Sachs same-store sales tally dropped 1.7 percent for December, worse than the already reduced estimate for a 1 percent decline. That means that same-store sales for the November-December period dropped 2.2 percent, making it the weakest holiday period since at least 1969, when the index began.

For the calendar year, retail sales rose on average a modest 1 percent, the weakest year since at least 1970, according to Michael P. Niemira, chief economist at the ICSC. The tally is based on same-store sales, or sales at stores opened at least a year, which are considered a key indicator of a retailer’s health.

Wal-Mart, blaming the weak economy and severe winter conditions, said that same-store sales rose 1.2 percent. Excluding the impact of declining gasoline prices at the pump, the gain was 1.7 percent. Analysts surveyed by Thomson Reuters had expected a 2.8 percent increase, excluding fuel.

“The current economy remains challenging for all businesses, and retailers have already seen customers pull back on discretionary spending,” Wal-Mart’s Chief Financial Officer Tom Schoewe said in a statement. “Consumers are very focused on value and necessities.”

Wal-Mart noted that health and wellness items were the categories that primarily fueled sales. Electronics sales were solid, while the apparel and jewelry business was weak.

Given the disappointing sales and higher-than-anticipated expenses, Wal-Mart said it now expects to earn 91 cents to 94 cents per share in the fourth quarter from continuing operations. That’s down from its previous projected range of $1.03 per share to $1.07 per share. Analysts surveyed by Thomson Reuters expected $1.06 per share.

Discount rival Target Corp., which has been stumbling because its merchandise focuses more on nonessentials like trendy clothes, announced a 4.1 percent decline in same-store sales, better than the 9.1 percent drop that Wall Street analysts predicted.