Weak holiday sales hurt retailers

A customer checks out at a Target store in Lombard, Ill., in this Dec. 6, 2007 file photo. Stores are reporting weak holiday numbers, with Target Corp., the nation's No. 2 retailer, forecasting worse than expected sales.

M. Spencer Green/The Associated Press, file photo
Published: Thursday, January 10, 2008 at 10:53 a.m.
Last Modified: Thursday, January 10, 2008 at 10:53 a.m.

NEW YORK - An already weak holiday shopping season turned out to be even worse than expected for many of the nation's retailers, who reported Thursday they had disappointing sales results for December. The poor performance raised more concerns about consumer spending, and in turn, the health of the economy.

The weak results came from across all retail categories, and prompted many stores to lower their fourth-quarter earnings forecasts. Particularly hard hit were apparel sellers including Limited Brands Inc. and AnnTaylor Stores Corp., as well as department stores including Macy's Inc. Among the few bright spots was Wal-Mart Stores Inc., which posted results that exceeded Wall Street expectations, as it benefited from shoppers trading down to cheaper stores amid higher gas prices and a slumping housing market.

"It's weaker than expected," said Jharonne Martis, a retail analyst at Thomson Financial. "There's definitely a consumer spending slowdown." But she added that she's waiting to see how sales fare in January, when stores benefit from consumers redeeming their gift cards. Retailers don't record sales of gift cards until they are redeemed.

According to a preliminary sales tally by Thomson Financial, 19 retailers missed December projections, while nine beat forecasts and one met expectations. The tally is based on same-store sales, or sales at stores open at least a year, considered a key indicator of a retailer's health.

A number of chains, including Macy's, saw their sales depressed in December in part by a quirk in the calendar, which pushed the post-Thanksgiving shopping week into November rather than December. Analysts say it is best to look at the combined November-December figures to get a better picture.

Still, it was clear that the slowing economy made shoppers frugal during the holiday shopping season.

A big worry is the weakening of the job market,which had helped prop up spending for most of 2007. On Friday, the Labor Department's jobs report showed that hiring practically stalled in December, driving the nation's unemployment rate up to a two-year high of 5 percent.

Wal-Mart, the world's largest retailer, posted a 2.4 percent increase in same-store sales, exceeding the 1.8 percent forecast of analysts polled by Thomson Financial. But the discounter said that its fourth-quarter results will be "pressured by higher interest expense" compared to last year.

Costco Wholesale Corp. reported a 7 percent increase in same-store sales, better than the 5.6 percent estimate.

Macy's posted a 7.9 percent drop in same-store sales, worse than the 6.5 percent decline anticipated. For the November-December period combined, Macy's same-store sales were down 1.1 percent.

Upscale department store retailer Nordstrom Inc. reported that same-store sales fell 4 percent, slightly beating expectations for a 4.2 percent decline.

Limited posted a 8 percent drop in same-store sales, worse than the 4 percent Wall Street expected. Based on weak sales, it said it is likely that fourth-quarter earnings will fall toward the low-to-midpoint of its previously announced projections.

AnnTaylor posted a 9.4 percent decline in same-store sales, much larger than the 1.9 percent drop analysts were expecting. It cut its fourth-quarter earnings estimates.

Maternity apparel retailer Mothers Work Inc. reported that same-store sales fell 7.6 percent, worse than the 0.5 percent analyst estimate.

Pacific Sunwear of California Inc. posted a 2.8 percent decline in same-store sales, a little bit better than the 3.1 percent forecast.

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