Holiday Sales Were Dismal, New Data Confirms
The New York Times
Published: Jan 09, 2009
After weeks of hoping for a Christmas miracle, the nation’s retail chains confirmed Thursday that they suffered one of the worst holiday shopping seasons in decades. Most stores reported sales declines and many lowered their earnings guidance, including Wal-Mart, the world’s largest retailer.
Sales in November and December are closely watched because they account for 25 to 40 percent of many retailers’ annual sales, according to the National Retail Federation, an industry group. And typically, those sales are robust.
But this past Christmas was anything but typical.
Ken Perkins, president of Retail Metrics, a research firm, said that for the entire industry, December sales at stores open at least a year — known as same-store sales and a barometer of retail health — fell 0.9 percent. That number is a little better than Mr. Perkins expected but comes on top of even-weaker November sales, when chains posted a 2.7 percent decline, according to the International Council of Shopping Centers, which began tracking year-over-year sales growth in 1970. Those numbers were propped up by some huge categories, like food and beverages, on which consumers are less likely to cut back even in a recession.
Wal-Mart, which had emerged as a rare victor, in large part because of its reputation as a low-price leader, had a same-store sales increase of 1.7 percent in December, not including fuel.
Still, the retailer missed analyst’s expectations and lowered its guidance, indicating more rocky months ahead.
Wal-Mart said Thursday that it expected little improvement next month, with January same-store sales likely to be between flat and up 2 percent.
The company was hurt by weak holiday sales at its Sam’s Club division, which caters to small business owners. Sales at Wal-Mart International were also below expectations, reflecting pressure from the global economy. Like other retailers, Wal-Mart added that its American business was stung by winter storms — in the week before Christmas some 40 Wal-Mart stores were closed for two hours to nine days.
Tom Schoewe, the company’s chief financial officer, said fourth quarter sales for Sam’s Club and Wal-Mart International were “trending below our expectations and our expenses are higher than anticipated.”
Mr. Schoewe estimated Wal-Mart’s fourth-quarter earnings at 91 to 94 cents a share, down from the company’s previous guidance of $1.03 to $1.07. (A loss of about six cents a share is the result of an after-tax charge for the settlement of 63 class-action wage and hour lawsuits against Wal-Mart.)
To keep consumers coming to its stores in the usually slow months after the holidays, Wal-Mart is continuing to aggressively cut prices. On Wednesday, the retailer said it was lowering the cost of a variety of items that might help people keep their health and fitness resolutions — like a Gold’s Gym elliptical machine for $297 (down from $327) and an eight-pack of Yoplait Light yogurt for $3.50 (down from $4.28).
A Wal-Mart rival, BJ’s Wholesale Club, also fared well in December, with sales rising 5.9 percent, excluding fuel. Other discounters, like Target and Costco, were softer, with sales down 4.1 and 4 percent.
Department stores of all ilk, as well as specialty apparel retailers, continued to struggle. Many acknowledged that consumers were still in hibernation and only buying deeply discounted merchandise.
Sales in the specialty retail stores segment of Neiman Marcus, which includes Neiman Marcus stores and Bergdorf Goodman, tumbled 31.2 percent — lower than its October and November sales figures. Sales at Saks sank 19.8 percent. Both high-end chains had improved their same-store sales in November but did not manage to continue the trend in December. At Nordstrom, sales were down 10.6 percent, though that was better than its 15.9 percent decline in November.
Sales at mall retailers also fell by double-digits, including Abercrombie and Fitch (down 24 percent), American Eagle Outfitters (down 17 percent), Gap (down 14 percent), Wet Seal (down 12.5 percent), Zumiez (down 12.3 percent), and Limited Brands and Pacific Sunwear (both down 10 percent).
December sales fell 8.1 percent at J.C. Penney, 7.3 percent at Sears Holdings Corporation, 5.8 at Bon-Ton, 5 percent at Dillard’s and 1.4 at Kohl’s. Macy’s said Thursday that it would close 11 stores, though its chief executive, Terry J. Lundgren, said in a statement that the closings were “part of our normal-course process to prune underperforming locations each year.” The retailer’s same-store sales fell 4 percent in December.
Analysts said liquidation sales at bankrupt retailers like Mervyns and Linens ’n Things took shoppers away from even low-priced stores like T.J. Maxx and Marshall’s. Sales at TJX Companies, Ross Stores and Children’s Place were flat.
Still, some niche retailers rose above the gloom. Sales at Aeropostale, the low-priced casual apparel store, were up 12 percent. And specialty teenage retailer Hot Topic — which struck gold by selling merchandise inspired by the cult-hit vampire film “Twilight” — had a 4.3 percent sales increase.
Retailing analysts said the economy, rising unemployment, winter storms and a dearth of compelling fashions hurt sales in December. And they noted that Thursday’s figures all but ensure a rash of bankruptcies in the next few months.
The surge began last year, when well-known chains including Circuit City, KB Toys, Mervyns, Boscovs, Steve & Barry’s, Linens ’n Things and Sharper Image filed for bankruptcy protection.
Even retailers that did not suffer double digit declines in December could be in trouble. By selling merchandise at staggeringly low prices, many stores trimmed their inventories and increased their same-store sales, but likely eroded their profit margins. For instance, Retail Metrics said industry earnings in the fourth quarter would probably fall at least 19.3 percent, or 27.5 percent, excluding Wal-Mart.
Thursday’s gloomy numbers were not a surprise. Reports trickling in from various retailing groups in the last few weeks said customer traffic and sales plummeted this holiday season compared with last year.
Holiday sales through Dec. 24 fell by double digits in major categories such as apparel, luxury goods, furniture, and electronics and appliances, according to SpendingPulse, a report by MasterCard Advisors that estimates retail sales from all forms of payment, including checks and cash.
Excluding gasoline, total retail sales were down 2 percent in November and 4 percent in December compared with the same periods a year ago.
ShopperTrak, a research group, does not report its final holiday figures until Jan. 14, but the group said Wednesday that for the entire season, customer traffic would probably decline 15 percent and sales 2.4 percent.
In late September, the National Retail Federation estimated that overall holiday sales would rise 2.2 percent. And in a press release on Nov. 30, the group reiterated that it stood by its prediction.
But the late holiday rush that many retailers had been dreaming of never came. Black Friday (the typically frenzied shopping day after Thanksgiving) and the last Saturday before Christmas were exceptions. Neither day, however, gave retailers enough of a lift to save the season.
Even e-commerce sales, usually a bright spot, are down. Online sales fell 3 percent for the season through Dec. 23, according to comScore, an Internet research firm. The company had expected holiday sales to be flat.
“This marks the first time we’ve seen negative growth rates for the holiday season since we began tracking e-commerce in 2001,” Gian Fulgoni, comScore’s chairman, said in a statement last week.
In what passes for good news these days, however, the erosion in retail sales seemed to slow a bit at the end of December. Michael McNamara, vice president for research and analysis for SpendingPulse, said Tuesday that lower prices of gasoline, extreme discounts, drier weather, pent-up consumer demand for discretionary items, and a calendar shift helped the declines in sales level off at about 20 percent.
“We were trying to look for the point,” he said, “where the numbers can at least stop getting worse.”
© The New York Times. All rights reserved. This article originally appeared in The New York Times.
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