December Sales Were Bleak; Experts Can See Bottom

While even Walmart had the blues last month, it looks as if December retail sales results aren't as bad as many feared. TNS Retail Forward, a consultancy based in Columbus, Ohio, reports that same-store sales slipped 1.5%, but that the decline was not as painful as November's fall of 2.5%. What's more, Frank Badillo, Retail Forward's senior economist, believes that December's numbers "show signs that we are bottoming out."

"We saw so much initial cutting back in September and October, given all the uncertainty," he says. "But now that we've gone beyond that initial tightening, shoppers are in a holding pattern in the way they spend. They are no longer looking for new ways to cut back, and that's why we haven't seen another drop-off," he says. "Yes, the numbers are still bad, but the fact that they didn't get even worse indicates that shoppers may be finding a bottom."

In addition, he says, as consumers have spent a few months realizing that the sky may not exactly be falling on them, "they've also been tempted by the deep discounts stores are dangling in front of them. The fact that spending and traffic did pick up the few days before Christmas and just after the holiday shows that people are willing to spend, but they're willing to wait, too."



Still, the results offered little in the way of holiday cheer. At Walmart, among the strongest performers since the downturn began, same-store sales in the U.S. gained just 1.9%--below analysts' expectations--and the company lowered its financial estimates. "Electronics sales were solid, while apparel and jewelry were soft," executives for the Bentonville, Ark.-based retailer say in its release. "Weather conditions slowed sales in several areas of the country the week before Christmas, forcing the closure of 40 stores for periods ranging from two hours to nine days." Rival Target posted a 4% decline in sales.

While sales fell at virtually every clothing chain, the sharpest declines were at teen retailers, with sales tumbling 24% at Abercrombie & Fitch, 17% at American Eagle Outfitters, 12.5% at Wet Seal, and 10% at Pacific Sunwear. A few, however, did post increases, with Buckle gaining 13.5%, Aeropostale 12%, and Hot Topic, 4.3%.

Department stores fared poorly, too, with every single chain in the Retail Forward index posting declines. Luxury stores had the steepest drops, with sales at Neiman Marcus plunging 27.5%, Saks's results falling 19.8%, and Nordstrom dropping 10.6%. But sales fell at lower-end department stores, too, with same-store sales sinking 12.8% at Sears, 9.6% at Gottschalks, 8.1% at JCPenney and 4% at Macy's. Separately, the Cincinnati, Ohio-based Macy's says it will shut down 11 underperforming stores.

Even the warehouse stores had soft results, with Wal-Mart's Sam's Club gaining just 0.1%, and Costco's sales falling 4%. BJ's Wholesale Club gained 1.6%.

Badillo expects a new stability going forward. Because sales were weak around the holiday of 2007, moving into 2009 will mean easier comparisons for stores, he says. "We're not expecting any big rebounds or sharp improvements, but things aren't going to get worse."

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