After weeks of hoping for a Christmas miracle, U.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 percent 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 - probably declined 1.2 percent.
That number 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.
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.
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 percent and 4 percent, respectively.
Department stores of all kinds, as well as specialty apparel retailers, continued to struggle. Sales at Neiman Marcus and Bergdorf Goodman stores tumbled 31.2 percent from December 2007 - lower than the group's October and November sales figures. Nordstrom's sales were down 10.6 percent.
Sales at mall retailers also fell by double-digits, including Abercrombie & Fitch, down 24 percent; American Eagle Outfitters, off 17 percent; Gap, down 14 percent; Wet Seal, 12.5 percent lower; Zumiez , down 12.3 percent; and Limited Brands and Pacific Sunwear, each down 10 percent.
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 were down 8.1 percent at J.C Penney, 7.3 percent at Sears Holdings, 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 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.
Still, some niche retailers rose above the gloom. Sales at Aeropostale, the low-priced casual apparel store, were up 12 percent.
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. Sales at Children's Place and Ross Stores were flat.
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 all 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 but likely eroded their profit margins. For instance, Retail Metrics said industry earnings in the fourth quarter of 2008 will likely fall at least 19.3 percent when Wal-Mart is included, or 27.5 percent without 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 like 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.
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, the comScore chairman, said in a statement last week.
