Stores Report Disappointing Dec. Sales

A shopper at a Walmart in North Fayette, Pa., loads her purchases into her car on Thursday Jan 4, 2007. Wal-Mart Stores Inc. posted better-than-expected results for December following a dismal November, but the discounter's overall holiday season was the worst on record, analysts said. (AP Photo/Gene J. Puskar) (Gene J. Puskar - AP)

NEW YORK -- December's lackluster retail sales left the nation's merchants wondering Thursday about their chances for a turnaround in 2007 _ even as several big merchants were scaling back their fourth-quarter earnings expectations.

As retailers reported their sales for the month and the entire holiday season, many blamed their disappointing showings on mild weather that depressed sales of winter wear like heavy coats, and on consumers who waited until just before Christmas to do their shopping. But it was clear that shoppers, worried about the housing market and energy prices, were waiting to get the lowest possible prices _ a cautious stance that's expected to continue this year.

December's disappointments crossed all retail categories, from Limited Brands Inc. to jewelry chain Zales Corp. and could be a harbinger to weak profit reports when retailers release their fourth-quarter results next month; retailers' fiscal years generally end in late January. A number of retailers including Zale, BJ's Wholesale Club Inc., Gap Inc. and AnnTaylor Stores Corp. cut their profit outlooks Thursday because they were forced to slash prices to lure shoppers.

Wal-Mart Stores Inc. posted better-than-expected results for December following a dismal November, but the discounter's overall holiday season was still its worst ever, analysts said.

"The season depended not on what the current economic conditions were but what consumers perceived," said Michael P. Niemira, chief economist at International Council of Shopping Centers. He noted that while gas prices declined and the housing market's slump appeared to be leveling off, "these concerns were pretty much ingrained in the consumers."

The International Council of Shopping Centers-UBS sales tally posted a 3.1 percent gain in December, in line with original expectations. That means for the November-December period, same-store sales averaged a 2.8 percent gain, slightly below the original forecast of 3 percent. The tally is based on same-store sales, or sales at stores open at least a year; these sales are the industry's standard for measuring retailers' health.

"The tone was more pessimistic than optimistic," Niemira said. "I think when you look back, November-December may be a good bellwether for the industry performance for this year."

For 2006, the ICSC-UBS survey averaged a 3.7 percent gain in same-store sales, but Niemira expects the pace to slow in the new year to about 3 percent.

Although retailers had a good start during the Thanksgiving weekend, many stores struggled in December and a shopping surge just before and after Christmas wasn't enough to make up for lost sales. Merchants tried to stick to their previously planned discounts, but at the season's end they resorted to bigger-than-anticipated cuts to pull shoppers in.

Balmy wather across much of the country meant consumers were disinclined to buy coats and gloves, depressing sales at many apparel stores. Declining gasoline prices and a steady job market should have helped merchants, but Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., believes the recent drop in home equity loans _ a big source of buying power over the past few years _ curtailed spending among middle-income shoppers.

Sales figures were also hurt by two big shifts in the way consumers shop: the increasing popularity of gift cards and the growing migration toward online buying, which is not reflected in same-store results. Gift card sales are only posted when they are redeemed rather than bought.

Wal-Mart, which warned early in the season that its same-store sales gain would be no better than 1 percent, posted a 1.6 percent increase for December. Retail industry analysts polled by Thomson Financial expected 1 percent gain.