A Brutal December for Retailers

Network News

X Profile
View More Activity
By V. Dion Haynes and Howard Schneider
Washington Post Staff Writers
Friday, January 9, 2009

Despite the most aggressive holiday price slashing in memory, shoppers largely remained stingy about spending their cash, spurring the biggest December decline in U.S. retail sales since record-keeping began nearly 40 years ago.

Sales slid 1.7 percent compared with December 2007, according to a report issued yesterday by the International Council of Shopping Centers, the most it's ever dropped since researchers began tracking the data in 1970. The report is based on sales at 36 chain stores that have been open at least a year.

Department stores, specialty apparel shops and even wholesale clubs were hit. December sales decreased 8 percent at J.C. Penney, 24 percent at Abercrombie & Fitch and 2 percent at Costco, compared with the year before. Macy's sales dropped 13 percent in November and fell another 4 percent in December.

Same-store sales at Wal-Mart did increase in the month compared with December 2007, but the 1.7 percent rise was less than expected at a time when the giant discounter was poised to become the default choice for shoppers in search of holiday bargains. The result prompted the company to reduce its profit estimates for 2008.

With a dizzying array of buy-one-get-one-free offers and rebates, 2008 was the year of the bargain. Retailers offered deep discounts -- 50 to 70 percent off -- much earlier than they had in the past and continued trimming prices throughout the season. But the housing slump, Wall Street collapse, bank failures, credit crunch, shrinkage of retirement and investment funds, and loss of millions of jobs battered consumers' confidence.

"I've never seen a holiday season as bad as this, and I've been following retail for over 50 years," said Walter Loeb, president of Loeb Associates, a retail consulting firm in New York.

"Before Christmas, the retailers began marking down everything but the light fixtures," Loeb said. "It comes at a cost. Markdowns affect the profitability of stores and there will be several retailers who won't make it."

Macy's cut its estimated earnings for 2008 after determining that same-store sales in the fourth quarter, including the all-important Christmas season, would fall by a larger-than-expected 7.5 percent. The company said it would close 11 stores -- though none in the Washington area -- in response to the downturn in sales. Sears said that U.S. same-store sales fell 12.8 percent.

While department stores have struggled in recent years against the lower prices offered at discount chains and big-box stores, the current economic downturn spread the pain throughout the retail sector. Walgreens, which posted a 4.9 percent sales increase, announced plans yesterday to cut its corporate staff by 1,000 this year to reduce its overhead by more than $500 million in fiscal 2010.

About 40 percent of retailers' annual earnings come from holiday sales -- so an off season can be disastrous. Already, Linen 'n Things has virtually gone of business, Circuit City has closed 155 stores and filed for bankruptcy protection and Borders has reorganized its upper management amid slow holiday sales and warnings that its stock would be delisted by the New York Stock Exchange.

Analysts said they expect to see more stores fail.

The International Council of Shopping Centers estimates that 148,000 retail stores closed in 2008 -- the most since 2001 -- and projects that 73,100 will shut down during the first six months of this year. The organization also estimates that the closures will result in the loss of 625,000 to 800,000 retail jobs.


© 2009 The Washington Post Company

Network News

X My Profile
View More Activity