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Retailers report dismal December sales
2009-01-08
NEW YORK - Retailers reported dismal sales figures for December on Thursday as even Wal-Mart Stores Inc., one of the bright spots in the industry, finally buckled under the pressures of the deteriorating economy. As merchants reported their sales figures, confirming fears that the holiday season was the weakest in four decades, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers. The deep discounts that began well before the official start of the holiday season spurred a number of merchants to cut their earnings outlooks on Thursday, fueling more concerns about the health of the industry. Among the many retailers that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, luxury retailer Saks Inc., Gap Inc., Abercrombie & Fitch Co. . But the biggest surprise came from Wal-Mart, the world's largest retailer, which posted a smaller sales gain than what Wall Street expected and cut its fourth-quarter earnings outlook. "This suggests that the lower income group is feeling the pinch more than we thought and this is clearly reflected in the lower-than-expected numbers at Wal-Mart," said Ken Perkins, president of research company RetailMetrics LLC. "I think it says the economy is in more dire straits than we thought." Wal-Mart, blaming the weak economy and severe winter conditions, said that same-store sales, or sales at stores opened at least a year, rose 1.2 percent. Excluding the impact of declining gasoline prices at the pump, the gain was 1.7 percent. Analysts surveyed by Thomson Reuters had expected a 2.8 percent increase, excluding fuel. "The current economy remains challenging for all businesses, and retailers have already seen customers pull back on discretionary spending," Wal-Mart's Chief Financial Officer Tom Schoewe said in a statement. "Consumers are very focused on value and necessities." Wal-Mart noted that health and wellness items were the categories that primarily fueled sales. Electronics sales were solid, while the apparel and jewelry business was weak. Given the disappointing sales and higher-than-anticipated expenses, Wal-Mart said it now expects to earn 91 cents to 94 cents per share in the fourth quarter from continuing operations. That's down from its previous projected range of $1.03 per share to $1.07 per share. Analysts surveyed by Thomson Reuters expected $1.06 per share. Meanwhile, Costco Wholesale Corp. reported a 4 percent decline in same-store sales, but excluding the impact of lower gas prices and currency fluctuations, it actually posted a 4 percent gain. Lower gas prices are good for consumers, but reduce the sales volume for retailers like Costco. Among department stores, Sears Holdings said its December same-store sales dropped 7.3 percent, weighed down by a 12.8 percent drop at domestic Sears stores. The company, whose brands include Kenmore and Craftsman, said Kmart same-store sales fell 1.1 percent. Macy's Inc. reported that same-store sales fell 4 percent in December, less than the 5.3 percent decline that analysts had expected. For the combined November-December period, same-store sales were down 7.5 percent. But the department store chain cut its fourth-quarter and full-year earnings outlook due to heavy markdowns and announced plans to close 11 underperforming stores. The chain operates more than 840 Macy's stores. Luxury retailer Saks Inc., which operates Saks Fifth Avenue, fared far worse, as affluent shoppers were spooked by the financial meltdown that resulted in massive layoffs on Wall Street and shrinking investment portfolios. Same-store sales dropped 19.8 percent for the month, worse than the 10 percent drop that Wall Street expected. Limited Brands Inc. posted a 10 percent drop in same-store sales, larger than the 7.8 percent decline analysts predicted. The company also lowered its fourth-quarter earnings outlook. Gap Inc. suffered a 14 percent drop in same-store sales, worse than the 9.3 percent decline that analysts had expected. It also cut its earnings outlook. "Customers waited until late in the month to shop and we faced a highly competitive promotional environment," said Gap's Chief Financial Officer Sabrina Simmons. Teen apparel retailers also suffered through a miserable holiday season. Wet Seal Inc. reported a 12.5 percent decline, larger than the 11.9 percent analysts expected, as its Arden B chain dragged down results. Abercrombie & Fitch Co. reported a 24 percent drop, in line with the 23.5 percent drop analysts had forecast. Kitchen gadget chain Williams-Sonoma Inc., which didn't break out December figures, said its same-store sales dropped more than 24 percent for the eight-week period ended Dec. 28 and warned its fourth-quarter profit will likely come in at the low end of expectations.
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