Holiday sales slumped Retailers are hurt, but not devastated


The heavyweights of the U.S. retail industry reported holiday sales numbers yesterday that showed the recession had won a round, but analysts were cheered that it wasn't a knockout.

With consumer confidence at its lowest level since 1982, the retail industry was expecting a lousy performance, and lousy is what it got. But industry analysts said the results were no worse that expected.

"Going into the season with such lousy expectations, you have to be impressed that we didn't fall totally out of bed," said Budd Bugatch, director of investment relations at Ferris Baker Watts in Baltimore.

Nevertheless, few would deny the results were weak. "Consumers tightened their purse strings, pulled in their horns and retreated from the malls," said Kenneth M. Gassman Jr., retail analyst at Davenport & Co. in Richmond, Va.

Perhaps the most telling number was this: Wal-Mart, which has cranked out double-digit increases in good times and bad seemingly forever, posted only a 5 percent gain in comparable-store sales -- that is, sales at stores that were in existence a year ago. Many retailers would have welcomed such a result, but for the nation's leading retailer it was the equivalent of Cal Ripken Jr. hitting .230.

"It was not what the market expected, and the market took it down," said Mr. Gassman. Wal-Mart stock fell $1.375 to close at $57.75 on 2 1/2 times its normal volume.

There were many retailers that posted far more depressing comparable-store sales numbers -- regarded as a more sensitive gauge than total sales, which are often skewed by temporary boosts from new-store openings.

For instance, Merry-Go-Round, the formerly high-flying Maryland-based apparel merchant, landed with a thud as it posted a 4 percent decline in comparable-store sales. Its total sales, however, increased 13 percent because of expansion through new store openings and acquisitions.

The entire department store category struggled, in terms of same-store sales, with May Department Stores, parent of Hecht's, down 1 percent and Sears, Roebuck and Co. off by 1.8 percent.

"This is a reflection of the environment," Mr. Gassman said. "Department stores don't offer the perception of value." And even those meager numbers were achieved only with heavy discounting, for which the chains will pay a heavy price when they report fourth-quarter earnings, he said.

Some other major department store chains posted results that were barely positive, including J. C. Penney, up only 0.4 percent, and Dayton Hudson, up 1.5 percent. However, those totals lagged behind the overall rate of inflation -- 2.9 percent for the consumer price index through November -- which translates into a loss in real terms.

"Anything above 3 percent, you know you're gaining on inflation," said Mr. Bugatch.

By that measure, there were several major retailers who made impressive gains -- most of them coming from the discount end of the spectrum.

The Gap Inc., a value-oriented clothing retailer based in San Francisco, soared to a 14 percent gain in comparable-store sales.

Another gainer was Value City, a Columbus, Ohio-based discounter with three stores in the Baltimore area, which had a sales increase of 9.2 percent. Toys "R" Us, the Paramus, N.J.-based giant, put presents under a lot of trees as it posted a 7.9 percent gain for November and December.

The federal government has yet to release its computation of December retail sales, but Mr. Gassman said that yesterday's totals indicate it will be about what analysts expect -- a small gain, but less than the rate of inflation.

"It looks like it's probably going to come in between 1.5 percent and 2 percent," he said.

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