Economic gloom, as expected, dragged down Christmas sales at retailers throughout the U.S., with discounters like Wal-Mart, luxury vendors like Neiman Marcus and pretty much everybody in between saying that their holiday season results were poorer than expected.
In the first wave of what is expected to be a steady flow of bad news from the retail sector in early 2009, individual companies yesterday began reporting December results and announcing steps to cope with the disappointing sales and profits. The figures are probably a sign of worse things to come for merchants in 2009 - not only more sharp discounts but probably fewer stores.
The nationwide picture was bleak: Same-store sales were down 1.7 percent for December, with many chains reporting declines of 10 percent and more, according to an index released yesterday by the International Council of Shopping Centers.
For November and December combined, the drop was 2.2 percent - the weakest holiday shopping season since the index was started in 1969. For all of 2008, sales rose just 1 percent, the weakest in at least 38 years.
"The blanket that has covered the North American consumer that has kept them from spending is heavier than expected," said Dean Hillier, partner in the retail practice of consulting firm A.T. Kearney.
The malaise was widespread - kitchen gadgets to jewelry to clothes. Several stores such as Toys R Us and Macy's said business improved in the last weeks of December as shoppers pounced on the best deals, but people still cut back overall.
Among the many stores that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears, as well as Abercrombie & Fitch, Gap Inc. and Saks.
Department store chain Macy's cut its estimated earnings for 2008 after determining the same-store sales in 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 Baltimore area - in response to the downturn in sales. Sears said that same-store sales in the U.S. fell more than 12 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.
Same-store sales at Wal-Mart did increase in December compared to the same period a year ago, but the 1.7 percent rise was less than expected at a time when the giant discounter was expected to become the default choice for shoppers in search of holiday bargains. The result prompted the company to reduce its profit estimates for 2008.
Wal-Mart said electronics sales were solid, clothing and jewelry sales were weak, and health and wellness items were the strongest.
Ken Perkins, president of research company RetailMetrics, expects Wal-Mart to cut prices even further, fueling price wars. That's good news for shoppers.
Rival store Target, which had been stumbling because it depends more on nonessential items like trendy clothes, said its same-store sales dropped less than expected. Target cut prices to gain market share and clear out inventories, but it says those moves will hurt its fourth-quarter profit.
The Associated Press and The Washington Post contributed to this article.