"Lower-income households were under strain, far more than upper-income households, where the job gains and income growths remains," said Frank Badillo, a senior economist at Columbus, Ohio-based research firm Retail Forward.
The flood of December sales results show that same-store sales overall were up just 3.2%, below the 3.6% registered in 2005, according to Retail Forward.
Nordstrom jumps 9%
But the luxury department-store channel beat those averages by a wide margin. Nordstrom reported a hefty 9% jump in same-store sales this December on sales of $1.2 billion. At Saks Fifth Avenue, same-store sales jumped a whopping 11.1% on sales of $444 million. Management pinned the gains on strong apparel sales -- despite industry-wide softness in the category.
The department-store resurgence wasn't shared by chains catering to the less affluent. Federated Department Stores, in its first season with a national advertising campaign behind its Macy's banner, came in below forecasts with same-store sales of 4.4%, not the 5% to 8% expected by analysts. Overall sales fell 8.5% to $5 billion. At Kohl's, same-store sales came in at 3%. At J.C. Penney, same-store sales were 2.6%.
For Gap Inc., same-store sales declined 8% in December across the company's brands and 3,184 stores. The only positive same-store gain came from its Banana Republic division, up 2% compared to a 5% drop in 2005.
Wal-Mart, after warning same-store sales could be as low as 1%, bettered the forecast at 1.3%, but it was still a poor showing compared to the 4.4% rise at rival Target Stores. Costco, which also caters to a high-income demographic, reported strong results, with same-store sales at 9% on sales of $7.2 billion in December, in part due to strong demand for its flat-panel TVs. Although far lower than Costco, Sam's Club, which launched its first-ever national TV campaign during the holidays, saw same-store sales growth of 3.5% during December on sales of $4.8 billion, compared to 3.2% during the same period last year.
Despite the disappointing results overall, some industry analysts remain optimistic a surge in gift-card redemptions and a bout of cold weather could save some retailers. "The holiday season doesn't end in December anymore," said Phil Rist, a retail analyst at Big Research, a Columbus-based retail-research firm, which has projected $24.8 billion in gift cards were sold this year, compared to just $18.5 billion in 2005.
"There's potentially a silver lining here," said Pat Conroy, vice chairman of Deloitte's retail consulting business, who added that online sales in addition to gift-card redemptions may lift fourth-quarter results. "It could be a pretty happy January for a lot of retailers if the weather turns cold and gets people in that winter buying mode."
'Some wiggle room'
So what were the lessons of a season that saw heavy discounting and promotions, yet soft results?
Retailers "have to hunker down and keep inventory levels very lean," said James Hurley, a research analyst at the Telsey Advisory Group, a retail-research firm based in New York. The final verdict on the season won't be handed down until Jan. 12, when the U.S. Department of Commerce releases its numbers. The National Retail Federation will reconcile its forecast with those results then. The trade group had forecast a 5% gain in overall holiday sales for November and December.
"We do have some wiggle room there for December to come in at the low end, somewhere between 3% and 5%," said Ellen Davis, a senior director at the industry trade group.