'Twas the Holiday Season of Dismal Retail Sales

Most Segments Reported Declines, but Luxury Stores Continued Posting Gains

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NEW YORK (AdAge.com) -- The results are in, and it's official: For most retailers, it was a brutal holiday season.

Hampered by heavy promotions, cutbacks in consumer spending and six fewer selling days than last season, the majority of retailers today reported dismal December sales. Retailers in the luxury (Neiman Marcus, owner of Bergdorf, and Saks) and discount segments (Costco and Wal-Mart) managed to eke out single-digit same-store sales gains. But department stores and specialty retailers took a sales wallop, with at least one, Kohl's, posting a double-digit same-store sales slide.

'Sales were listless'
"Holiday sales were listless outside of a stellar Black Friday and the final weekend heading into Christmas," wrote Ken Perkins, a research analyst with Retail Metrics. "Facing growing macroeconomic headwinds, consumers tightened purse strings this holiday season. Traffic levels were sluggish and there was a general lack of fashion buzz and 'must have' items."

At Wal-Mart Stores, same-store sales for the five weeks ended Jan. 4 rose 2.4% in the U.S., as Wal-Mart stores increased 2.6% and Sam's Club increased 1.3%. The discounter reported a sales increase of $46.6 billion, or 8.4%, compared to $43 billion in the year-ago period, with strengths in its grocery, pharmacy and electronics areas.

Costco, meanwhile, reported a stronger-than-expected 7% jump in stores open at least a year. Total sales increased 10% to $7.6 billion for the period ended Jan. 6, compared to $6.8 billion during the same period last year.

Kohl's cited deep discounts and an aggressive clearance strategy for its 11.4% plunge in same-store sales. Overall, sales for the period ended Jan. 5 were down 3.4% to $2.67 billion from $2.77 billion in the year-ago period. Target Corp. fared slightly better, with stores open at least a year reporting a sales decline of 5% on flat sales.

Poor showing for Gap
The specialty arena was also hit hard across the board. Gap Inc. saw a 6% drop in stores open at least a year, along with a 6% decrease in net sales. Among the retailer's brands in North America, Gap performed the worst, with a 9% decline in same-store sales, while Old Navy reported an 8% drop. Banana Republic was the top performer, with a 1% decline in same-store sales.

Among department stores, Nordstrom took somewhat less of a beating, with a same-store sales decline of 4%, along with a 3.8% decline in total sales. Macy's and the J.C. Penney Co. saw same-store sales drop 7.9% and 7.5%, respectively. At Macy's, total sales decreased 7.4% to $4.6 billion from $5 billion a year ago. J.C. Penney said its sales fell 4.5%, with fine jewelry and big-ticket items for the home showing weakness.

Luxury shoppers, however, continued to show some strength, despite general economic uncertainty. Neiman Marcus saw a 2.9% increase in same-store sales, with customers snapping up shoes and designer handbags. Saks, meanwhile, said that same-store sales rose 0.8%. The retailer cited consumer appetite for fine jewelry, shoes and accessories.

Some experts, however, maintain that it's too early to call the holiday season. They stress that the numbers must be viewed in the context of strong holiday sales last year and the fact that few gift cards have yet been redeemed. "We're up against some very aggressive comp numbers from last year," said Marshal Cohen, chief industry analyst at the NPD Group.

He suggested that with gift cards gaining more traction than ever before -- 61% of consumers gave them as gifts them this year, according to an NPD poll -- the traditional holiday sales period should be expanded to include at least the first two weeks of January. "We've not even seen 50% of gift cards redeemed."

Calendar shift
What really hurt retailers was the calendar shift, which artificially inflated November results as several key holiday shopping days shifted away from December. Overall, the month included 23 selling days, down from 29 selling days last year.

"When you look at the dynamics and put November and December together, it's OK, but we look at November and December separately and we critique them," said Mr. Cohen. "We're evaluating the business with bold parameters that really need to be changed."
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