Home / Today's News / December retail sales show signs of life (2:05 p.m. 1/7/10)

December retail sales show signs of life (2:05 p.m. 1/7/10)

AP Retail Writer

NEW YORK (AP) — Last-minute holiday shoppers brought relief to the nation’s retailers, handing them modest sales gains for the season and prompting several chains to raise their fourth-quarter profit outlooks.

The improved profit picture comes because retailers never had to resort to drastic price-cutting after keeping inventories lean.

Still, the solid finish capped a year that saw the biggest sales decline in at least four decades, according to the International Council of Shopping Centers. Merchants saw sales fall every month but September, October and December.

And retailers may be facing chilly months ahead as consumer spending is expected to remain muted amid high unemployment and tight credit, though the slowdown in job losses may help.

“The holiday season was decent but nothing you can get excited about. And it was saved by a last-minute surge,” said Ken Perkins, president of research firm RetailMetrics. “Santa didn’t deliver coal, but he certainly didn’t deliver caviar.”

According to the ICSC sales index, December sales rose 2.8 percent compared with a year ago, ending a year that averaged a 2 percent drop. For November and December combined, the index rose 1.8 percent, better than its estimate for a 1 percent gain. That figure, however compares with a 5.8 percent drop a year ago, the biggest holiday sales decline in least four decades.

The sales figures are based on sales at stores open at least a year and are considered a key indicator of a retailer’s health. The index doesn’t include Wal-Mart Stores Inc., which no longer releases its sales figures on a monthly basis.

The better-than-expected December reading was the strongest since April 2008, when stores collectively had a 3.3 percent gain, according to the ICSC.

Several retailers, including Sears Holdings Corp. and TJX, saw their stocks soar in Thursday trading. However, the Dow Jones U.S. Retail Index has been largely unchanged since Thanksgiving. For 2008, the retail index rose 27.8 percent, surpassing the 18.8 percent gain for the Dow Jones Industrial average.

As merchants reported results Thursday, warehouse club operator Costco Wholesale Corp., Target Corp., Macy’s Inc. and TJX Cos. all reported increases. Luxury stores like Saks Inc. and Nordstrom also saw strong December sales.

Even Sears Holdings Corp., which operates Kmart and Sears, Roebuck and Co., eked out a small gain and offered fourth-quarter guidance that’s sharply above Wall Street estimates. Macy’s Inc., Kohl’s Corp. and Limited Brands are among retailers raising profit outlooks.

Stragglers included jewelry chain Zale Corp., which reported a sharp sales decline but said it maintained discipline in discounting. Teen retailer Abercrombie & Fitch struggled with continued double-digit sales drops.

Bookseller Barnes & Noble Inc. lowered its fiscal third-quarter guidance after holiday sales proved weaker than expected.

Perkins noted that stores will be remain cautious about their outlooks for this year because “the consumer is still very strapped.”

Retailers managed to avoid another Christmas catastrophe because they had a year to plan for a new consumer mindset. They headed into the season with lower inventories and more practical merchandise that resonated with shoppers who stuck to shopping lists and researched deals online.

Shoppers were in malls buying, but they were choosy. They picked up discounted flat-panel TVs, computers and smart phones. They searched for certain hard-to-find hot toys like Cepia LLC’s Zhu Zhu Pets hamsters. They shopped online, but often stayed away from clothing unless it was practical, like socks, boots and coats.

Stores were on edge until near Christmas because consumers delayed their buying more than last year, either because they were shut in by winter snowstorms or were holding out for better deals.

But many stores kept to their planned discounts and didn’t panic. That’s a big difference from last year, when stores were forced to start liquidating merchandise in November amid a freefall in spending because of the escalating financial crisis.

Shoppers’ frugality showed up in retail sales figures released Thursday, with discounters and warehouse clubs faring best.

Costco said Thursday that higher gasoline prices and a weaker dollar helped generate a 9 percent gain in December. That’s above the 7.9 percent increase analysts polled by Thomson Reuters.

Target said that sales at stores opened at least a year rose 1.8 percent.

Sears Holdings reported a 0.4 percent rise for December, fueled by a 5.3 percent increase at its Kmart stores as shoppers went for toys, home goods and clothing.

Macy’s sales rose 1.0 percent in December.

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