Nation's retailers report disappointing December sales

NEW YORK (AP) _ An already disappointing holiday shopping season turned out to be even worse than expected for many of the nation's retailers, who on Thursday reported tepid sales gains for December.

Thursday, January 4th 2007, 8:49 am

By: News On 6

NEW YORK (AP) _ An already disappointing holiday shopping season turned out to be even worse than expected for many of the nation's retailers, who on Thursday reported tepid sales gains for December.

The downbeat results came from retailers in all categories, from Limited Brands Inc. to jewelry chain Zale Corp. Wal-Mart Stores Inc. posted better-than-expected results for December following a dismal November.

Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said retailers were forced to mark down heavily to bring in sales.

``Clearly, this was a promotional Christmas,'' he said. ``Consumers clearly waited until the last minute.''

Such aggressive discounting led a number of merchants including Zale, Gap Inc. and AnnTaylor Stores Corp. to cut their profit outlooks.

After a robust start to the holiday season, many stores struggled with disappointing business in December, and a shopping surge in the days just before and after Christmas wasn't strong enough to make up for lost sales.

Mild weather across much of the country meant shoppers were in no hurry to buy cold weather wear such as coats and gloves, depressing sales at many apparel stores. Declining gasoline prices and a steady job market should have helped merchants this holiday season, but Perkins believes the recent drop in home equity loans _ a big source of buying over the past few years _ depressed spending among middle-income shoppers.

Sales results were also hurt by two big shifts in the way consumers are shopping: the increasing popularity of gift cards and robust online buying, which is not included in same-store results. Gift card sales are only posted when they are redeemed rather than bought, helping to extend the holiday season into January.

Wal-Mart, which warned earlier in the season that its sales gain from stores open at least a year would be no better than 1 percent, posted a 1.6 percent for December. Retail industry analysts polled by Thomson Financial expected 1 percent gain.

Sales from stores open at least a year, known as same-store sales are sales, are considered the industry standard for measuring a retailer's health.

The results followed Wal-Mart's 0.1 percent decline in same-store sales in November, its first monthly same-store sales drop in a decade.

Wal-Mart has struggled in recent months with a mix of problems, including the fact that its lower-income customers were hurt by soaring gas prices. But the company's lackluster sales have persisted even as the cost of gas eased _ partly because its attempt to broaden its appeal to higher-income shoppers was poorly executed, particularly in apparel.

The company reported Thursday that it had a very strong performance in electronics and the grocery business in December.

Rival discounter Target Corp. had a 4.1 percent gain in same-store sales, better than the 4.5 percent estimate.

Costco Wholesale Corp. posted a 9 percent gain in same-store sales, beating Wall Street's 5.7 percent estimate.

Among department stores, Federated Department Stores Inc., which acquired May Department Stores Co. last year, had a 4.4 percent gain in same-store sales, below the 5.5 percent estimate from Wall Street. The same-store results include only the Macy's and Bloomingdale's stores that existed before September, when the company transformed most of the former May Co. stores to Macy's units.

Terry Lundgren, Federated's chairman, president and CEO, noted that that performance at the converted May stores improved in December.

``While December sales were somewhat softer than expected, we overcame unseasonably warm weather in most of the country and ended the month strong,'' said Lundgren in a statement.

J.C. Penney Co. Inc. had a 2.6 percent gain in same-store sales at its department stores, slightly better than the 2.4 percent estimate. While it said that certain apparel areas were hurt by unseasonably warm weather, Penney said it was pleased with overall holiday sales performance.

Penney's Internet sales rose 15.2 percent in December, on top of a 26 percent gain in the year-ago period.

Nordstrom Inc. reported a robust 9 percent gain in same-store sales, exceeding the 4.3 percent Wall Street estimate.

Pier 1 Imports Inc. suffered a 10.7 percent drop in same-store sales, worse than the 9.4 percent analysts anticipated.

Zale, which did not break out December same-store sales figures, reported a same-store sales increase of 2.3 percent for the combined months of November and December. But it said that while the Zales brand gained sales momentum, profit margins were below expectations due to more aggressive price cutting.

Limited Brands had a 4 percent gain, well below the 9.3 percent Wall Street expected.

Gap, which has long been struggling with its merchandising formula, suffered an 8 percent drop in same-store sales in December, worse than the 5 percent decline analysts had expected. As a result, the company said it was slashing its annual profit outlook.

AnnTaylor posted a 5.3 percent decline in same-store sales; analysts had expected a 0.6 percent gain.

Among teen retailers, Pacific Sunwear of California Inc. had a 3.2 percent dip in December, worse than the 2.9 percent forecast.

Bebe Stores Inc. had a 4.0 percent gain in same-store sales for December, less than the 6.3 percent estimate.