U.S. retailers report dismal December

-- Retailers reported dismal sales figures for December yesterday as even Wal-Mart Stores Inc., one of the bright spots in the industry, finally buckled under the pressures of the deteriorating economy.

The same-store sales tally by the International Council of Shopping Centers-Goldman Sachs dropped 1.7 percent for December, lower than the 1 percent decline it predicted. That means that same-store sales for the November-December period dropped 2.2 percent, making it the weakest holiday period since at least 1969, when the index began.

Sales at stores open at least a year are considered a key indicator of a retailer's health.

The malaise cut through practically all areas, from kitchen gadget stores to jewelry purveyors and teen apparel retailers.

The deep discounts that began well before the official start of the holiday season spurred merchants to cut earnings outlooks, fueling more concerns about the health of the industry.

Among the many retailers that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, luxury retailer Saks Inc. and Gap Inc.

In Virginia, a Retail Merchants Association survey of its members found sales in the region generally north of Dinwiddie County to Northern Virginia were down 15.3 percent between Black Friday and Dec. 31, compared with the same period last year.

The survey included about 130 merchants, 10 percent of the group's membership, said George C. Peyton Jr., vice president of government relations for the association.

Sales results ranged from an increase of 15 percent to a drop of 50 percent, he said.

"I don't think I've ever seen things this far down," Peyton said.

However, Peyton warned that the average 15.3 percent drop needs to be put into perspective.

"For big-box retailers, a 1 percent drop can represent millions of dollars," he said. But for a smaller retailer, a 15 percent decline could be several thousand dollars.

But the biggest surprise came from Wal-Mart, the world's largest retailer, which posted a smaller sales gain than Wall Street expected and cut its fourth-quarter earnings outlook.

Wal-Mart, blaming the weak economy and severe winter conditions, said same-store sales rose 1.2 percent. Excluding the effect of declining gasoline prices at its pumps, the gain was 1.7 percent. Analysts surveyed by Thomson Reuters had expected a 2.8 percent increase, excluding fuel.

"This suggests that the lower income group is feeling the pinch more than we thought, and this is clearly reflected in the lower-than-expected numbers at Wal-Mart," said Ken Perkins, president of research company RetailMetrics LLC.

For the calendar year nationwide, retail sales rose on average a modest 1 percent, the weakest year since at least 1970, according to Michael P. Niemira, chief economist at the International Council of Shopping Centers.

Among department stores, Sears Holdings said its December same-store sales dropped 7.3 percent, weighed down by a 12.8 percent drop at domestic Sears stores. The company, whose brands include Kenmore and Craftsman, said Kmart same-store sales fell 1.1 percent.

But luxury stores fared far worse as affluent shoppers sharply cut back on buying those goods.

Not everyone had a difficult time.

Richmond retailer Angie S. Heyming, owner of These Four Walls, said the season was a good one for her store.

Holiday sales at the Shockoe Slip home furnishings store were up 31 percent from 2007. The store finished its second full year of business with a 9 percent increase in sales.

She credited preparation for her success.

"We didn't do anything out of the ordinary as far as markdowns, but in the fall, we made a whole-hearted commitment to having better merchandise -- and more of it," Heyming said yesterday. "Through the few years we have been in business, we have become more in tune with the wants and needs of our customers."
Staff writer Louis Llovio and The Associated Press contributed to this report.