Retailers Report Dismal December Sales
Macy's announced it will close 11 underperforming stores in 9 states -- affecting 960 employees.
As merchants reported their sales figures, confirming fears that the holiday season was the weakest in four decades, the malaise cut through practically all areas from kitchen gadget stores to apparel retailers.
Among the many that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, and Limited Brands Inc. But the biggest surprise came from Wal-Mart, the world's largest retailer, which posted sales below Wall Street estimates and cut its fourth-quarter earnings outlook.
"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. "I think it says the economy is in more dire straits than we thought."
Wal-Mart said that same-store sales, or sales at stores opened at least a year, rose 1.7 percent. Including fuel sales, that gain was 1.2 percent. Analysts surveyed by Thomson Reuters had expected a 2.8 percent increase.
"The current economy remains challenging for all businesses, and retailers have already seen customers pull back on discretionary spending," Wal-Mart's Chief Financial Officer Tom Schoewe said in a statement. "Consumers are very focused on value and necessities."
Given the disappointing sales and higher-than-anticipated expenses, the discounter said it now expects to earn 91 cents to 94 cents per share in the fourth quarter from continuing operations. That's down from its previous projected range of $1.03 per share to $1.07 per share. Analysts surveyed by Thomson Reuters expected $1.06 per share.
Meanwhile, Costco Wholesale Corp. reported a 4 percent decline in same-store sales, but excluding the impact of lower gas prices and currency fluctuations, it actually posted a 4 percent gain. Analysts surveyed by Thomson Reuters predicted a 3.7 percent decline.
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.
Limited Brands Inc. posted a 10 percent drop in same-store sales, larger than the 7.8 percent decline analysts predicted. Based on disappointing sales, Limited also lowered its fourth-quarter earnings outlook.
Macy’s stores slated for closure include locations in Los Angeles, West Palm Beach, Nashville and St. Louis, among others. Cincinnati-based Macy's Inc. says the closures will cost about $65 million, most of which will be booked in the 2008 fourth quarter.
The news comes as Macy's says its December sales at stores open at least a year, or same-store sales, fell 4 percent. That's better than the 5.3 percent drop analysts surveyed by Thomson Reuters were expecting. However, Macy's is lowering its forecast for the fourth quarter and full year due to heavy markdowns.