Sears Reports Dismal December

NEW YORK — Dismal sales figures for the holiday shopping season are probably a sign of worse to come for merchants in 2009 _ not only more sharp discounts and cheaper groceries but probably fewer stores.

Holiday spending was so anemic that even Wal-Mart didn't escape unscathed: It posted a smaller sales gain than Wall Street expected and cut its earnings outlook for the fourth quarter. Macy's, Gap and a slew of others reduced their forecasts as well, mainly because of the huge discounts stores have used to draw in customers.

The nationwide picture was bleak: Same-store sales were down 1.7 percent for December, with many chains reporting declines of 10 percent and more, according to an index released Thursday by the International Council of Shopping Centers and Goldman Sachs.

For November and December combined, the drop was 2.2 percent _ the weakest holiday shopping season since the index was started in 1969. For all of 2008, sales rose just 1 percent, the weakest in at least 38 years.

"The blanket that has covered the North American consumer that has kept them from spending is heavier than expected," said Dean Hillier, partner in the retail practice of consulting firm A.T. Kearney.

The malaise was widespread _ kitchen gadgets to jewelry to clothes. Several stores such as Toys R Us and Macy's said business improved in the last weeks of December as shoppers pounced on the best deals, but people still cut back overall.

Among the many stores that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears, as well as Abercrombie & Fitch, Gap Inc. and Saks.

Sales on new items for spring have already begun, fueling more concerns about the retail industry's health. A rash of store closings is expected as retailers navigate the deepening recession.

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Disappointing sales of holiday gift cards mean stores probably won't see a big lift in business in January. Michael P. Niemira, chief economist at the ICSC, forecasts a 1 percent decline in same-store sales for the month.

Wal-Mart, the world's largest retailer, benefited last year as shoppers focused on necessities and switched to cheaper stores, but analysts say its disappointing December performance may signal that shoppers are pulling back even more. December sales were up 1.2 percent including fuel sales and rose 1.7 percent without. Wall Street was expecting 2.8 percent excluding fuel.

Wal-Mart said electronics sales were solid, clothing and jewelry sales were weak, and health and wellness items were the strongest.

Ken Perkins, president of research company RetailMetrics, expects Wal-Mart to cut prices even further, fueling price wars. That's good news for shoppers.

Rival store Target, which had been stumbling because it depends more on nonessential items like trendy clothes, said its same-store sales dropped less than expected. Target cut prices to gain market share and clear out inventories, but it says those moves will hurt its fourth-quarter profit.

Grocery store chain Supervalu Inc. has already said shoppers will probably pay less and be offered more promotions this year. The chain says customers are switching to cheaper food, like ground beef rather than T-bone steaks.

Some chains see a silver lining: Some of their competitors will probably have to close their doors.

Jewelry chain Zale Corp. reported a 22 percent drop in same-store sales but said business improved during the week leading up to Christmas and has also been better since the holidays.

"We believe that we are in a strong position to benefit from the winnowing of competitors," said Zale Chief Executive Neal Goldberg.

But for now, the picture is grim. Sears Holdings said its December same-store sales dropped about 7 percent, including a drop of nearly 13 percent at domestic Sears stores. Kmart sales fell only about 1 percent, suggesting that its low prices are drawing shoppers away from more expensive stores.

And Macy's Inc. cut its full-year earnings outlook because of heavy markdowns and said it plans to close 11 stores. Its same-store sales were down 4 percent in December, and more than 7 percent for November and December combined.

High-end stores fared far worse, and luxury items will probably get cheaper. Saks Inc. posted a sales decline of almost 20 percent, while Neiman Marcus Group was down more than 27 percent.

Comments

[adam hartung]

Best Buy, Walgreen, Sears - all had a great past. But none are prepared to compete in the new market requirements. Lacking internal Disruption and White Space, they are not going to grow, or succeed. Sears is likely to fail. And new competitors will most likely reap the benefit of shifting markets. Read more at http://www.ThePhoenixPrinciple.com

[sad03]

I cannot figure out from this article what percent Sears sales were down. What am I missing?

[hulagirrrl]

Sears at least does not have the ugly reputation like Walmart when it comes to treating employees decent. I would never ever step into a Walmart.
One more thing, this Christmas season, SEARS had given away gift cards to many military members, and I for one thought that was a good thing, especially during times like these. Some of the military families are really being tried by these times, and were able to put this unexpected gift to good use.
Sears may not always toot their own horn about the good they do, but I bet that their top management is not corrupt and greedy like some other companies, at least you do not read about it here.
People should consider that when taking their money somewhere.

[RobinSeattle]

Just don't get your car fixed there. Because they will fix your wallet, too, if you know what I mean.

[RobinSeattle]

How has Sears managed to stay in business? I personally haven't been in one in a quarter century and their automotive repair racket has been notoriously rife with fraud. I would no more go to a Sears for anything than I would hope for a comeback for Zody's.

[wdw505]

Zody's?

[Perry Clease]

They still have a pretty good selection of tools, hand and power. I was in a Sears a few days after Christmas and bought my son some tools that were on sale. Two days I ago I was in the same store and bought myself a nylon cell phone holster, back in the tool department.

Zody's! That is so '70s

[BabsfromKansas]

Walmart?
and Macy's?
and Sears?
Oh My!

[AZterritory]

The terrible followup service Sears gives may have something to do with past and current customers leaving in droves. Anyone who has ever gone through the h e l l of trying to get a Sears appliance serviced knows exactly what I'm talking about.

[BabsfromKansas]

That's their only redeeming factor IMO - but then, that could be another regional difference ;)

[wdw505]

i buy thousands of dollars of hand tools there each year for the shop..... i love the warranty

[hulagirrrl]

I am European living in the US, and remember about 15 years ago, in Europe all you would hear about the great service a customer receives in America. Now, the service in general sucks, but I believe it is because greedy pigs in the board rooms really could not care less how we feel about their service, because we will like little sheep come back for more of the same.
I bet if you were to sit down and take the time and write someone in their Headquarters you will get a response. I do it all of the time, I hate to see what this country has become. People just do not care anymore, and it bothers me.
My biggest frustration, ATT and their endless non human answering of their service lines, but they do not care because we continue doing business with them and do not tell them that we do not like what they are doing.
I remember a big US computer company in Europe had switched their customer service phone lines to India, and customers were not happy with that, eventually they switched back to local call centers. Walmart was boycotted in Germany and had to close shop within two years, because customers would not want to go there because they were Union busters. It is all our choice as customer.

[coldcanuckinwhite]

We need to cut ALL of our services and do without for a while. It's possible.. Then they will come crawling back for our business... give them a taste of their own kitchens!!