The holiday shopping season started with a whimper and then got worse.
It was clear several months ago that the economic downturn would make this a difficult Christmas, but temperatures in the Northeast and Rocky Mountain states -- that have been more like the South Seas than the North Pole -- have layered insult upon injury for retailers.
On Thursday, the nation's merchants reported sales growth for November that was below already low expectations, as not even desperate pre-holiday price slashing enticed consumers to pick up one more wool turtleneck or leather blazer.
The numbers that indicated continued softness in consumer spending contrasted with news earlier this week -- a drop in jobless claims, strong auto sales and a bottoming in manufacturing activity -- that seemed to promise an early end to the economic downturn.
"It is a mixed bag," said Carl Steidtmann, chief economist at Deloitte Research. "I think we've hit the bottom and we are bouncing up, but it is coming way too late for retailers this season."
Sales at stores opened at least a year, a closely watched measure of industry health, grew 2 percent in November, according to the Goldman Sachs Retail Index. Even that tepid number was inflated by a quirk in the calendar that moved a week of the selling season to November from December.
While many stores did adjust their numbers to compensate for this quirk, a handful of large stores, including Federated, May Department Stores, Kohl's and Target, did not, and most of them expect that to depress sales growth for December. When the retailers report December numbers, the average of two months will give a clearer picture of the success of the season.
Even with the early start to the holiday season, many companies reported lower-than-expected sales. "Certainly, retailers weren't expecting anything great," said Jeff Feiner, a stock analyst with Lehman Brothers, who lowered his annual profit expectations for a half-dozen chains, "but for many it was even worse than was expected."
One of the most dismal reports came from Gap Inc., which posted a 25 percent year-to-year sales decline for November, below Wall Street's expectations. The apparel chain, which has been struggling because of overly aggressive expansion and fashion missteps, showed serious strain across all divisions. Sales at Banana Republic were down 11 to 13 percent, and Old Navy sales were off 31 to 33 percent.
Gap said it was forced to put more on sale than it had expected and predicted that losses would continue throughout the year. "It is reasonable to expect that the current negative trends in comparable store sales and gross margins could continue," said Heidi Kunz, the company's chief financial officer, in a written statement.
Gap not the only loser
Although it was the most remarked upon, Gap was hardly the the only chain to miss its November sales targets. May Department Stores, which owns Lord & Taylor's, saw sales decline by six-tenths of a percent as opposed to an expected increase of 3 percent. Sales increases at J.C. Penney Stores, which had been showing signs of a bit of a turnaround, failed to reach management's target of at least 1 percent growth. Specialty retailers like American Eagle Outfitters, down 9.6 percent, and Limited Inc., down 7 percent, and Abercrombie & Fitch, down 5 percent, all took it on the chin as mall traffic remained thin across the country.
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