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Retailers Expect Sluggish Holiday

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Bloomberg News

Published: December 5, 2007

Retail sales rose this past month by 2.5 percent as stores discounted items and offered online specials during what the National Retail Federation expects to be the slowest-growing holiday season in five years.

Also, sales fell 2 percent from the week before as shoppers cut back after a Thanksgiving holiday weekend of price discounts, the International Council of Shopping Centers and UBS Securities said Tuesday. Same-store sales gained 3.1 percent for the week ended Dec. 1 from a year ago.

Target, Dillard's and Circuit City Stores are cutting prices by as much as 50 percent, and eroding profits, to lure consumers facing higher food and gasoline prices. More people shopped over the Thanksgiving holiday weekend than a year ago, spending less on average per person, the National Retail Federation said.

"The retail environment's been lousy out there this year," said Jon Fisher, who helps manage $22 billion, including retailers' shares, at Fifth Third Asset Management in Minneapolis.

November includes sales on Black Friday, the day after the Thanksgiving holiday, which is typically one of the busiest shopping periods. Weekly sales fell 2 percent after Black Friday for the biggest sequential drop in a year.

The last quarter accounts for 30 percent of retailers' annual profit, according to Michael Niemira, the shopping council's chief economist.

The 30-member Standard & Poor's 500 Retailing Index fell 5.1 percent since the holiday shopping season began Nov. 1.

The sales figures are preliminary. The shopping council and UBS, as well as the retailers, will report November's sales Thursday.

The discounts are hurting some retailers' profits. Sales and earnings have declined at Sears Holdings Corp., sending its stock to the biggest drop in more than four years on Thursday. Phillips-Van Heusen Corp., the seller of Calvin Klein and Izod clothes, fell as much as 15 percent in New York trading Tuesday after the company's full-year profit forecast trailed analysts' estimates.

This holiday shopping season is expected to see the slowest growth in five years. The National Retail Federation expects sales to increase 4 percent in November and December from the same period a year earlier.

The Johnson Redbook Index, another measure of U.S. retail sales, rose 2.4 percent in November from last year.

The Redbook index examines same-store sales at general-merchandise retailers representing 9,000 locations. Such sales are considered an industry benchmark because they exclude results from new or closed sites. The shopping council's figures include about 60 chain stores.

Online spending, which makes up more than 3 percent of all retail sales, rose 18 percent to $4.06 billion in the week through Nov. 30, Reston, Va.-based ComScore said Sunday.

The most-visited sites were from Yahoo, Target, Apple, Circuit City and Toys R Us.

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