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Early Figures Hint Season Wasn't Merry For Retailers

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By ELLEN SIMON, The Associated Press

Published: December 26, 2007

NEW YORK - Early holiday sales reports are weak, with Target Corp., the nation's No. 2 retailer, warning that its sales may have fallen in December.

A broad gauge of consumer spending released by MasterCard, which includes estimates for spending by cash and checks, showed a modest 2.4 percent increase in holiday spending, excluding gasoline and auto sales.

Women's apparel in particular suffered, with spending down 2.4 percent, said Michael McNamara, vice president of research and analysis at MasterCard Advisors. The category had been doing even worse, down 5.7 percent at the middle of the season, before a boost in sales during the past three weeks.

"It's a continuation of a slowing trend we've been monitoring for two years," McNamara said.

Analysts have watched this retail season nervously, concerned the housing bust and subsequent credit crunch would prompt a drop in consumer spending.

Those concerns were merited at Target, which cut its sales projections Monday, saying it expects comparable store sales for the five weeks ending Jan. 5 to be between a 1 percent increase and a 1 percent decrease, a shift from the 3 percent to 5 percent increase the chain had forecast for December.
Chief Executive Officer Bob Ulrich had said in early December that the company's sales trends would have to improve meaningfully for the retailer to achieve its fourth-quarter earnings-per-share targets. Instead, "December sales are likely to fall well short of the meaningful improvement Mr. Ulrich described," the company said in a recorded message.

Target said an increase in store traffic in the third week of the holiday season "was not sufficient to compensate for the unfavorable traffic trends that carried over into December from the week following Thanksgiving."

Target went into the holiday season weakened, after its third-quarter earnings fell 4 percent as sales on tepid sales of clothing and home furnishings. The company is expected to report its actual sales on Jan. 10.

Meanwhile, Costco Wholesale Corp. has had "pretty good" holiday-season results so far and largely has avoided inventory gluts that would lead to markdowns, the retailer's chief financial officer told The Wall Street Journal.

"Generally speaking, our season went well," Richard Galanti, Costco's chief financial officer, said in the Monday interview. "We were left pretty clean in terms of seasonal markdowns. ... All of our seasonal gift packs sold through pretty well."

He declined to divulge specific figures.

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