It’s official: Retailers had a terrible holiday
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At a Target in Los Angeles this week, Terrence King waited in a long line at the customer service counter holding a $40 Monopoly set. He bought the board game as a Christmas present for his grandson, but decided to take it back after finding the same one at Kmart for $18 less. “I’m returning it because the price was too high,” said King, 61, a security officer from West Los Angeles. “Money is tight.”
Shoppers such as King are giving retailers heartburn. Today, major chains announced plans to close stores, promised more bargain-basement prices and cut their earnings forecasts, signaling some deals for shoppers but more trouble ahead for the nation’s deteriorating economy.
The nation’s largest department store chain, Macy’s Inc., said it would shutter 11 stores nationwide, including one of its two neighboring locations in downtown Los Angeles. Nordstrom Inc. said it was adjusting inventory levels in response to weak demand. Even discount giant Wal-Mart Stores Inc., considered one of the few winners of the holiday season, lowered its earnings projections.
With no prospect for a quick turnaround in sight, retailers are bracing themselves for an industry shakeup that will eliminate the weakest players, analysts said. That would leave store employees without their jobs, commercial landlords scrambling for new tenants and consumers with fewer choices.
“There’s more to come, clearly,” said Todd Slater, a retail analyst with Lazard Capital Markets. “Retailers are struggling, are feeling the pain that has widely hit most other sectors. The retail sector will feel it most acutely. Nobody is immune.”
Desperate merchants were counting on a robust holiday season to pull them out of a months-long slump. The end of the year is a crucial time for the industry — sales from November and December usually make up 25% to 40% of annual revenue. But sales fell 2.2% during the two-month period compared with a year earlier, according to the International Council of Shopping Centers. That made it the weakest holiday season in 40 years, despite some of the most aggressive markdowns ever seen on merchandise including electronics, apparel and luxury items.
“Retailers were forced to slash prices to entice consumers to spend,” said Michael Niemira, chief economist for the shopping center group. “But even that strategy was not enough.”
December sales at stores open at least a year, called same-store sales and considered a barometer of retail health because they exclude store closings and openings, fell 1.7%, according to the group’s tally of 36 major chain stores. Teen apparel stores and luxury chains were among the worst performers in December. Sales at Abercrombie & Fitch, which has resisted slashing its prices to protect its brand image, plummeted a whopping 24%.
Luxury retailer Saks Inc., which made headlines in November when it offered designer goods for as much as 70% off, reported a 19.8% decrease. Gap Inc., parent company of the Gap, Banana Republic and Old Navy brands, reported a 14% sales decline, missing analysts’ expectations of a 9.3% drop.
-- Andrea Chang
