Shopping surge can’t salvage slow-growing holiday sales season

Thursday, December 27, 2007 at 2:01am

Target Corp., Macy’s Inc. and Lowe’s Cos. fell Wednesday in New York trading after a weekend shopping surge failed to salvage the slowest-growing holiday sales season in five years.

Sales at stores open more than 12 months rose 2.8 percent last week from a year earlier, the International Council of Shopping Centers and UBS Securities LLC said in a joint statement today.

The results prompted the group to lower its forecast for November and December sales growth to “a tad below” the 2.5 percent it was predicting.

Shoppers making last-minute purchases pushed sales up almost 20 percent over the weekend, according to Chicago-based ShopperTrak RCT Corp. Consumers burdened by higher gasoline and food prices and a deepening housing slump held off on buying gifts for much of December as they awaited steeper discounts, sending sales lower for four straight weeks, ShopperTrak said.

“This consumer is spent out,” Howard Davidowitz, chairman of Davidowitz & Associates, said in a Bloomberg Television interview. “When they say sales are up three-and-a-half percent, that's an absurd number. You've got 5 percent more stores. That's why retail earnings are in the tank.”

Target, the second-biggest U.S. discounter, said Dec. 24 that sales at stores open more than a year may decline in December after customer visits slowed in the weeks after Thanksgiving. It fell $1.31 cents, or 2.5 percent, to $51.16 at 4:01 p.m. in New York Stock Exchange composite trading.

Macy's declined $1.06, or 3.9 percent, to $25.95. Lowe's fell 1.2 percent to $23.19. Macy's spokesman Jim Sluzewski and Lowe's spokeswoman Chris Ahearn declined to comment.

The Standard and Poor's 500 Retailing Index lost 1.2 percent, with 28 of the 31 members declining.

Even though consumers limited purchases of holiday gifts, the U.S. will avoid a recession next year as a “stable” job market keeps Americans spending amid falling housing prices and higher fuel costs, said Bear Stearns Cos. Chief Investment Strategist Jonathan Golub.

“It is increasingly clear that the U.S. consumer did not roll over during the holiday shopping season,'' Golub said. “We do not believe a consumer-led recession is in the cards.'' Inc., the world's largest online retailer, said the 2007 holiday season was its “best ever.''

The company didn't provide specific profit and sales figures. The busiest day was Dec. 10, when customers ordered more than 5.4 million items, Seattle-based said today in a statement.

Industrywide sales in November and December this year may rise 4 percent, the slowest growth since 2002, according to the National Retail Federation. ShopperTrak predicted a 3.6 percent increase.

MasterCard Inc.'s consulting unit said yesterday that sales from Nov. 23 to Dec. 24 gained 3.6 percent, the lowest in at least three years.

“Given the slow performance at the beginning of the month, it appears that the industry is on track for a sales gain that is slightly under our original expectation,” Michael Niemira, the International Council of Shopping Centers’ chief economist, said in the statement.

Retailers began cutting prices today to clear out merchandise left over from the weekend spending surge, which boosted sales by 19 percent from Dec. 21 through Dec. 23, according to ShopperTrak.

Macy’s Inc.’s Bloomingdale’s offered as much as 75 percent off men’s clothes, and closely held Lord & Taylor advertised half-off prices for children’s coats today.

Gasoline at $3 a gallon and rising food prices have discouraged shoppers from spending during November and December, which account for 20 percent of retailers' annual revenue, according to the Washington-based NRF.

Costco Wholesale Corp., the largest U.S. chain of wholesale clubs, said the holiday season “went well,'' the Wall Street Journal reported yesterday. Costco Chief Financial Officer Richard Galanti didn't immediately return a call for comment left at his Issaquah, Washington, office on Christmas Day.

Shoppers buying online led the growth in spending, with Internet sales gaining 22 percent from Nov. 23 though Dec. 24, Michael McNamara, vice president for research and analysis at MasterCard Advisors, said in an interview yesterday.

“If you were expecting this holiday season to stimulate a new ramp-up in growth, I think you'd be disappointed,'' McNamara said. “I think the vast majority of people in the marketplace had modest expectations.''

Apparel rose 1.4 percent from a year ago, McNamara said. Men's clothing climbed 2.3 percent, while clothes for women fell 2.4 percent.

Luxury goods, excluding jewelry, rose 7.1 percent compared with the same period last year, and footwear sales increased 6 percent.

MasterCard Advisors' SpendingPulse surveys retailers across the U.S. Its figures are based on sales in the MasterCard network and estimates of other forms of payment, including checks and cash. MasterCard is the second-biggest U.S. credit- card company.

Last year's holiday season grew 6.6 percent over 2005's holidays. Two years ago, retail sales grew 8 percent from the previous year, MasterCard said.

Although Target's customer visits increased for the week ended Dec. 22, “this increase was not sufficient to compensate for the unfavorable traffic trends that carried over into December from the week following Thanksgiving,'' the Minneapolis-based retailer said on a recorded call.

— Bloomberg News

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