Retail sales fall 2.7% in November; Wal-Mart up 7.7%

<p>Heavy markdowns and the start of the crucial holiday shopping season weren't enough to pull retailers out of a slump, as November sales figures released Thursday showed yet another steep drop-off in consumer spending.</p><p>Retail experts said it could have been worse. Thanks to a better-than-expected Black Friday, "the November results were terrible instead of being completely horrific," said Ken Perkins, president of research company Retail Metrics.</p><p>With so many spooked consumers avoiding the malls, retailers probably will continue to slash prices and offer Black Friday-style deals through Christmas, he said.</p><p>"There's no question this is affecting their bottom line and cutting into their margins," he said. "But they really don't have another choice. If you don't discount, no one's coming into your store, and you're not making money anyway. So some revenue stream is better than none at all."</p><p>According to a tally of 37 major retail chains conducted by the International Council of Shopping Centers, sales fell 2.7 percent in November compared with last year, making it the worst month since at least 1969, when the index began. Excluding Wal-Mart -- which stands out as one of the few bright spots in retail -- sales registered a huge 7.7 percent drop.</p><p>"Without a doubt, this has been and probably will be the most promotional holiday on record," said Scott Krugman, spokesman with the National Retail Federation. "There's no way around that. Obviously, the November numbers reinforce that."</p><p>Wal-Mart, the world's largest retailer, posted a 3.4 percent sales gain in November, excluding fuel. The company has benefited as cost-conscious shoppers, concerned about the economic crisis, forgo more-expensive retailers in favor of the discount chain.</p><p>One of the biggest disappointments was Costco, which despite selling many household goods in bulk, saw its sales fall 5 percent. Analysts had been expecting a 2.4 percent drop.</p><p>Many retailers blamed their weak November results partly on the late arrival of Thanksgiving, which meant the month's reporting did not include a week of post-holiday shopping compared with a year earlier.</p><p>One of the weakest performers was Abercrombie &amp; Fitch, which has fallen to the bottom of the pack for several months. Unlike its competitors, the teen clothing retailer has resisted deep discounting.</p><p>But experts say the company's unwillingness to discount its pricey apparel could permanently damage the business.</p><p>"Abercrombie better get their act together or they won't be around next year," said Britt Beemer, chairman of consumer behavior company America's Research Group. "Here's a company that's oblivious to the world. They don't want to run sales to protect their brand, but there might not be any brand left. They better get real."</p><p>Although heavy markdowns didn't translate into year-over-year sales gains for many stores, it did allow them to exceed Wall Street's expectations.</p><p>Attractive markdowns helped San Francisco-based Gap, parent of the Gap, Banana Republic and Old Navy clothing chains. Wall Street had predicted a 17.4 percent drop, but the company experienced only a 10 percent drop from last year.</p><p>"In anticipation of a challenging holiday season, we made the decision to attract customers with more aggressive offers than last year," Sabrina Simmons, chief financial officer of Gap, said in a statement. "While this resulted in November merchandise margins below last year, our strategy allowed us to successfully clear through inventory in the month."</p><p>But now, fresh worries have emerged that consumers will continue to cut spending well into the new year.</p><p>"What's really concerning us is what's going to happen in January, February, March," Perkins said. "Those have the potential to be really ugly, because there's no catalyst on the horizon to spend."</p>