A dismal December

<p>NEW YORK -- Dismal sales figures for the holiday shopping season are probably a sign of worse to come for merchants in 2009 -- not only more sharp discounts and cheaper groceries but probably fewer stores.</p><p>Holiday spending was so anemic that even Wal-Mart didn't escape unscathed: It posted a smaller sales gain than Wall Street expected and cut its earnings outlook for the fourth quarter. Macy's, Gap and a slew of others reduced their forecasts as well, mainly because of the huge discounts stores have used to draw in customers.</p><p>The nationwide picture was bleak: Same-store sales were down 1.7 percent for December, with many chains reporting declines of 10 percent and more, according to an index released Thursday by the International Council of Shopping Centers and Goldman Sachs.</p><p>For November and December combined, the drop was 2.2 percent -- the weakest holiday shopping season since the index was started in 1969. For all of 2008, sales rose just 1 percent, the weakest in at least 38 years.</p><p>"The blanket that has covered the North American consumer that has kept them from spending is heavier than expected," said Dean Hillier, partner in the retail practice of consulting firm A.T. Kearney.</p><p>The malaise was widespread -- kitchen gadgets to jewelry to clothes. Several stores such as Toys R Us and Macy's said business improved in the last weeks of December as shoppers pounced on the best deals, but people still cut back overall.</p><p>Among the many stores that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears, as well as Abercrombie & Fitch, Gap Inc. and Saks.</p><p>Sales on new items for spring have already begun, fueling more concerns about the retail industry's health. A rash of store closings is expected as retailers navigate the deepening recession.</p><p>Disappointing sales of holiday gift cards mean stores probably won't see a big lift in business in January. Michael Niemira, chief economist at the ICSC, forecasts a 1 percent decline in same-store sales for the month.</p><p>Wal-Mart, the world's largest retailer, benefited last year as shoppers focused on necessities and switched to cheaper stores, but analysts say its disappointing December performance may signal that shoppers are pulling back even more. December sales were up 1.2 percent including fuel sales and rose 1.7 percent without. Wall Street was expecting 2.8 percent excluding fuel.</p><p>Wal-Mart said electronics sales were solid, clothing and jewelry sales were weak, and health and wellness items were relatively strong.</p><p>Ken Perkins, president of research company RetailMetrics, expects Wal-Mart to cut prices even further, fueling price wars.</p><p>Rival store Target, which had been stumbling because it depends more on nonessential items such as trendy clothes, said its same-store sales dropped less than expected. Target cut prices to gain market share and clear out inventories, but it says those moves will hurt its fourth-quarter profit.</p><p>Also Thursday, drugstore operator Walgreen Co. said it will cut 1,000 jobs by midyear, or about 9 percent of corporate management, through a combination of voluntary buyouts and layoffs. The Deerfield, Ill., company said the job cuts will come from corporate and field management and won't include store employees.</p><p>Sears Holdings said its December same-store sales dropped about 7 percent, including a drop of nearly 13 percent at domestic Sears stores. Kmart sales fell only about 1 percent.</p><p>High-end stores fared far worse. Saks Inc. posted a sales decline of almost 20 percent, while Neiman Marcus Group was down more than 27 percent.</p>