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The Honolulu Advertiser
Posted on: Sunday, January 11, 2009

Holiday sales season weakest recorded since 1969

By MAE ANDERSON
Associated Press

Hawaii news photo - The Honolulu Advertiser

Unlike most retailers, Wal-Mart Stores reported a profit in December, but it fell short of expectations and the discount giant's stock price fell.

TONY DEJAK | Associated Press

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Hawaii news photo - The Honolulu Advertiser
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NEW YORK — Retailers confirmed fears that the dismal holiday shopping season was the worst in decades when they reported December same-store sales — a figure the retail sector relies on to periodically take its own temperature — were down by 1.7 percent.

Here are some questions and answers about the latest sales numbers.

Q: What are same-store sales?

A: Same-store sales are usually sales at stores that have been open at least a year — although some retailers use other time periods, like 14 months, or also exclude stores that were temporarily closed for remodeling or other reasons.

Same-store sales are considered a more accurate measure of how a retailer is performing than total sales, since they chart change over time at established locations and exclude the boost companies get from simply opening new stores. Most retailers also report a total sales figure.

Q: How bad were December same-store sales?

A: The International Council of Shopping Centers-Goldman Sachs same-store sales tally dropped 1.7 percent for December — worse than the already-lowered estimate of a 1 percent decline. Combine that with the previous month's decline and you get a drop of 2.2 percent in same-store sales for the November-December period, making it the weakest holiday shopping season since at least 1969, when the index began.

Q: Do all retailers report this figure monthly?

A: Many publicly traded retailers report monthly same-store sales, though some just report the figure once a quarter. A few privately held companies, such as Neiman Marcus, also report monthly. A poor same-store sales report can hurt a company's stock price, which is one reason why a company might choose not to release the figures.

Macy's Inc. stopped reporting same-store sales monthly in February but resumed in October. Talbots Inc. and AnnTaylor Stores Corp. — which, like many women's clothing chains, have been hit hard during the economic downturn — stopped reporting monthly same-store sales in recent years.

Urban Outfitters Inc., Anthropologie and Free People stores report quarterly but give an annual update on the November and December shopping season.

Q: Why are the December reports important?

A: Holiday sales can account for between 30 percent and 50 percent of retailers' annual sales. October and November sales were the weakest in years. While analysts believe shopping picked up in December as Christmas and Hanukkah drew near, December was still weak. With consumers sharply pulling back on their spending, even the holidays gave people a little push to spend.

Q: What does a bad December sales report mean for retailers?

A: Weak same-store sales in December were expected, but analysts watch for any stores that perform sharply better or worse than expected.

For example, Wal-Mart Stores Inc. reported December same-store sales rose 1.2 percent, or 1.7 percent excluding the impact of declining pump prices for gasoline sold by Wal-Mart. Any increase may sound like good news during a recession, but this one missed analyst expectations of a 2.8 percent gain, and shares fell 7.5 percent by the end of the trading day.

Also, while poor December sales might not be the only factor, analysts expect several retailers to file for bankruptcy as weaker players that struggled through the holidays are weeded out.

Q: Were there any bright spots?

A: Discounters usually outperform other retailers during an economic downturn, but this month even they showed weakness, as evidenced by Wal-Mart's disappointing results.

Some teen retailers are bucking the trend, however. Aeropostale Inc. and The Buckle Inc. both reported double-digit same-store sales gains. Teen retailers are shielded somewhat as parents cut back on themselves ahead of their children.

Q: Who was the weakest performer?

A: Luxury retailers were among the weakest performers: Same-store sales were down 19.8 percent at Saks Inc. and 10.6 percent at Nordstrom Inc.

But weakness was widespread. Gap same-store sales fell 14 percent and Limited Brands sales fell 10 percent.

Q: If a retail chain files for bankruptcy, what is the likelihood it'll end up shutting down completely?

A: That depends on how cash-strapped the company is. Clothing chain Steve & Barry's, for example, at first planned to keep some stores open when it filed for bankruptcy in July, but scrapped those plans in November and began liquidating all of its stores.

Mervyns similarly sought bankruptcy protection in July and planned to stay open, but said in October it would liquidate. Circuit City Stores Inc., which filed for bankruptcy protection in November, plans to stay open as it reorganizes.

Q: How long are the bad times for retailers expected to last?

A: Most analysts and retailers predict that things will be difficult throughout the rest of the year and are cautious about forecasting beyond that.

Q: What are companies doing to cope?

A: Retailers are cutting costs, in many cases by slashing jobs, and discounting merchandise to an unprecedented degree.