Retailers report dismal December sales
As merchants reported their sales figures, confirming fears that the holiday season was the weakest in four decades, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.
The deep discounts that began well before the official start of the holiday season spurred a number of merchants to cut their earnings outlooks on Thursday, fueling more concerns about the health of the industry.
Among the many retailers that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, luxury retailer Saks Inc., Gap Inc., Abercrombie & Fitch Co. . But the biggest surprise came from Wal-Mart, the world's largest retailer, which posted a smaller sales gain than what Wall Street expected and cut its fourth-quarter earnings outlook.
"This suggests that the lower income group is feeling the pinch more than we thought and this is clearly reflected in the lower-than-expected numbers at Wal-Mart," said Ken Perkins, president of research company RetailMetrics LLC. "I think it says the economy is in more dire straits than we thought."
"The current economy remains challenging for all businesses, and retailers have already seen customers pull back on discretionary spending," Wal-Mart's Chief Financial Officer Tom Schoewe said in a statement. "Consumers are very focused on value and necessities."
Wal-Mart noted that health and wellness items were the categories that primarily fueled sales. Electronics sales were solid, while the apparel and jewelry business was weak.
Given the disappointing sales and higher-than-anticipated expenses, Wal-Mart said it now expects to earn 91 cents to 94 cents per share in the fourth quarter from continuing operations. That's down from its previous projected range of $1.03 per share to $1.07 per share. Analysts surveyed by Thomson Reuters expected $1.06 per share.
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