Heavy discounting, cautious consumers fearful of losing jobs, and even the weather, combined to produce what ICSC called the weakest holiday season on record. The drop continued a multi-month decline, following a decrease of 2.7% in November and 0.9% in October. For the year, overall comp-store sales rose by 1%, the smallest increase since at least 1970.
"Through the year and certainly during the holiday season, consumers were more frugal and hesitant to spend," wrote Michael P. Niemira, ICSC chief economist and director of research. "Retailers, in turn, faced with this unprecedented pullback in demand during the holiday shopping season slashed prices."
Drug stores led all sectors: Walgreen's reported a 4.9% increase, though Rite-Aid saw a 0.2% comp drop. On the other hand, luxury stores, which joined the discounting frenzy, posted the worst December results, with a 17.4% drop, followed by apparel chains, with a 10.7% decline. Department stores reported a 6.8% drop, though Macy's 4% decline beat estimates. Apparel chains dropped 10.7%, with Limited Brands (parent of Victoria's Secret) posting a 10% comp decline and Abercrombie & Fitch reporting a 24% comp-store drop. Ross Stores reported flat comps, while Cato Corp. posted a 2% decline.
Discount stores posted a 0.4% rise, with Target reporting a better-than-expected 4.1% decline. Kmart saw a 1.1% drop, a vast improvement over its 10% decline in November. Both likely affected Wal-Mart, whose increase was less than expected. The company also cited severe winter weather in some regions as a factor.
Falling fuel prices also blur some numbers to a degree. Wholesale clubs as a category reported a 3.3% decline, but a 1.6% gain without fuel. If gas is excluded, Costco's 4% comp decline was a 4% increase.
Boding ill for the beginning of 2009, consumers also cut their gift card purchases in favor of December discounts: Cards constituted 13.6% of holiday sales, compared with a 14.7% share in 2007, the lowest since 2005, according to the ICSC-Goldman Sachs consumer survey. As gift cards are a driver of January sales, ICSC predicts that comp-store sales will decline approximately 1% this month.
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