Weekend Surge May Not Rescue Retailers' Holiday Slump

American consumers, uneasy about the economy and unimpressed by the merchandise in stores, delivered the bleak holiday shopping season retailers had expected, if not feared, according to one early but influential projection.
Spending between Thanksgiving and Christmas rose just 3.6 percent over last year, the weakest performance in at least four years, according to MasterCard Advisors, a division of the credit card company. By comparison, sales grew 6.6 percent in 2006, and 8 percent in 2005.
“There was not a recipe for a pick up in sales growth,” said Michael McNamara, vice president of research and analysis at MasterCard Advisors, citing higher gas prices, a slowing housing market and a tight credit market.
Strong demand at the start of the season for a handful of must-have electronics, like digital frames and portable GPS navigation systems trailed off in December. And robust sales of luxury products could not make up for sluggish sales of jewelry and women’s clothing.
What did eventually sell was generally marked down — once, if not twice — which could hurt retailers’ profits in the final three months of year. “Stores are buying those sales at a cost,” said Sherif Mityas, a partner at the consulting firm A.T. Kearney, who specializes in retailing.
A surge in spending during the weekend before Christmas may not have been enough to rescue Target Corp., Sears Holdings Corp. and Macy's Inc. from the slowest holiday spending season in five years.
MasterCard Inc.'s consulting unit said today that sales from Nov. 23 to Dec. 24 gained 3.6 percent. Spending in the week through Dec. 22 declined 2.2 percent, the fourth week of declines, even after sales increased almost 20 percent over the last weekend before Christmas, Chicago-based ShopperTrak RCT Corp. said yesterday.
``It's not going to overcome the negative forecasts,'' Frederick Crawford, managing director at Southfield, Michigan- based AlixPartners LLP, said of the weekend in a Bloomberg Television interview. ``It's going to be a good start, a very weak midsection, and a strong finish.''
Gasoline at $3 a gallon and rising food prices have discouraged shoppers from spending during November and December, which account for 20 percent of retailers' annual revenue, according to the National Retail Federation in Washington. Target, the second-biggest U.S. discounter, said yesterday that sales at stores open more than a year may decline in December after customer visits slowed in the weeks after Thanksgiving.
Five-Year Low
Sales in November and December this year may rise 4 percent, the slowest growth since 2002, according to the National Retail Federation. ShopperTrak has predicted a 3.6 percent increase. MasterCard's holiday growth figure was the lowest in at least three years.
Costco Wholesale Corp., the largest U.S. chain of wholesale clubs, said the holiday season ``went well,'' the Wall Street Journal reported today. Costco Chief Financial Officer Richard Galanti didn't immediately return a call left at his Issaquah, Washington, office today.
Sales rose 19 percent from Dec. 21 to Dec. 23 as U.S. shoppers took advantage of discounts and extended hours, ShopperTrak said.
Less than one-fifth of consumers had finished their holiday shopping as of Dec. 16, according to the International Council of Shopping Centers in New York. J.C. Penney Co., Sears and Toys ``R'' Us Inc. tried to lure late buyers with discounts over the weekend, helping boost U.S. retailers' sales by 7.6 percent on Dec. 22, the Saturday before Christmas.
Chris Lewis, a cleaning-franchise owner, began shopping for his two children on Dec. 21, and may buy more items after Christmas.
Staying Frugal
``I try to stay kind of frugal,'' the 35-year-old resident of Silver Spring, Maryland, said. ``I'm not going to give everything I have in one day.''
Shoppers buying online led the growth in spending, with Internet sales gaining 22 percent from Nov. 23 though Dec. 24, Michael McNamara, vice president for research and analysis at MasterCard Advisors, said in an interview today.
``If you were expecting this holiday season to stimulate a new ramp-up in growth, I think you'd be disappointed,'' McNamara said. said. ``I think the vast majority of people in the marketplace had modest expectations.''
Apparel rose 1.4 percent from a year ago, McNamara said. Men's clothing climbed 2.3 percent, while clothes for women fell 2.4 percent.
Luxury Gains
Luxury goods, excluding jewelry, rose 7.1 percent compared with the same period last year, and footwear sales increased 6 percent.
MasterCard Advisors' SpendingPulse surveys retailers across the U.S. Its figures are based on sales in the MasterCard network and estimates of other forms of payment, including checks and cash. MasterCard is the second-biggest U.S. credit- card company.
Last year's holiday season grew 6.6 percent over 2005's holidays. Two years ago, retail sales grew 8 percent from the previous year, MasterCard said.
Although Target's customer visits increased for the week ended Dec. 22, ``this increase was not sufficient to compensate for the unfavorable traffic trends that carried over into December from the week following Thanksgiving,'' the Minneapolis-based retailer said on a recorded call.