Retailers' Hopes Dashed Amid Weak Christmas Weekend Sales

CHICAGO – The U.S. recession dashed retailers' hopes for a flurry of last-minute purchases this weekend as deep discounts and extended hours failed to generate enough sales to save the holiday season from perhaps proving to be the worst in a decade.

"The customer traffic was there, but the transactions were not,'' Kurt Barnard, president of Barnard's Retail Consulting Group, said on Monday. "The words used most often to describe this weekend were 'lackluster' and 'disappointing.'''

The week before Christmas is critical to retailers because it can account for one-third of total holiday sales as procrastinating consumers head to stores to finish their shopping, according to data from the International Council of Shopping Centers (ICSC), a retail trade group based in New York.

ICSC will publish final data for the season on Wednesday. For now, the group still predicts holiday sales will be flat to 1 percent higher, compared with a gain of 2.2 percent in 2000, a spokeswoman said. Holiday forecasts vary widely, but general expectations are for sales to range from down slightly to up slightly.

According to holiday sales data from the U.S. Commerce Department, the slowest sales growth seen in recent years occurred in 1990, when sales were flat. In 1996, sales rose 2.7 percent.

But this year the shrinking economy, a spike in the jobless rate, unseasonably warm weather in the East and Midwest, and fallout from the Sept. 11 attacks have been gnawing away at consumer spending on gifts. So retailers were banking on a big weekend to help lift sales.

"I don't feel that traffic this weekend was as strong as it has been in the past,'' said Karen MacDonald, a spokeswoman for the Taubman Centers Inc., which operates 31 malls in 13 states.

Retailers offered deep discounts and extra hours this weekend in a bid to lure shoppers. For example, Gap Inc., the largest apparel chain, e-mailed customers a coupon offering 15 percent off everything in its stores this weekend, including items already marked down 65 percent.

Kmart Corp. is keeping its discount stores open for 110 hours straight in a bid to capture last-minute sales. J.C. Penney Co. Inc. kept its stores open until 11 p.m. over the weekend, two hours later than its regular closing time.

Retailers that sell DVDs, video games and items for the home like candles are expected to outperform companies that sell luxury goods and clothing. Since Sept. 11, consumers have traveled less, shifting that spending to improving their homes.

Discount stores have also done well in the recession as shoppers purchased essential items like food and household cleaners. In contrast, department stores and apparel chains have suffered as consumers spurned purchases of clothing.

For example, Wal-Mart Stores Inc., the world's largest retailer, said on Monday it sees sales in December at its stores open at least a year -- or same-store sales -- to come in at the low end of its forecast for growth of 4 percent to 6 percent. The discount noted good sales of toys, crafts and ladies clothing.

Wal-Mart will release sales information for the period from Nov. 23 to Dec. 24 on Wednesday. Kmart also said it will release holiday sales information that day.

Federated Department Stores Inc. expects sales to decline 11 percent to 14 percent in December.

Penney reported sales were slow during the week, but business picked up on the weekend, which will help the department store operator achieve a same-store sales gain of 3 percent to 4 percent for the month. A year-ago in December, Penney's sales fell 2.7 percent.