Housing slump, high energy prices affect retailers over holidays

By Anne D’Innocenzio

Published: January 11, 2008

NEW YORK — The economic outlook became more uncertain Thursday after many of the nation's big retailers reported weaker than expected holiday sales, the result of consumers cutting spending because of higher energy prices and the housing slump.

Many merchants failed to meet already lowered sales projections during December, and their performance during this critical sales period led some stores to reduce earnings outlooks for the fourth quarter.

The weak results crossed all retail categories. Particularly hard hit were apparel sellers including Limited Brands Inc. and AnnTaylor Stores Corp., as well as department stores including Macy's Inc. Among the few bright spots were low-price operators like Wal-Mart Stores Inc., which posted results that exceeded Wall Street expectations, as it benefited from shoppers trading down to cheaper stores amid higher gas prices and a slumping housing market.

"Overall, the holiday season was dismal,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass.

A number of chains including Macy's and Target Corp. saw their sales depressed in December in part by a quirk in the calendar, which pushed the post-Thanksgiving shopping week into November rather than December. Analysts say it is best to look at the combined November-December figures to get a better picture.

Still, it was clear the slowing economy made shoppers frugal during the holiday shopping season. Lured by fat discounts, shoppers jammed stores over Thanksgiving weekend, the start of the holiday shopping season, but they didn't return until the final days before Dec. 25, when stores were stepping up their promotions and the discounts were even deeper. December sales results also got some lift from post-Christmas shopping as consumers bought holiday leftovers. Such late buying cut into profits, analysts said.

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