U.S. Retail Sales Rose 2.3% Last Week on Discounts

U.S. Retail Sales Rose 2.3% Last Week on Discounts

Jan. 2 (Bloomberg) -- U.S. retail sales rose 2.3 percent last week from a year earlier as consumers slowed spending during what may be the worst holiday shopping season since 2002.

Weaker sales at the beginning of last month caused the International Council of Shopping Centers to reduce its forecast today to a sales gain of 2.5 percent ``or lower'' at stores open at least a year for November and December from an increase of 2.5 percent.

Macy's Inc., Kohl's Corp. and Wal-Mart Stores Inc. lowered prices on sweaters, coats and jewelry by at least 50 percent to clear out holiday merchandise as consumers grapple with $3-a-gallon gasoline and the worst housing slump in 16 years. Such discounting probably hurt retailers' profit margins, analysts including Howard Davidowitz said.

``I see a tremendous effort on the part of retailers to extend the season and sell what they can,'' said Davidowitz, chairman of Davidowitz & Associates, a New York-based retail- consulting firm. ``Merchandise margins are going to be ugly and Q4 earnings are going to be terrible.''

Comparable-store sales in the seven days through Dec. 29 slipped 0.2 percent from the previous week, the council and UBS Securities LLC said in a statement today, because of a surge of shopping right before Christmas. That's the first week-over- week decline since Dec. 1.

Wal-Mart, the world's largest retailer, fell 68 cents, or 1.4 percent, to $46.85 as of 11:47 a.m. in New York Stock Exchange composite trading. The Standard & Poor's 500 Retailing Index, which dropped 18 percent in 2007, declined 2 percent.

Gift Cards

Some retailers also introduced new apparel last week to sell full-price sweaters and jackets as shoppers use gift cards.

The ICSC's 2.5 percent November-December sales forecast would be the slowest gain since 2004. December may be below the council's 1.5 percent estimate as sales were slower than it projected at the beginning of the month because shoppers procrastinated, said Michael Niemira, chief economist of the council.

``The theme of 2007 has been a much more conservative spending pace and that continued into the post-holiday shopping period,'' Niemira said today in an interview. ``Clearance typically drives consumers to the stores right after the holidays.''

In another measure of retail sales, the Johnson Redbook Index rose 1.6 percent last week from a year earlier. December sales so far have climbed 1.4 percent, above its estimate for a 1.2 percent gain.

Bargains, Returns

Post-Christmas shoppers headed to stores to return and exchange presents, spend gift cards and buy discounted coats and gloves as temperatures dropped, according to Johnson Redbook.

Some retailers have noted ``continuing'' pressure on profit margins, Johnson Redbook said. Target Corp., the second- biggest U.S. discounter, said Dec. 24 that same-store sales may decline in December after customer visits slowed in the weeks after Thanksgiving.

Same-store sales are considered a key measure of a retailer's performance because they exclude locations that have recently opened or closed. Many retailers report December sales on Jan. 10.

U.S. holiday Internet sales have risen at the slowest pace on record. Online spending from Nov. 1 through Dec. 27 increased 19 percent to almost $28 billion from $24 billion a year earlier, Reston, Virginia-based ComScore Inc. said Dec. 30.

20 Percent

For that period in 2006, growth was 26 percent. ComScore hadn't recorded online growth of less than 20 percent since first tracking the figures in 2002.

U.S. new-home sales fell to a 12-year low in November, the Commerce Department said Dec. 28. The housing recession may worsen as lower prices fail to lure buyers and mounting foreclosures increase the number of unsold properties, economists said. Falling property values may cause consumer spending to slow.

The Reuters/University of Michigan index of consumer sentiment for December was 75.5, the lowest since October 2005.

Spending in November and December may rise 4 percent, the National Retail Federation estimates, the slowest since 2002. Stores typically count on those two months for about a fifth of their annual sales.

The Johnson Redbook index examines same-store sales at general merchandise retailers representing 9,000 locations. The ICSC figures include about 60 chains.

BLOOMBERG