After posting two consecutive monthly sales gains after more than a year of declines, merchants collectively posted a surprise 0.3 percent decrease for November. The decline is on top of a freefall last November as spooked shoppers went into a defensive crouch after the financial meltdown.
Analysts caution that a better gauge of the month may lie in government retail sales numbers, which will be released Dec. 11. The numbers offer a broader view of spending, including online sales and results from electronics chains - two bright spots for the holiday season, analysts said.
Nevertheless, the weak figures released Thursday are a worrisome sign for an economy in the early stages of a fragile recovery. Now, merchants may have to step up discounting as they try to woo financially strapped shoppers back to the stores in a season that is at best expected to be unchanged from a year ago.
"This is extremely disappointing for the retailers heading into the key selling season and it is not a good harbinger for things to come," said Ken Perkins, president of retail research group Retail Metrics. "It suggest that retailers will have to be more promotional than they had planned. It also suggests that consumers are under significant amount of pressure. They're ailing, struggling to make ends meet."
According to sales results announced Thursday, most stores including department store chains Macy's Inc., Children's Place Retail Stores Inc., teen merchant Abercrombie & Fitch Co. and discounter Target Corp. posted sales declines.
Warehouse club operator Costco Wholesale Corp. posted a sales gain, though smaller than expected. Another exception was Limited Brands Inc., which runs Victoria's Secret and Bath & Body Works. It reported a solid sales gain instead of the sales decrease that Wall Street projected.
The figures are based on sales at stores open at least a year and are considered a key indicator of a retailers' health because they exclude the effects of store expansions or closings.
The 0.3 percent drop, according to the International Council of Shopping Centers-Goldman Sachs Index, is far worse than the original 5 to 8 percent growth forecast. The results come on top of a 7.7 percent drop a year ago.
Michael Niemira, chief economist at ICSC, said he wasn't lowering his already conservative 1 percent holiday sales growth forecast. He still expects December sales at stores open at least a year to rise 2 to 3 percent and said consumers appear to be delaying their holiday buying.
As Niemira pointed out, the figures from his tally and others may not represent overall spending because they exclude electronics chains like Best Buy and the world's largest retailer, Wal-Mart Stores Inc., which stopped releasing monthly sales figures after April. Most stores' figures also exclude online sales.
After consumers showed some signs of life in September and October, merchants saw a sales lull throughout November until shoppers crowded stores and malls for the early morning specials for the day after Thanksgiving.
According to reports, however, shoppers were picky about what they bought for themselves and others, focusing on discounted basics like microwaves, boots and bed sheets over the holiday weekend.
Economists say depressed spending could persist for several years amid stubbornly high unemployment - now at 10.2 percent, the highest in 26 years.
Amid a challenging economy, Costco fared well, posting a 6 percent increase; results were less than the 8.1 percent gain that analysts surveyed by Thomson Reuters expected. However, half of that increase results from currency shifts and higher gas prices.
But discounter Target, which sells one of the widest ranges of goods among the stores reporting, said that strong sales during Thanksgiving weekend were not enough to offset weak business the rest of the month, sending sales in stores open at least a year down 1.5 percent. The drop was bigger than the 0.5 percent drop analysts were expecting and were on top of the 10.4 percent decline in November 2008.
Macy's sales in stores open at least a year fell a disappointing 6.1 percent in November. It said the month was hurt by a shift of a sales event and warm weather. Still, Macy's said it had strong traffic early on Black Friday, the day after Thanksgiving. Analysts had expected a 3.1 percent drop.