It's a new year filled with old problems for retailers, which are expected to report this week that sales in January were skimpy to nonexistent...
It’s a new year filled with old problems for retailers, which are expected to report this week that sales in January were skimpy to nonexistent — possibly the weakest on record.
That could lead some major chains to lower 2008 profit forecasts and add fuel to recession predictions.
How bad was it? Sales were “near flat,” the International Council of Shopping Centers predicted Tuesday. If that forecast holds true when official numbers are released Thursday, January results will be the weakest since the council began keeping track in 1970.
February might be better, said chief economist Michael Niemira, but probably not by much. “We’re still struggling with a lot of these economic weights around the necks of the consumers.”
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Thomson Financial was only slightly more optimistic, anticipating a 1 percent January sales gain at stores open a year or more, a key industry indicator. “If retailers really come in below 2 percent, it is definitely a worrisome level,” said Jharonne Martis, senior research analyst.
Thomson said department stores probably took the hardest hit, slipping more than 5 percent, and that luxury retailer Saks Inc. was probably the only one to log a gain. “Everybody else is expected to be negative,” she said, based on input from analysts who track traffic and inventory levels.
Indeed, foot traffic dipped 2.1 percent in January from the same time last year, said Bill Martin, co-founder of ShopperTrak RCT. “We’re seeing declines on top of declines,” he said.
Some stores had hoped strong gift-card sales late last year would do more to give January a boost because they’re not counted until they’re redeemed. But Niemira said gift-card purchases, as a share of total expenditures, were weaker in 2007 than the year before.
January is typically a clearance period for retailers and the weakest sales month of the year. It’s also a time when apparel sellers haul out their spring offerings, hoping shoppers will pay full price for something new. That would boost revenues and profits.
It doesn’t seem likely that happened, Martis said. “So far, the estimates are poor for the apparel sector,” she said.
Consumers have been unnerved by ongoing problems in the housing industry, high fuel prices, shrinking stock portfolios and, last month, a weak employment report.
“In a nutshell, I think it’s the broadening of the weakness in the economy,” Niemira said.