CHICAGO - The 2012 holiday season may have been the worst for retailers since the financial crisis, with sales growth far below expectations, forcing many to offer massive post-Christmas discounts in hopes of shedding excess inventory.
While chains like Wal-Mart Stores Inc and Gap Inc are thought to have done well, analysts expect much less from the likes of book seller Barnes & Noble Inc and department store chain J. C. Penney Co.
Growth was always expected to slow this season, though an improving employment picture and rising home values had helped mitigate the worst fears. But then Superstorm Sandy hit the East Coast in late October, mild weather blunted sales of winter clothing and rising concern about the "fiscal cliff" became more of a reality, dragging down already pessimistic forecasts.
"The broad brush was Christmas wasn't all that merry for retailers, and you have to ask what those margins look like if the top line didn't meet their expectations," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group.
The latest sign of trouble came from MasterCard Advisors Spending Pulse, which reported holiday-related sales rose 0.7 per cent from Oct. 28 through Dec. 24, compared with a 2 per cent increase last year.
The preliminary estimate from SpendingPulse was in line with other estimates showing weak growth during the holiday season, when retailers can book about 30 per cent of annual sales - and in many cases, half of their profits.
"It has been a very uneven industry performance, probably at least for the last year, and that certainly continued into the holiday season," said Michael Niemira, chief economist at the International Council of Shopping Centers, in an interview with Reuters Insider.
The latest holiday season could end up the weakest since 2008, during the last recession, when sales actually declined. The National Retail Federation had previously predicted 4.l per cent sales growth this year, versus a 5.6 per cent increase a year earlier.
Markets reacted sharply to the gloomy outlook.
The S&P retail index fell 1.8 per cent in midday trading Wednesday, and 16 of the top 20 decliners in the broader S&P 500 were retailers or consumer brands.