Holiday Sales Dash Retailers’ High Hopes Stingy Consumers Demonstrate Preference For Saving Over Splurging On Gifts

U.S. retail sales sputtered in December as consumers proved far more interested in squirreling away money than splurging on gifts.

The disappointing holiday season is a comedown for retailers, many of whom had expectations of strong gains after Thanksgiving’s vibrant beginning. That was a false start, though, as spending tapered off in following weeks.

The upshot is a middling sales season that’s likely to result in lower-than-expected earnings for some of the nation’s biggest retailers, including Kmart Corp., Limited Inc., WalMart Stores Inc. and Toys “R” Us Inc.

“Wall Street expectations were too high,” said John Snyder, who manages $1.8 billion, including retail stocks, for John Hancock. “Retailers did not meet the expected numbers.”

The fourth quarter accounts for as much as half the annual sales and profits of many retailers.

Electronics sellers fared the worst, as they have in recent months, with many posting double-digit same-store sales drops.

Many department stores barely met trimmed-down forecasts, as same-store sales were virtually unchanged at Federated Department Stores Inc. and fell 7.7 percent at Dayton Hudson Corp.’s department stores and 1.2 percent at Carson Pirie Scott & Co. Apparel chains didn’t do much better: Sales fell 1 percent at Limited Inc. and inched up 2 percent at Gap Inc.

The few good sales came from Wal-Mart Stores Inc., Sears, Roebuck & Co. and some specialty chains such as bookstores.

Same-store sales rose 5.2 percent for the month, according to a Bloomberg index. Sales last year rose 2 percent, one of the slimmest gains in a non-recessionary environment in decades.

December’s numbers are somewhat skewed, though, because retailers didn’t all use the same reporting periods. Other indexes vary from Salomon Brothers’ 6.2 percent increase to Bank of Tokyo-Mitsubishi’s 3.4 percent gain.

In all, analysts said when November and December are combined, the sales results will be less murky and much weaker.

“Everybody was optimistic after a strong start, but sales really submarined in the middle of the month,” said Philip Abbenhaus, an analyst at KMPG Peat Marwick. “In some cases, sales were extremely disappointing.”

Sales were depressed because consumers are now saving twice as much as they did two years ago for retirement and college educations. Retailers also said they were hurt by a shopping season five days shorter than a year ago.

Sales of clothing, while still a big gift item, didn’t turn out to be nearly as robust as expected. That hurt some department store chains, though apparel sales rose more than 10 percent at Sears, Roebuck & Co.

Toy sales also failed to ignite, even with the popularity of toys such as Tickle Me Elmo and Nintendo 64.

Some of the better sales increases came from specialty chains such as Pier 1 Imports Inc., whose same-store sales jumped 17 percent.

Sales were also stronger at some major discounters, though markdowns will likely hurt earnings.