A decline in sales at the nation's retailers in November after two consecutive months of gains is an ominous warning sign for the holiday shopping season and for an economy in the early stages of a fragile recovery.
Many merchants may be forced to discount more than they planned to get financially strapped holiday shoppers to buy after last weekend's respectabledidn't offset weak spending for the rest of the month.
The 0.3 percent decline, according to one measure, is especially worrisome because it comes on top of a freefall last November as spooked shoppers went into a defensive crouch after the financial meltdown. Analyst had expected a solid gain. Consumer spending accounts for 70 percent of all economic activity.
According to sales results announced Thursday, a diverse group of stores, including department store chains Macy's Inc., Saks Inc., teen merchant Abercrombie & Fitch Co. and discounter Target Corp. posted sharper-than-expected sales declines. Children's Place Stores Inc. was among the biggest disappointments, suffering a steep drop, though Wall Street expected a small gain.
Analysts caution that a better gauge of the month may lie in government retail sales numbers, slated to 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. Thursday's figures also don't include Wal-Mart Stores Inc., the world's largest retailer, which stopped releasing its monthly figures after announcing April results.
Warm weather also was a factor in depressing shoppers' appetite for seasonal apparel like coats, analysts said.
Nevertheless, November's buying trends show that Americans mostly will shop only when the bargains are deep.
"I think we are seeing the true stripes of the consumer," said BMO Capital Markets analyst John Morris. "She is still motivated by need rather than want."
After consumers showed some signs of life in September and October, merchants saw a sales lull throughout November until shoppers crowded stores for the early morning deep-discounted merchandise for the day after Thanksgiving.
However, shoppers were picky about what they bought for themselves and others, focusing on discounted electronics like flat-panel TVs and hard-to-find toys like Zhu Zhu Pets. But mostly shoppers stuck to sharply reduced basics like boots and bed sheets.
Trish Groski from Tucson, Ariz., plans to spend less than the several hundred dollars she spent last year to keep in line with her dwindling income. Groski and her husband have been out of full-time work for about two years and are getting by with their online businesses selling things like handmade items and vacuum parts.
"If there's a coupon and it corresponds with an item I want to get, absolutely I'll use it," Groski said.
Economists say such depressed spending could persist for several years amid stubbornly high unemployment now at 10.2 percent. The Commerce Department reported last week that over the 12 months ending in October, wages and salaries, the most important component of incomes, fell 2.9 percent.
Target said 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.
Warehouse club operator Costco Wholesale Corp. posted a 6 percent sales gain, though smaller than expected and half of which came from higher gas prices and currency shifts. 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.
Though business was weak, stores have cut inventory, reasoning it's better to leave some sales on the table than be stuck with unsold merchandise. That could help protect their profits.
The 0.3 percent drop compared with a year ago, according to the International Council of Shopping Centers tally, is well below the reduced growth forecast of 3 to 4 percent. The results come on top of a 7.7 percent drop a year ago.
Another sales tally from Thomson Reuters, which uses different methodology, was up a meager 0.5 percent in November.
Niemira said he wasn't lowering his already conservative 1 percent holiday sales growth forecast.