Last-Minute Shoppers Unlikely to Save Retailers

Wal-Mart isn't the only one having troubles. Rival discounter Target said that its same-store sales in the first couple of weeks of December have actually been below its plan of 4% to 6% growth. Best Buy echoed Target, saying its same-stores sales this month have been below its own goal of 6% to 8% growth.

Although the economy appears to be picking up, the labor market remains unstable. That's helping to keep down sales at many retailers, analysts say.

"Middle-class Americans are profoundly worried about their jobs. Many of them are financially ill-prepared for the future," said Hastings. "The situation becomes even more challenging for lower-income populations."

Many companies also had to contend with the severe winter weather earlier in the month. The poor weather forced stores to shut down and discouraged people from going outside to shop. Best Buy blamed its disappointing sales to date in part on the weather.

"To the extent that weather was the story, this [past] weekend [was] exceedingly important," said Michael Niemira, chief economist and director of research at the International Council of Shopping Centers.

Declining December: Monthly results as a portion of annual core retail (GAFO) sales
Year	January	December
1992	6.33%	14.66%
1997	6.63	13.75
2002	6.91	13.14
Note: GAFO represents sales by general merchandise, electronics, apparel, furniture, sporting goods, books, gift and office supply retailers. Numbers are not seasonally adjusted. Source: U.S. Census Bureau.

Some analysts argue that retailers will be OK, no matter how holiday sales turn out. Consumers have been increasingly shifting their spending from December to other months, they note. That means that even if holiday sales come in below plan, retailers still have time to make their quarterly revenue or earnings numbers.

At least part of that shift can be explained by the increasing use of gift cards. Sales of gift cards now represent about 8% to 10% of holiday retail spending, analysts estimate.

But such spending can skew retailers' holiday results. Although consumers often purchase gift cards in December, retailers don't recognize revenue from such cards until they are redeemed, which often occurs weeks or months after Christmas.

"Gift cards really don't affect total sales," said Craig Johnson, president of retail consulting firm Customer Growth Strategies. "But they dramatically affect [same-store] sales," which seem unlikely to produce the kind of gains many investors were betting on this holiday season.