It's Official – Christmas Stunk

The Goldman Sachs Index of Retail Sales for December 2000 confirmed retailers'worst fears. Same-store sales rose 0.1 percent in the five weeks of the month, the worst December since Goldman Sachs began compiling its index in 1987. It was also the most anemic one-month report since March 1995, when sales declined 0.1 percent from the same month a year earlier. This comes after two extremely strong holiday seasons. In December 1998, comp sales grew 5.5 percent, and in 1999 grew 6.2 percent over that.

“The consumer spending binge has finally decelerated,” said Goldman retail analyst George Strachan.

The slump hit the strong as well as the weak. While much of the post-holiday gloom centered around the announced bankruptcies of Montgomery Ward and Bradlees, such powerhouses as Wal-Mart, Target and Tiffany's also suffered. Wal-Mart predicted 3 percent sales growth; it realized 0.3 percent. Target estimated 2 percent growth; its reality was a 0.1 percent decline. Tiffany's, which had ridden the crest of luxury spending for the past few years, expected holiday sales to rise by 5 percent in its U.S. stores – its sales fell 3 percent. And The Limited, expecting 5 percent sales growth, suffered from sudden disinterest with its Intimate Brands products (Victoria's Secret and Bath & Body Works) and flatlined.

The good news is that many industry analysts believe the nadir has been reached. Strachan said his leading indicators seemed to support the fact that we've bottomed out. Yesterday's interest rate cut suggested that more were to come, which will surely free up disposable funds.

However, not everyone agrees that the worst is over. Marie Menendez, vp and senior credit officer at Moody's Investor Services, said that consumers were shopped out. “This expansion has gone on for nine years,” she said, “and that is long enough.” During that period, it was reported, Gap Inc. had added 27 percent more floor space, Home Depot 23 percent, Wal-Mart 8 percent and Target 7 percent. “Anyone who used these boom times to grow square footage but did not produce comparatively comparable productivity gains will have difficult times in the months ahead,” said Menendez, singling out Nordstrom, Saks and Dillard's as among those under review for downgrading of their debt ratings.