December Retail Sales Take Expected Dive

The equity markets bounced on Thursday like a ping pong ball.  In the case of the Dow Jones, the index ended up nearly where it started, down only 27.24 points, or 0.31 percent. The S&P 500 managed to venture into positive territory, up 0.34 percent, and the Nasdaq did even better, gaining 1.12 percent.President-elect Barack Obama made his case early in the day for a multi-billion-dollar stimulus package that he can sign as soon as he takes office. At least he’s thinking big. No word from Congress yet on just how big its ideas will be in the coming weeks and months. Obama also says no pork (every president says that), but historically speaking such a no-pork goal translates in Congressional terms to, “just a little, please, and only for my district.” Various retail sales figures for December were reported Thursday, and to no one’s surprise they generally showed declines during the month when compared with the same month in 2007. According to retail consultancy TNS Retail Forward, December comparable-store sales declined an average of 1.5 percent among the 40 major retailers that it surveys. Macy’s Inc., for instance, saw a 4 percent drop in comparable-store sales in December, and yesterday announced that it was closing 11 stores in nine states. Macy’s Chief executive Terry Lundgren tried to put a good face on the move by calling it part of a “normal-course process to prune underperforming locations.” And, to be fair, the company now expects to achieve earnings of $1.10 to $1.20 per share for its entire fiscal year. That might be lower than previously expected, but it’s still black ink. Sears Holdings Inc. has reported same-store sales declines of 7.3 percent at its Sears and Kmart chains for December, but that average masks a plunge of 12.8 percent drop for Sears but a mere 1.1 percent drop for Kmart. Kmart is, naturally, the discount side of the equation, but according to the company there’s more to its relative strength than that. Sears Holding says that Kmart has been buoyed by a positive consumer response to its revived layaway program. Even mighty Wal-Mart has said that it will miss its fourth-quarter sales forecasts, bagging 91-94 cents a share, compared with the $1.03-1.07 a share previously anticipated. Not counting gasoline, the retail behemoth’s comparable-store sales were up in December–1.7 percent–but that wasn’t as much as expected. Wal-Mart cited bad weather nationwide in the weeks before Christmas as a dampening factor in December sales. Retail is one of the front-line victims of a trend toward consumer deleveraging. According to the Federal Reserve, consumer borrowing dropped by $7.9 billion in November, a record decline for a single month. Borrowing was also down in October, with the November figures reflected the first back-to-back monthly consumer borrowing declines since 1992. The impact of the economy on major retailers is one thing, but how are retail landlords getting by–especially the owners of bread-and-butter smaller properties, such as strip centers or grocery-anchored centers, which are arguably a linchpin of the retail world? “If, as a retail owner, you have debt coming due, or you have space to fill in your properties, 2009 will be as hard as it’s ever been to handle those business necessities,” Michael Christie, president of Park Ridge, Ill.-based Heritage Realty Partners Inc., told CPN. “But on the whole, retail owners will do what they have to do to get through this year.” For financing, Christie says that Wall Street isn’t an option for the foreseeable future–but that in part community banks and other local sources of capital are stepping into the void. “Local financial relationships are paramount these days,” he noted. As for leasing, he said that landlords are working closer than ever with entrepreneurs and mom-and-pops to get space filled. “I’m seeing landlords courting tenants–good tenants, as it turns out–that might not have been considered only two years ago, because they weren’t large enough to be considered credit tenants. The thinking on that subject has changed completely since then.”