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Trouble Ahead

The 2007 holiday season proved to be a dismal one for U.S. retailers, crashing hopes that the months-long weakness in same-store sales was a temporary setback and signals a tough year ahead. On Jan. 10, ICSC reported that comparable chain store sales increased only 0.9 percent in December, compared to 3.3 percent in December 2006. ICSC previously forecast growth of 1.0 percent for the month.

For the combined November/December period, same-store sales increased 2.2 percent — the lowest figure since the 2002 holiday season, when growth reached only 0.5 percent. Sectors that performed the worst included department stores, with same-store declines of 7.0 percent; apparel chains, with declines of 4.4 percent; and furniture stores, with a drop of 0.7 percent.

Wholesale clubs, with positive same-store growth of 5.3 percent, and discount stores, with positive growth of 2.2 percent, came out on top.

“When consumers are trying to save money on gas and food, membership warehouse clubs are a great place to go,” says C. Britt Beemer, founder of the Charleston, S.C.-based consumer behavior research firm America's Research Group. “You are able to save money on your gasoline and food, and save money on your Christmas shopping as well.”

But the weakness in other sectors of the industry worries economists. In November, the Deloitte Leading Index of Consumer Spending, which is based on indicators, including unemployment claims, real wages, real home prices and the tax burden on consumers, fell to a low of 2.3 percent, from 2.61 percent in October.

“Until now, it was hard to determine just how difficult a sales year 2008 will be — now we are getting some indication that it's going to be difficult, particularly in the first half of the year,” says Frank Badillo, senior economist with TNS Retail Forward, a Columbus, Ohio-based retail consulting firm.

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