Retail sales drop again in January

NEW YORK | Shoppers grappling with rising layoffs and shrinking retirement accounts dug deep into survival mode last month, leading to sharp January sales declines for many retailers. The poor results raised more concerns about the financial health of the industry.

The malaise crossed the spectrum of retailing, from department stores to teen chains. Gap Inc., luxury retailer Saks Inc. and Children’s Place Retail Stores Inc. were among those posting deeper-than-expected sales declines.

Wal-Mart, the world’s largest retailer, was a notable exception, reporting sales that beat Wall Street’s forecast, as shoppers continued to focus on necessities such as groceries.

“Sales are coming in extremely soft, and we see more of the same for at least three to six months,” said Ken Perkins, president of research company RetailMetrics. “Shoppers continue to be under pressure. They are fatigued and tapped out. They are feeling pressure from all fronts. And there’s absolutely no incentive to shop.”

January sales fell 1.6 percent, according to the International Council of Shopping Centers-Goldman Sachs tally - not as bad as the 2 percent to 3 percent drop expected but still the fourth consecutive monthly decline. The index was helped by the better-than-expected results from Wal-Mart, which accounts for a little more than half the index. Excluding Wal-Mart, January same-store sales fell 4.8 percent. The tally is based on same-store sales, or sales at stores open at least a year, which are a key indicator of a retailer’s health.

The sales figures capped the final month in the industry’s fiscal year, which saw a meager 0.9 percent sales increase, the slowest pace since at least 1969 when the ICSC index began.

January is the least important month of a retailer’s sales calendar, but the figures confirmed how weak consumer spending is. Merchants couldn’t even count on a sales lift from shoppers redeeming holiday gift cards - gift card sales were down because shoppers were focusing on deals, or just not buying. And with the economy deteriorating, the ICSC’s chief economist Michael P. Niemira expects that same-store sales will keep falling through at least spring.

Shoppers are worried about slumping home prices, tight credit and shrinking retirement accounts. But the biggest concern is job security and income - and that may only be reinforced by data Thursday showing that new claims for unemployment benefits jumped to their highest level in more than 26 years. The unemployment rate - now at 7.2 percent - is expected to jump to 7.5 percent, a 17-year peak, in January when the government releases new figures Friday.

In this environment, stores are slashing prices to try to pull in shoppers. Already many chains, including AnnTaylor Stores and Banana Republic, are discounting spring merchandise.