Holiday Sales Tumble as U.S. Consumers Cut Spending

 Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, resulting in what may be the biggest holiday- shopping sales decline in four decades.

“It’s been difficult, much more difficult than anyone expected,” Gilbert Harrison, chairman and chief executive officer of retail advisory firm Financo Inc., said today in a Bloomberg Television interview from West Palm Beach, Florida. Consumers “will spend on necessities, they’ll spend on what they need, but they’re being very particular in what they’ll buy.”

Discounts of 70 percent off or more by Macy’s Inc., AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Including fuel, sales tumbled as much as 8 percent.

More than a dozen retailers, including Circuit City Stores Inc., have sought bankruptcy protection this year as the credit squeeze and the U.S. recession dried up funding. The holiday results indicate further filings are possible, along with consolidation among similar companies, said Harrison.

The decline is the worst since MasterCard Advisors started tracking data in 2002 to provide the SpendingPulse service, said Michael McNamara, vice president of research and analysis, in an interview yesterday. He estimates sales, excluding autos and gasoline, fell 2 percent to 4 percent from Nov. 1 to Dec. 24.

Share Performance

The Standard & Poor’s 500 Retailing Index has shed 34 percent this year, with only two of its 27 companies gaining.

The index doesn’t include Wal-Mart Stores Inc, the world’s largest retailer, which rose 15 cents to $55.44 on Dec. 24 in New York Stock Exchange composite trading. Wal-Mart shares have gained 17 percent this year.

The SpendingPulse data follow forecasts of falling sales from industry groups. Sales at stores open at least a year may drop as much as 2 percent in November and December, the International Council of Shopping Centers said on Dec. 23, the worst drop since at least 1969.

Consumers facing a recession, tightening credit and the highest unemployment rate in 15 years shortened their gift lists and spent less. The drop puts pressure on retailers to attract shoppers with after-Christmas sales starting today, further affecting profit margins. J.C. Penney Co. opened doors at 5:30 a.m., offering 70 percent off gold jewelry.

Spending to Savings

“This week isn’t going to do it,” Burt Flickinger, managing director of Strategic Resource Group, a consumer industry consulting firm in New York, said today in a Bloomberg Television interview. “Consumers are more cash- and credit- constrained than ever before. After a 25-year spending tsunami, they’ve shifted from spending to savings.”

The SpendingPulse data service calculates its sales estimates based on MasterCard Inc. network transactions and adjusts for cash, checks and other payment forms. MasterCard is the world’s second-biggest credit-card company. Data include food purchases.

From Nov. 1 through Dec. 24, women’s clothing sales dropped 23 percent and men’s fell 14 percent, according to SpendingPulse.

Combined electronics and appliance sales tumbled 27 percent, with purchases over $1,000 suffering the most, according to SpendingPulse data. Luxury sales, including jewelry, plunged 35 percent, the data showed. Specific dollar figures aren’t yet available, the service said.

Purchases over the Internet fared better, with a 2.3 percent decline. E-commerce may have been helped by inclement weather at the end of the holiday shopping season, McNamara said. Historically, Web sales have posted 15 percent to 20 percent year-over-year sales gains.

The U.S. economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Consumer spending fell the most in almost three decades and forecasters project an even deeper slump in the final three months of this year.

 Heather Burke Bloomberg