Worst Holiday Sales in 40 Years

Holiday sales are shaping up to be the worst in 40 years and will likely prompt store closures, bankruptcies, take overs and layoffs.

Dec. 29 (Bloomberg) — U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers. Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations.

More than a dozen retailers, including Circuit City Stores Inc., Linens ‘n Things Inc., Sharper Image Corp. and Steve & Barry’s LLC, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, said Burt Flickinger.

Even Wal-Mart is hurting with its stock falling 24%.

This part of the story is interesting,

“The whole pricing system is becoming an old-fashioned bazaar,” Hastings said today in a telephone interview. “They’re going into the stores and they’re looking at the stuff and they’re saying ‘You know what? I know that that price is way too high,’ and they have figured out that the signage doesn’t mean that much.”

So are consumers going in and actually haggling with sales people over prices, even at large chain establishments? Looks like it. Now that is something I wouldn’t have expected.

NEW YORK — If you’re looking for an extra bargain before the holidays, you may only have to ask. With holiday sales shaping up to be the lowest in years, possibly the worst since the industry began annual comparisons in 1969, retailers say they’re taking consumers’ demands for good deals seriously. Some are extending return policies, while others are matching competitors’ prices. Many are volunteering on-the-spot discounts and even letting customers haggle prices well down from what’s marked in a desperate bid to make the cash register ring.

The above story is before Christmas, and I wonder if such tactics will still work. If not, just wait for the going out of business sales I guess.

FILED UNDER: Economics and Business, , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. anjin-san says:

    Retailers are going to have to make some changes. I was at Macy’s the other day looking at clothing that was 50% off. Perry Ellis slacks, regular $150 – half off. On what planet is a pair of Perry Ellis slacks worth $150? For $225 you can get some Italian slacks and have something worth wearing. Even at $75 they are overpriced.

    Over at Brookstone, they have a huge sign in front “Up to 75% off”. After looking around and seeing nothing more than 50% off, I asked a clerk where the 75% items were. There was exactly one, in the far corner of the store. Sorry guys, we know what “bait and switch” is.

    If brick and mortar stores want to stay in business, I suggest they do three things.

    >Don’t look at your customers as cash cows, charge reasonable prices and provide real value.

    >Provide some actual service. A bored kid who is too busy texting to help me does not impress.

    >Don’t treat your customers like they are stupid. Its a bad assumption to base a relationship on.

    If you can’t do these things, I will stay at home and shop on my laptop in front of the fireplace with some good music on.

  2. I love how lacking in economic logic the reporter is. Heather Burke writes,

    U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

    One could reasonably assume that meant sales were at the level of 1968. If true, that would clearly be a sign of a depression. But that’s not what Burke meant:

    Sales at stores open at least a year probably dropped as much as 2 percent in November and December, the ICSC said last week, more than the previously projected 1 percent decline. That would be the largest drop since at least 1969, when the New York-based trade group started tracking data.

    That probably means holiday sales went down to 2006 levels. The economy isn’t great, but there’s little need to hype it as being worse than it is.

  3. Steve Verdon says:

    If you can’t do these things, I will stay at home and shop on my laptop in front of the fireplace with some good music on.

    Agreed.

    Sean,

    I agree the idea that sales volume is equal to 1968 is clearly a bad impression to make, still it is bad news, even if in relative terms. I wouldn’t say bad economic logic as it strikes me as just bad logic and/or writing. One of my favorite examples is,

    Since 1950 the number of children killed by handguns have doubled.

    Vs.

    Every year since 1950 the number of children killed by handguns has doubled.

    In the first case if X is the number of handgun deaths in 1950 the number of deaths “today” is 2x. In the second case if we assume 1 child died by a handgun in 1950 today we’d have 288,230,376,151,712,000 dead children. I think that number would surpass the number of people who ever lived on this planet and probably ever will.

    Another dubious use of numbers is the estimation 73,000 store closures. Sounds scary…73,000 stores is alot. But later in the article we learn that there are something like 1.1 million stores.

    Still, I wouldn’t be surprised if there are store closings, bankruptcies, etc. Is it the end of the world? No, bankruptcy to reorganize can be a good thing for a company if it can put it back in sound condition.

  4. Dave Schuler says:

    Another way of looking at these same numbers would be to conclude that we are over-invested in retail stores.

    An additional problem with the article is that it gives no baseline for store closings. As far as I know 73,000 could be the smallest number of closings in a decade. I simply have no idea.

  5. mike says:

    Anjin is right. Don’t make me feel guilty for not wanting to shop at a store who falsely advertises and then when I get in there, the salesman doesn’t give a sh#$ if I buy something or choke to death in the corner. this is just darwinism and the heydey of these stores is over.

  6. Drew says:

    Men threatening to not go out and shop. Now that’s new. Meanwhile, women and teens, for whom its a social event, will.

    Mr Schuler makes an interesting point, what is the baseline number? If I told you that approximately every three months 8 million jobs are destroyed in the US you would be horrified. But its true. Of course a like, or greater number, are created. Such is the nature of job churn.

    Our intrepid reporter failed to put anything in context.

  7. Floyd says:

    The retailers were a bit reticent when it came to ordering adequate inventory this year. I personally found at least four items that required more than two stores to find and at least one item that I did not find at all.
    This certainly would seem to be a piece of the story of poor sales this season.

  8. anjin-san says:

    Men threatening to not go out and shop. Now that’s new. Meanwhile, women and teens, for whom its a social event, will.

    I am probably a bit atypical, I spent a lot of time around the clothing industry many years ago and still enjoy shopping for clothes. I buy most of my wife’s because she does not like to shop and I have a better eye than she does in any case. I have a pretty healthy clothes budget and think I am a customer these guys need and should want to attract.

  9. Triumph says:

    Holiday sales are shaping up to be the worst in 40 years and will likely prompt store closures, bankruptcies, take overs and layoffs.

    I love how the liberal media elites constantly try and spread negative information about the economy to blame Bush for the alleged economic “downturn.”

    These people are a bunch of winers and consistently forget that we are at war. War requires sacrifice. If people would rather be living in Saadam’s Iraq than in the free country of America, they shouldn’t be complaining.

    The economy is fine.

  10. anjin-san says:

    Of course a like, or greater number, are created.

    Unless, of course, Bush happens to be President.

  11. Drew says:

    “Unless, of course, Bush happens to be President.”

    Compare the monthly unemployment rate for Clinton’s full term to that for Bush’s full term. They are indistinguishable.

    Of course, Clinton’s term was an “economic miracle.” And Bush’s was “tough economic times.”

    At least according to the major media……..and the sheep who unquestioningly follow them.

  12. anjin-san says:

    Compare the monthly unemployment rate for Clinton’s full term to that for Bush’s full term. They are indistinguishable.

    Perhaps, but the subject is job creation, and it is easy to see why you would want to change the subject when Bush’s job creation record comes up.

    # One of the most important measures of economic well-being is the number of people with jobs. The number of jobs in the economy increased 2.38 percent per year under Clinton, but it has decreased 0.17 percent per year under Bush.9 While it’s clear that the economic downturn in 2001 was not Bush’s fault, the sluggishness of the recovery is unprecedented in the period since the federal government began issuing detailed employment reports in the 1940s. There have been 1.7 million jobs created since September 2003, which may sound like a lot, but that number falls short of the 1.8 million jobs that must be created per year just to match population growth, and it falls far below the 3.7 million jobs that the administration predicted would be created when the president signed his 2003 tax cut into law.10 This slow job growth is largely attributable to both the failure of the administration’s fiscal policies (which targeted tax cuts to stimulate savings rather than spending) and the failure of its trade policies (which have done a poor job of opening foreign markets to spur export growth, and have not created the conditions for an orderly decline in the value of the dollar, which would have helped ease the trade imbalance).11

    # Full-time vs. Part-time Jobs12
    The change in the number of jobs does not provide a complete picture of employment in the U.S. economy. Not only did the Clinton years produce many more jobs than the Bush years have, but they also produced more full-time jobs compared to part-time jobs. This is an important indicator because in an economic slowdown many displaced and new workers resort to part-time work as a second-choice option. Granted, some people might prefer part-time work because they have children or attend school. But, overall, a decrease in the ratio of full-time to part-time jobs implies that a greater share of workers have less stable work with fewer benefits. The ratio of full-time to part-time work rose under Clinton by 0.11 percent per year, but it has decreased at an annual rate of 1.67 percent since the beginning of 2001. In fact, the ratio of full-time to part-time jobs has not only reversed direction, but as of September 2004 it has fallen below what it was before Clinton took office.

    http://www.ppionline.org/ndol/print.cfm?contentid=252964

  13. Brett says:

    You know, this is what bothered me about the stimulus plans (among a whole lot of things). If you want to put money in people’s pockets, why not do it a few weeks before Christmas? Considering that it is the biggest time of year for many retailers, and the strong incentives to shop, people were probably as likely to spend the money then as they would ever be. But no, political gridlock . . .

  14. Drew says:

    Spare me. The local subject was net job destruction and creation, as the 8 million figure so aptly points out. And the bigger issue is overall economic performance. But I understand why you would want to change, and selectively choose, the measurement……….faulty as it is.

    If you want to dive into gory detail on jobs reporting, compensation etc you need to take into account things like the growing number of unreported self employed, the growth in comp through bennies as opposed to wages etc etc. You, and the column you site obviously have no appetite for real understanding, just partisan puffery.

    For example, in the official statistics, yours truly is not even counted as employed (in fact, I would be accounted for as a job lost!) and yet I’m in the upper 1% of income earners. Damn that no good George Bush!! And there are many, many like me.

    I also had to laugh out loud at some of the cause and effect descriptions in your citation, as if such fundamental trends ebbed and flowed in lock step with Presidential policies.

    If you would like to elevate the discussion to something worthwhile, like overal economic performance during the 25 year period from Reagan to Bush, and the globalization policies that produced that performance, let me know.

    If not, have fun continueing to polish that bust of Clinton in your living room.

  15. anjin-san says:

    Sure Drew, Sure. The economy is just great. Bush is a god. Yep.

  16. Drew says:

    I rest my case, anjin, you have no ability to carry on a reasoned discussion about policy cause and effects wrt the economy.

    By the way, Clinton implemented/approved two very significant and positive economic policy initiatives during his term. (You see, reasonable and intellectually honest people can give credit where it is due, unlike your Pavlovian partisan rants.) However, one was absolutely antithetical to the commentary in your citation, and the second is still criticized by most Democrats.

    Fascinating.

    Now, back to your neanderthal grunting: Clinton gooooooood. Bush baaaaaaaad…….

  17. anjin-san says:

    Drew,

    If you want to defend Bush’s record on the economy, have at it. The economy in shambles and deficits that defy the imagination… hell, you have good reason to be proud of your man.

    At any rate its not as if anyone besides bithead takes you all that seriously 🙂

  18. Drew says:

    As I said, I rest my case. You have shown absolutely no capacity to have an educated discussion on the matter, and I see no evidence that this can or will change.

    Bye-bye.

  19. anjin-san says:

    Damn Drew, how will I go on if you deny me the pleasure of your company?

    Luckily, you don’t even contribute the comic relief element that bitsy does…

  20. bob in fla says:

    No, Steve. You & Bloomberg are both entirely wrong. Sales have not dropped to levels of 40 years ago, as you both state. The percentage decline in sales is the worst in 40 years. Big difference in those statements. Since population has roughly doubled in that time period, sales would have to have been less than half of last years to be as low as they were in 1968, wouldn’t you think? (Of course I mean in inflation adjusted dollars.) The highest estimate I have seen in year to year decline is about 8%.

    Times are bad, but they aren’t that bad – at least not yet. But I am nervous about the next few months. You mentioned Wal-mart stock dropping 24%. Last I knew, they were one of a very few retailers whose sales gained slightly this year as well as the only stock on the DJIA which hadn’t lost significant value. Perhaps you might post on the story behind this news?

  21. anjin-san says:
  22. bob in fla says:

    On second thought, forget about the followup on Walmart’s stock price, since their stock is up for the day & up significantly for the year. I don’t know where you got the info that Walmart dropped 24%, but it is clearly wrong.

    WTF?

  23. john says:

    saw this on yocial. This is an insane time. My flailing little 401k dropped to almost half its value. check this out to billionaire list

  24. Barry says:

    Drew: “Of course a like, or greater number, are created. Such is the nature of job churn. ”

    Not this f*cking year.

    Drew: “Compare the monthly unemployment rate for Clinton’s full term to that for Bush’s full term. They are indistinguishable.”

    Compare job creation figures, or median wages and salaries. Clinton blow Bush out of the water.