U.S. Retailers Post Smallest Sales Gain in Two Months (Update2)

Dec. 18 -- Retailers in the U.S., mired in the worst holiday season since 2002, posted their smallest weekly sales gain in two months as discounts failed to entice consumers faced with $3-a-gallon gasoline.

Sales at stores open more than a year increased 2.1 percent in the week through Dec. 15, the International Council of Shopping Centers and UBS Securities LLC said today in a statement. December sales at stores open more than 12 months may grow 1.5 percent from a year earlier, the group said, matching an earlier forecast.

Shoppers have delayed holiday gift purchases as higher fuel prices and the first drop in the median price of homes since the Great Depression make Americans hesitant to spend. Home Depot Inc., Macy's Inc. and Target Corp. have responded by cutting prices by 50 percent to attract customers.

``Consumers are holding out,'' Burt Flickinger, managing director at Strategic Resource Group in New York, said in an interview. ``They're outsmarting the stores for deeper discounts.''

Online sales, which may be the fastest-growing retail channel this November and December, have also slowed. Internet spending from Nov. 1 through Dec. 14 rose 18 percent to $22.7 billion, Reston, Virginia-based ComScore Inc. said Dec. 16. That's less than the firm's forecast of 20 percent growth for November and December, which would be the smallest increase on record, and slower than last year's 26 percent gain.

The Standard & Poor's 500 Retailing Index was virtually unchanged at 10:14 a.m. New York time. The 31-member index has fallen 11 percent through yesterday since Oct. 31, compared with a 6.7 percent decline in the S&P 500.

Lower Earnings

Black & Decker Corp., the largest U.S. power-tool maker, reduced its annual profit forecast Dec. 14. Retailers cut orders because consumers bought fewer tools for home-remodeling projects as the housing slump enters its third year.

Circuit City Stores Inc., the second-largest U.S. consumer-electronics chain may report a loss this quarter because of slowing sales of flat-screen televisions, analysts at Bear Stearns & Co. and Morgan Stanley said Dec. 14.

Black & Decker rose $1.05, or 1.5 percent, to $71.27 while Circuit City fell 53 cents, or 7.9 percent, to $6.16.

Consumer spending accounts for two-thirds of U.S. gross domestic product. For retailers, sales in the last three months of the year contribute 30 percent to their annual profits, according to Michael Niemira, the ICSC's chief economist.

The National Retail Federation in Washington forecast a 4 percent increase in holiday sales this year, the slowest since 2002.

The biggest online shopping day of the year may be this week because most retailers' deadlines for guaranteed shipping by Christmas expire on Dec. 17 and Dec. 18, according to a survey by the National Retail Federation.