Many top U.S. retailers reported disappointing December sales as consumers who shopped right after Thanksgiving would only spend again on big bargains and were set to stay frugal in 2011.
A post-Christmas blizzard made things worse for some retailers, and companies ranging from department store operator Macy's Inc and discounter Target Corp to teen clothing store American Eagle Outfitters were among those whose results fell far short of Wall Street's forecasts.
The turbulence is here to stay, said David Bassuk, a managing director at consulting firm AlixPartners. The consumer is still very sensitive to even slight fluctuations in prices -- the consumer is still looking for deals.
Many retail stocks fell, and the Standard & Poor's retail index was down 1.6 percent, at its lowest level since early December. By contrast, the broader S&P 500 index fell just 0.3 percent.
December sales at stores open at least a year for the 28 major retailers tracked by Thomson Reuters rose 3.1 percent, below Wall Street's forecast of a 3.4 percent increase.
The chains that beat forecasts included department stores J.C. Penney Co Inc and Dillard's and off-price retailer TJX Cos, which cater to frugal shoppers.
TJX unexpectedly reported a same-store sales gain and raised its outlook, sending its shares up more than 5 percent.
But Penney noted that shoppers had spent less per transaction, citing a general need to discount that continued into the holiday shopping season. Its shares fell 1.3 percent.
Now that Christmas is over, consumers, whose spending accounts for about 70 percent of the U.S. economy, are putting their wallets away.
I want money in my bank account and my 401k back to where it used to be, said Patricia Welcoy, a legal assistant shopping on Wednesday in Manhattan and toting a T.J. Maxx bag.
Unemployment is still hovering just below 10 percent, and efforts by Americans to pay down high household debt loads are limiting their ability to shop as often as they once did.
New U.S. claims for unemployment benefits rose more than expected last week, although a decline in the four-week average to a more than two-year low indicated some improvement in the labor market.
The International Council of Shopping Centers forecast same-store sales will rise 2.5 percent to 3 percent in January and 3 percent to 3.5 percent in 2011. Chief Economist Michael Niemira said discount chains would see big gains, in part because of higher food prices.
Top performers also included high-end department stores Saks Inc and Nordstrom Inc, suggesting a bifurcation in the consumer market between the well-to-do and the still struggling, said Michael Koskuba, a portfolio manager at Victory Capital Management.
Those that do have jobs are more confident, said Koskuba.
Target suffered from the same low prices for consumer electronics that hurt Best Buy in November, he said.
Some retailers blamed the weather for sales missing expectations that were ratcheted up after shoppers hit stores at the start of the holiday shopping season.
We did a lot better before the snow hit, no question about it, Macy's Chief Executive Terry Lundgren told cable channel
December 26, which was the third-biggest shopping day of 2009, would struggle to make the top 10 this year, according to research firm ShopperTrak. The week after Christmas accounts for 15 percent of seasonal sales.
ShopperTrak said on Wednesday that retailers did not make up all of the $1 billion in retail sales it said shoppers put off because of the storm.
British retailers also said snow hurt Christmas sales.
Macy's same-store sales rose 3.9 percent, below estimates of 4.5 percent, but the company did not raise its profit forecast.
Gap Inc shares were down nearly 8 percent after the clothing chain reported an unexpected same-store sales drop as shopper traffic plummeted.
Wet Seal posted an unexpected decline, and American Eagle Outfitters reported an 11 percent drop and lowered its profit forecast, as teen chains had cut prices aggressively to win shoppers away from rivals. Abercrombie & Fitch's same-store sales soared 15 percent as it did not have to slash prices as sharply as its rivals to woo shoppers.
(Reporting by Phil Wahba; additional reporting by Dhanya Skariachan, and Helen Chernikoff in New York, Jessica Wohl in Chicago, and Nivedita Bhattacharjee and NR Sethuraman in Bangalore)