Retailers today will put to bed their worst holiday shopping season in decades. But unfortunately for the industry, a new calendar won't automatically wean consumers hooked on markdowns.

MARK LENNIHAN/The Associated Press

Retailers expect to report their worst holiday season since 1970 after sales fell 2.7 percent industrywide in November and will probably drop 1 percent in December from year-earlier figures. January is looking puny as well.

Analysts expect chains to slash year-end earnings and say they can't forecast 2009 results as consumer malaise and a recession tear into margins.

The winners of this season, characterized by discounts on top of discounts, can be counted on one hand.

JIM MAHONEY/DMN

Shoppers are still expecting huge markdowns, retailers say.

Wal-Mart Stores Inc., Family Dollar Stores Inc., Grapevine-based GameStop Corp. and Beaumont-based Conn's Inc. are on the short list of chains posting positive December sales.

But many chains, including Plano-based J.C. Penney Co., are expected to report double-digit sales declines. And the industry as a whole is forecast to post a 1 percent decline in December sales, after posting a record 2.7 percent decline in November, based on an index of chain store results compiled by the International Council of Shopping Centers and Goldman Sachs.

It would be the industry's worst performance since 1970.

"Retail earnings estimates were in free-fall throughout November and into December before slowing just ahead of Christmas," said Ken Perkins, president of Retail Metrics Inc. Now retailers are expected to turn in a seventh straight quarter of earnings declines, with a 19.3 percent drop in fourth-quarter profit. Without Wal-Mart's results, fourth-quarter earnings for the industry are expected to be down a whopping 27.5 percent.

Analysts don't expect retailers to say much about their earnings expectations for 2009.

"If we hear comments about the first quarter, that'll be good," Mr. Perkins said. "Expect to hear that conditions are too tough to predict."

Throughout the holiday season, shoppers said over and over that they were cutting back and spending more conservatively. They also held out for discounts, and some returned items that went on sale even before they could wear a holiday dress or give a Christmas gift. Americans bought fewer gift cards because they bought items that cost less than what they would have loaded onto the plastic.

Even luxury shoppers held back. Since last fall, some of the biggest monthly sales declines have come from Neiman Marcus, Saks Fifth Avenue and Nordstrom.

Luxury goods suffered a 27.6 percent drop in December, according to figures released Wednesday by SpendingPulse, a data service provided by MasterCard Advisors that estimates U.S. retail sales across all payment forms, including cash and checks.

Footwear sales dropped 12 percent compared with the same period a year ago, and consumer electronics and appliances fell 21.4 percent.

Online sales were expected to be flat this holiday season but posted a 3 percent decline from a year ago, the first November-December decline for e-commerce, according to comScore, an Internet tracking firm.

Some early reports of December results were mixed.

Walgreen's said its general merchandise sales increased 0.4 percent last month. Conn's, a regional consumer electronics and appliance chain, turned in its best December ever, with a 5 percent rise in same-store sales. Family Dollar Stores said Wednesday that fiscal first-quarter profit rose 13.5 percent and said same-store sales rose 6 percent in December. But Borders Group reported a 14 percent drop in December.

Analysts surveyed by Thomson Reuters expect apparel chains to post some of the worst declines. Overall sales of apparel fell 17.3 percent last month, according to SpendingPulse, as consumers made do with the clothes they had.

Teens and their mothers have been "empowered by the retailers' relentless discounting in order to reduce inventory and match the competition," said analyst Jennifer Black of Jennifer Black & Associates.

"We hear stories of women walking into stores and asking salespeople for the same deal their friend got just a couple of days ago."

The discount drumbeat continues. This week, $10 coupons and offers to "save up to 70 percent off" are attracting enough buyers to draw down inventories at specialty chains such as New York & Co. and Coldwater Creek, said Eric Beder, an analyst at Brean Murray, Carrett & Co.

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