Poor results by US retailers add to fears of recession

More than half of all US retailers missed sales expectations in January, deepening fears of a consumer-led slowdown that could tip the economy into a recession.

As a slew of big-name stores released sales figures yesterday, it became clear that last month saw the weakest growth since at least 2003. Wal-Mart, the country's biggest retailer, failed to meet Wall Street's expectations, as did a number of other chains including Target and Victoria's Secret.

According to Thomson Financial, 58 per cent of retailers had missed analysts' forecasts. It said like-for-like sales growth was around 1 per cent, making January the worst month since March 2003 when the US economy was emerging from its last downturn.

A survey by the International Council of Shopping Centres came out with an even more stark measure yesterday, calculating sales growth at just 0.5 per cent, the worst monthly figure since 1970. The poor figure from Wal-Mart came as a particular surprise. Comparable store sales, excluding fuel, rose 0.5 per cent, against expectations of about four times as much. Consumers are struggling with high fuel prices, rising mortgage bills and a weaker jobs market. Eduardo Castro-Wright, head of Wal-Mart stores in the US, said: "Gift card redemptions were below expectations, and customers appear to be holding gift cards longer and using them more often for food and consumables rather than discretionary purchases."

Clothing chains including Gap and American Eagle outfitters posted declining January sales, as did department stores. Only discounters and drug stores performed better this January than they did in the first month of 2007.

Wall Street had already been braced for bad news, and many retail stocks rose yesterday, but analysts predict continued weakness in coming months. "I don't think the green I'm seeing on the screen today suggests we're in the clear at all," said analyst Joseph Beaulieu. "I just think it shows that every few days investors are reminded that the world isn't really ending."

During periods of economic uncertainty, investors and analysts pore over same-store sales data more than usual to assess the health of US consumer spending, which makes up about two-thirds of the economy. On Wednesday night, Macy's had posted a wider-than-projected 7.1 per cent decline in January sales and said it would lay off 2,550 staff.