Dec. 31 (Bloomberg) -- U.S. retail store traffic fell last week as steeper discounts failed to lure shoppers before and after Christmas, prompting a research firm to lower its forecasts and predict the worst holiday-shopping season it has seen.

Holiday sales probably decreased 2.3 percent and traffic dropped 16 percent during November and December, ShopperTrak RCT Corp. estimated today. Those figures would be the worst since the research firm started tracking the data in 2003.

Many consumers retrenched and those that sought out last- minute holiday gifts looked for the steepest bargains. A U.S. recession, consumer confidence that plunged to a 41-year low and the highest unemployment rate in 15 years deterred shoppers even as retailers including Macy’s Inc. and AnnTaylor Stores Corp. marked down items by 60 percent or more.

Traffic fell 4.9 percent in the week ended Dec. 27 from a year earlier, Chicago-based ShopperTrak said in a statement.

Some consumers did their holiday shopping earlier this year and others waited to take advantage of post-Christmas discounts, Hana Ben-Shabat, a partner at consultant AT Kearney’s retailing practice, said today in a telephone interview. “The first six months of 2009 are going to be really difficult,” she said.

Retail sales rose 21 percent last week from a year earlier, helped by a calendar shift that increased the number of weekdays before Christmas, according to ShopperTrak.

Previous Forecast

ShopperTrak had predicted sales would increase 0.1 percent and customer traffic would slide 9.9 percent during November and December. The research firm uses a sampling of more than 50,000 stores in shopping centers and malls that measures the number of customers that enter the locations.

“A rapidly declining economy, almost the smallest period of days between Thanksgiving and Christmas, terrible weather patterns and very aggressive discounting by retailers all combined to create one of the worst holiday seasons in recent memory,” Eric Beder, an analyst at Brean Murray Carret & Co. in New York, wrote in a research note yesterday.

He reduced fourth-quarter and 2009 earnings estimates for retailers including J.Crew Group Inc., Coldwater Creek Inc. and Aeropostale Inc.

The holiday-shopping season accounts for as much as 35 percent of a retailer’s annual sales, according to the National Retail Federation industry group.

U.S. retailers’ sales at stores open at least a year declined 1.8 percent in the week ended Dec. 27, the largest year- over-year drop in almost six years, the International Council of Shopping Centers and Goldman Sachs Group Inc. said yesterday.

Internet Spending

Online spending at U.S. retailers declined 3 percent in the holiday season compared with the same period a year earlier, research firm ComScore Inc. said yesterday. Consumers spent $25.5 billion over the Internet from Nov. 1 through Dec. 23, the last day to buy gifts online in time for Christmas Eve delivery, compared with $26.3 billion a year ago, the firm said.

Gap Inc. and Macy’s are among retailers that plan to report December sales results on Jan. 8.

The ICSC’s forecast last week of a same-store sales decrease of as much as 2 percent in November and December is more than its previously projected decline of 1 percent. It would be the largest drop since at least 1970, when the trade group started tracking shifts from the previous year.

Some investors consider comparable-store sales the best measure of results because they exclude the effect of location openings and closings in the past year.

Macy’s gained 94 cents, or 10 percent, to $10.35 at 4:15 p.m. in New York Stock Exchange composite trading. AnnTaylor rose 47 cents, or 8.9 percent, to $5.77 and Gap climbed 23 cents, or 1.8 percent, to $13.39 in New York trading.

The Standard & Poor’s 500 Retailing Index, which tracks the performance of 27 companies, lost 32 percent this year.

To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net.

Last Updated: December 31, 2008 17:07 EST