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Retail Stocks Fall On Tepid Sales

Initial forecasts suggested that people shopped less this holiday than expected

Investors sold U.S. retail stocks on Dec. 26, as they worried that people might have been stingier this holiday than initially thought.

ShopperTrak RCT, a Chicago-based researcher that tracks retail sales, reported initial estimates on Dec. 25 suggesting that holiday retail sales have fallen short of expectations - up 4.3% so far this season, compared to the 5% forecast (see, 12/26/06, "Retail Results Signal Tough Times Ahead").

"It's possible that consumers may have responded to the anticipated large crowds on 'Super Saturday' and pushed to get their shopping done earlier in the week, or simply taken pains to avoid crowded malls altogether," said Bill Martin, co-founder of ShopperTrak, in a press release Dec. 25.

The disappointing results came even as retail heavyweights like Wal-Mart (WMT) battled to keep sales up by offering hefty discounts on products like flat panel TVs. Wal-Mart's stock slid 0.2% to $45.45 in early trading on the New York Stock Exchange. Shares of rival Target (TGT) fell 1.1% to $56.72.

The electronics chain Circuit City Stores (CC), which has been particularly vulnerable to the price war this season as it shells out money on new services, dropped 0.1% to $19.87. But its rival Best Buy (BBY) wasn't immune and sank 1.8% to $49.05. Both have profited less on their sales this year (see, 12/19/06, "Circuit City Loses Money amid Price War").

Online retailers weren't spared in the market either. (AMZN) shed nearly 2% of its value, despite the Seattle company's declaration in a press release on Dec. 26 that "the 2006 holiday season finished as its best ever." On its busiest day, Dec. 11, Amazon had orders for more than 4 million items. As part of a promotion this season, Amazon sold 1,000 Xbox 360s in 29 seconds and 1,000 Axion portable DVD players in 34 seconds.

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