Retail losing streak despite holiday blitz

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NEW YORK (CNNMoney.com) -- When the 2008 holiday shopping season wraps up next week, analysts expect to see far more retail losers than winners this year.

The recession has spooked consumer spending to such an extent that some industry experts have renamed their usual holiday "winners and losers" tally to "survivors and losers."

"The winners' side is a pretty thin book," said Craig Johnson, president of retail consulting group Customer Growth Partners. "Beyond the usual suspects, it's a tough find [for winners] in this exceptional difficult year."

The year-end shopping period is crucial for stores. Merchants often accumulate as much as half of their profits and sales for the full year just in November and December.

A healthy holiday season also bodes well for the economy since consumer spending fuels two-thirds of economic activity. As long as households are spending, it signals that Americans are feeling confident about their jobs and personal wealth.

That hasn't been the case for most of this year as retail sales have progressively slumped heading into the holiday season.

The National Retail Federation expects holiday sales to show the weakest gain in six years.

"People are very scared to spend their money," said Love Goel, chairman and CEO of Growth Ventures Group, a specialty-retail private-equity firm.

"Consumers are losing their jobs, their home values are lower, their savings are eroding," he said.

Still, retail watchers say most families will dig deep to find that extra money to buy the Christmas gifts for loved ones.

So even in this environment of very cautious discretionary spending, some sellers will gain market share.

But they are few and far between.

Wal-Mart (WMT, Fortune 500), the world's largest retailer, is sitting in a sweet spot. "If ever there was a year made for Wal-Mart, this is it," said Johnson.

A survey of 1,000 consumers conducted last week by America's Research Group showed half, or 49.5% versus 32.2% last year, said they were doing their holiday shopping at a Wal-Mart.

"With recessionary cutbacks at the top of the mind, American consumers are flocking to Wal-Mart for discounts. Wal-Mart will be the only clear winner," said Britt Beemer, CEO and founder of America's Research Group.

To his point, Wal-Mart's November same-store sales, which are a measure of sales at stores open at least a year, were stronger than expected as consumers continue to trade down, not just in their everyday purchases, but also for gifts.

"What's really driving Wal-Mart's sales are staples like food, beverages and detergent," said Goel. Beyond that, the retailer has also made successful forays into branded consumer electronics, which is a hot category for holiday gifts, he said.

Goel and others said Wal-Mart, with its lower prices, has stolen market share this holiday season from industry leader Best Buy (BBY, Fortune 500).

Analysts said wholesale club operators like BJ's (BJ, Fortune 500) and Costco should also be able to grow holiday sales over last year because of their low prices model.

"If you're looking to score a Wii Fit you might not find it at BJ's," said Johnson. "BJ's appeal is the value-priced serendipitous gift that you just happen to come across while you are there."

Drug store chains like CVS should do well, said Beemer. "About 40% of consumers buy prescription drugs every month. So drug stores already have a built-in consumer base," he said, adding that these retailers have been very smart about expanding their merchandise to aggressively compete on holiday products like decorations and packaged gifts.

Although most analysts are expecting department stores to emerge as big losers, Johnson said he's optimistic about Kohl's (KSS, Fortune 500).

"The discounts have looked very sharp at Kohl's. They're selling a good mix of gifts and stylish merchandise like Vera Wang at affordable prices," he said.

Among online sellers, Goel is positive about Amazon.com (AMZN, Fortune 500). "We think Amazon will see high single-digit to low double-digit sales growth over last year," he said.

Beemer's projection for losers is simple: "It's everyone else," he said. "Most retailers either didn't have the right merchandise, didn't discount enough, or lost out to a competitor who did a better job on both counts."

He predicts that luxury sellers will post a 20% drop in holiday sales while toy sellers' sales will decline between 10% to 15%. One toy seller - KB Toys - already filed for bankruptcy midway through the season.

Since toys and electronics are both highly discretionary purchases, Goel said most consumers who did buy these types of products either bought fewer items or traded down to less expensive options.

Both those trends will damage merchants' holiday sales, he said.