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Holiday Retail Sales Worst Since 2008, Below Expectations

Visions of sugar plums, or perhaps big screen TVs, danced in consumers' heads, but credit cards remained in their wallets. Early reports suggest a lackluster holiday shopping season, without many of the big-ticket items and pricier splurges that made Christmas sales in recent years merry for retailers.

Same-store sales rose just 0.7% for the week that ended Dec. 22, the International Council of Shopping Centers said Wednesday. ICSC is still holding to its comparable sales forecast of 3% for the November-December holiday shopping season.

But a report from MasterCard Advisors pegged the sales bump for the eight weeks leading up to Christmas at just 0.7%, compared with a 2% bump that same period last year. It's the slowest growth since the 5.5% decline MasterCard's SpendingPulse noted in 2008, when the economy was mired in recession.

'No Real Joy' With improvements in the housing market, and the economy seeming to improve, analysts expected busier cash registers.

"There seemed to be no real joy this holiday season or buzz out there in retail land," Ken Perkins, president of Retail Metrics, told IBD. Perkins said he now expects "ho-hum" results, with maybe a 2% bump in sales at stores open at least a year.

Investors weren't in the buying mood either, especially for luxury goods. Fashion house Michael Kors (KORS) fell nearly 7% in heavy volume Wednesday. Leather handbags, accessories maker and retailer Coach (COH) slid 6%. Ralph Lauren (RL) lost about 4%.

Shares of discount giants Wal-Mart Stores (WMT) and Target (TGT) dipped about 1%.

"I was wandering around on the 24th and there weren't a lot of people in the stores. Parking lots weren't overly full," said Joel Naroff, president of Naroff Economic Advisors.

There were many contributing factors. Unemployment has edged lower, but remains high. Superstorm Sandy devastated parts of the Northeast at the end of October. Unseasonably warm weather in parts of the U.S. hurt outerwear sales, while heavy snows right before Christmas socked in many in the Midwest.

Then there was the tragic Newtown school shooting, which shattered the holiday spirit of many.

Pull It Forward Naroff thinks retailers' earlier start to the holiday also pulled sales forward. Many retailers opened on Thanksgiving, rather than waiting until the traditional Black Friday. Christmas decorations and music in stores started even earlier.

Shoppers who waited until the last minute may have been spooked by the fiscal deadlock in Washington. Taxes will go up, and some have forecast another recession, if President Obama and GOP lawmakers can't settle on a deal before the new year.

Online retailers felt the slowdown too.

MasterCard data showed online spending up 8.4%, a more muted pace than the double-digit growth of recent years. (AMZN) shares slid 4% Wednesday. EBay (EBAY) fell 2%.

The iPad Mini was seen as a rare "must have" item, but Apple (AAPL) shares fell more than 1%, back near recent 10-month lows.

The holiday season isn't over yet. Retailers typically get an echo as consumers cash in gift cards and trade in items. But the slower pre-holiday traffic could signal larger margin-eroding inventory clearance sales.