Retail Boom or Bust?

Retailers reported dismal sales figures for December on Thursday.

The data confirmed fears that the holiday season was the weakest in decades, and deep discounts spurred a number of merchants to cut their earnings outlooks Thursday, fueling more concerns about the health of the industry.

The Retail Trade

Among the many retailers posting steep declines, the biggest surprise came from Wal-Mart , which posted a smaller sales gain than what Wall Street expected and cut its fourth-quarter earnings outlook.

"Wal-mart customers are being massacred by this economy!" exclaims Howard Davidowitz on the Fast Money Final Call . "Who's the customer with the adjustable rate mortgage? It's the Wal-Mart customer."

About 50% of Wal-Mart merchandise is discretionary. And Davidowitz doesn't think Wal-Mart shoppers will open their wallets for things ranging from TV's to T-shirts. "And that's why I like Dollar Tree, he says.  "They don't carry apparel at all." For a trade he recommends a long position.

"There's definitely a consumer retrenchment that's happened a lot more quickly than people think," observes Zach Karabell. "However I don't think investors will get hurt in Wal-Mart, but no place in this space is particularly high beta."

Other Disappointments

Meanwhile, Gap reported a similarly dismal decline in same-store sales, which dropped 14% in December, well above analyst predictions of a 9.3% decline.

Luxury retailer Saks also fared poorly; affluent shoppers were apparently spooked by the financial meltdown. Same-store sales dropped 19.8% for the month, worse than the 10% drop that Wall Street expected.

And J. Crew cut its full-year outlook for the second time in three months.

Bright Spots

The retail landscape had a few bright spots.

At Macy’s , same-store sales fell 4% in December, less than the 5.3% decline expected by analysts.
Secaucus, N.J.-based retailer The Children’s Place said same-store sales were up 1% in December, beating forecasts.

And teen apparel company Aeropostale also had a good month. The retailer reported a 12% increase in same-store sales for December.

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CNBC.com with wires