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by Ray A. Smith

When retailers report December sales on Thursday, the picture won’t be pretty.

Sales at stores open at least a year — a key barometer of retail health — are expected to show an average decline of 1.1%, according to analysts’ estimates for 35 chains compiled by Thomson Reuters. The reports will likely confirm that the 2008 holiday season was the worst for retailers in decades.

Excluding Wal-Mart Stores Inc., which has benefited from a consumer focus on buying necessities as the economy soured, the picture is even grimmer, with December sales falling an average of 6.3%, Thomson Reuters says. Some analysts expect an increase in the rate of gift returns, which could further crimp sales.

The December sales results would likely have been even worse if retailers hadn’t slashed prices sharply before and after Christmas to lure shoppers. The discounts “will have turned what would have been a disastrous retail season into a dismal retail season,” says Craig R. Johnson, president of Customer Growth Partners, a New Canaan, Conn., retail consulting and research firm.

At Abercrombie & Fitch Co., a teen retailer that bucked the discounting trend, sales are expected to have plunged 20% last month, according to Thomson Reuters. That is worse than the expected decline of 14.6% for the teen-and-children’s category overall and the 13% drop at American Eagle Outfitters Inc.

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