Every year Wall Street make a big deal about the holiday selling season and the outlook for retailers, and every year investors collectively forget the most important point of this whole exercise: Stocks represent a claim on future earnings — not sales. Although a retailer can usually boost top-line numbers by slashing prices, it can also cut prices to the point where it begins to sell merchandise at a net loss.

This misplaced attention on sales rather than margins became evident yet again when the nation’s retailers reported December’s same-store sales figures Thursday. Same-store sales, which generally include only receipts from locations open at least a year, are considered a key measurement of a retailer’s health. And based on the latest figures, the patient isn’t doing as well as hoped.

True, Macy’s (NYSE:M) December sales beat expectations, allowing the department-store operator to lift its earnings guidance, raise its dividend and approve a billion-dollar share buyback program. But too many other major names look to have price-cut themselves into a margin squeeze.

Target (NYSE:TGT), the nation’s second-largest discount retailer after Wal-Mart Stores (NYSE:WMT), missed Wall Street estimates and had to cut its outlook. Midprice retailers J.C. Penney (NYSE:JCP) and Kohl’s (NYSE:KSS) also offered disappointing outlooks. And Gap (NYSE:GPS), the nation’s largest specialty retail chain, reported a larger-than-expected 4% drop in sales.

Overall, sales grew just 3.6%, according to Retail Metrics. Yes, that was fractionally better than Wall Street forecasts. But that figure doesn’t account for inflation, which rose 2.2% year-over-year in November, excluding food and energy prices. On an adjusted basis, retail sales may have produced almost no real growth at all.

It’s understandable that investors collectively become fixated on holiday sales. Consumer spending accounts for roughly 70% of GDP, and total retail sales, including more prosaic items like gas and food, account for about half of those outlays. From a macroeconomic perspective, holiday sales should say something about the state of the consumer.

Unfortunately, what the latest same-store sales figures showed was that consumers are as price-conscious and finicky about their spending as ever. The dollar stores continued to pressure the discounters, which in turn created price pressure on the midmarket stores. It was a promotional holiday selling season. Consumers have been trained — and now demand — sales and specials.

For a retailer, it’s a terrible tightrope act. Remember: Revenue equals units times price per unit sold. If you slash prices, you’ll sell more units. And if you sell enough additional units, the increase in volume will more than offset those lower prices, leading to an increase in total revenue.

But if a retailer sacrifices too much markup (or margin) on each unit, it can easily sell items at a loss. That’s why retailers (and retail investors) fret over something called gross margin, which is sales minus cost of goods sold. Essentially, it’s the initial markup on whatever the retailer is selling.

And ultimately, it all comes down to gross margin. Target, for example, has a gross margin of a bit more than 30% for the trailing 12 months. Not bad. But by the time the company got done accounting for all its other costs, it posted a net profit margin of 4.3%. In other words, an initial markup of 30% netted just a little more than 4 cents on the dollar.

That leaves retailers precious little room for error. A few poor choices in merchandise selection, with some heavy discounts to clear inventory, and the next thing you know, you’re selling goods at cost — or maybe even at a loss.

That’s why retailers measure gross margin in terms of basis points — or hundredths of a percentage point — and are thrilled by the most fractional of improvements. It seems absurd, but a 200 basis-point expansion in gross margin (or 2%) can make or break a retailer’s quarter. Such is the importance of selling goods at the fullest possible price.

The true verdict on the holiday selling season — at least for investors — doesn’t come until February, when retailers will report their fourth-quarter results. But by then, as always, the holiday selling season will be long forgotten.

As for now, it looks to have been a mixed picture at best. Luxury and off-price retailers continued to fare better than the stores in the middle. Discounting and promotions hurt too many companies’ margins. And, worst of all, those lower prices still failed to lure enough extra customers, traffic and volume to push industry revenue significantly higher.