Shoppers spend a little more during holiday season

[December 28, 2009]  NEW YORK (AP) -- Holiday shoppers spent a little more this season, according to data released Monday, giving merchants some reason for cheer.

The spending bounce means retailers managed to avoid a repeat of last year's disaster even amid tight credit and double-digit unemployment. Profits should be healthier, too, because stores had a year to plan their inventories to match consumer demand and never needed to resort to fire-sale clearances.

Retail sales rose 3.6 percent from Nov. 1 through Dec. 24, compared with a 2.3 percent drop in the year-ago period, according to figures from MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.

Adjusting for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent gain.

Last year, the economy was in "critical condition," said Michael McNamara, vice president at MasterCard Advisors' SpendingPulse. "This year, it's in stable condition."

A major winter storm that slammed the Northeast and shut in shoppers on the Saturday before Christmas derailed sales. But consumers appeared to have made up for the loss by shopping in advance of the storm and the days leading up to Christmas.

"We had a pretty decent surge," McNamara said.

Online sales were a particular hot spot, fueled by a big increase the weekend before Christmas. They rose 15.5 percent on the season, though they make up less than 10 percent of all retail sales.

One worrisome sign: Merchants are facing big hurdles to lure shoppers back in January amid lean inventories and what appear to be weak gift card sales. Gift card sales are recorded only when they are redeemed.

Stores count on a post-Christmas boost because of the growing importance of January on the retail sales calendar. Last year, the week after Christmas accounted for 15 percent of overall holiday sales, according to ShopperTrak, a research firm.

Retail consultant Burt P. Flickinger describes gift cards as "the lifeblood" of the post-Christmas season, because shoppers typically spend more than the value of the cards.

"Retailers with a disappointing December are going to need January to survive," Flickinger said. "Inventories are even too low for retailers."

Karen MacDonald, a spokeswoman at Taubman Centers Inc., said a survey among its centers this past weekend showed that merchants are on track to generate on average low single-digit sales increases from a year ago, though they still have a week to go.

MacDonald noted that the centers had a strong last-minute sales surge, and this past weekend, business has been strong. She added that 85 percent of shoppers are buying, 10 percent are exchanging and about 5 percent are returning items.

Gift card redemption rates have been discouraging this weekend, she said. They averaged 10 percent, based on a sampling of malls, she said. In good years, those rates are anywhere from 30 to 40 percent. That confirms that gift card sales were just "lukewarm," she said.

"Shoppers are seeing more value in deeply discounted merchandise" than buying gift cards, MacDonald said.

Ricki Smith, 30, of Prairie Village, Kan., had no returns and was hunting for bargains Saturday at the local Walmart store.

"Today, I bought mostly clearance stuff, stuff that got marked down to half-price, " she said. She added that there were a lot of leftover bath sets, which were mostly what she bought. "The Christmas area, the actual decorations, it was pretty picked over," she said.

Among the hottest sectors this shopping season, according to SpendingPulse:

- Consumer electronics, up 5.9 percent, helped by flat-panel TVs, smart phones, cameras and video games.

- Footwear, up 5 percent.

- Jewelry, up 5.6 percent. Last year, jewelry sales fell 30 percent.

Weaker area included luxury items, whose 0.8 percent increase came nowhere near making up for last year's 20 percent decline. Apparel sales fell 0.4 percent on top of a 19 percent decline last year.

A full picture of how individual retailers did will not be known until Jan. 7, when many report December sales.

[Associated Press; By ANNE D'INNOCENZIO]

AP writer Heather Hollingsworth in Roeland, Kan., contributed to this report.

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