Clothing stores discounted less and sold fewer items last month than a year ago, a combination that undercut sales but likely will translate into higher fourth-quarter profits, according to figures released Tuesday.
Apparel and department stores remain among the weaker retailers, with sales well below pre-recession levels. December clothing sales fell 1.8% and department store sales fell 2.3%, both from the same month a year ago, according to MasterCard Inc.'s SpendingPulse unit.
Despite the softer sales, many retailers are expected to signal higher earnings for the crucial fiscal fourth quarter when they release results Thursday. Most mall retailers scaled back inventories dramatically last year to avoid a repeat of the drastic markdowns of the 2008 holiday season. As a result, the sales that did occur were closer to—or at—full price.
"It was a healthier season," said Michael McNamara, vice president of research and analysis for MasterCard Advisors, which tracks sales by all payment forms.
As 2010 gets under way, retailers are continuing to cut costs as they adjust to the new, lower level of consumer spending. Macy's Inc. said Tuesday it will soon close five of its more than 800 stores.
"It's still a tough credit environment. It's still an economy in which there has been no job creation," said John Long, a partner at consultancy Kurt Salmon Associates. "Until those two things change, we won't see consumers changing their behaviors."
Overall, the holiday season was slightly better than the year before, when economic turmoil gripped the country and consumer spending on discretionary items plummeted. Total retail sales from Nov. 1 to Dec. 24 rose 3.6% over 2008, according to MasterCard. The company didn't provide a December figure for total sales.
December results were boosted by a late-month surge in shopping following Christmas, as customers cashed in gift cards and took advantage of post-season clearance sales, it said. Sales for the seven-day period ending Jan. 2 were up 2.5% compared with last year, according to estimates released Tuesday by the International Council of Shopping Centers.
As a result of the relatively strong finish, analysts now expect many chains to boost their fourth quarter earnings outlooks. Thomson Reuters Corp., estimates December sales for the 30 reporting chain stores that it tracks rose 2%. Retail Metrics Inc., which uses a slightly different methodology, puts the increase at 1.8%.
While overall retail sales continued to be soft, one notable exception was in electronics. MasterCard reported December sales were up more than 7% from last year.
Many electronics experts had forecast declining prices would keep revenues flat despite an increase in unit sales. Although falling prices for televisions hurt overall sales, their impact was more than offset by sales of hot gadgets including smart phones and electronic-book readers, MasterCard's Mr. McNamara said.
Write to Elizabeth Holmes at elizabeth.holmes@wsj.com and Miguel Bustillo at miguel.bustillo@wsj.com
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