Late Holiday Shopping Puts Retailers Ahead

By ANN ZIMMERMAN And RACHEL DODES Retailers won the closely watched holiday skirmish with shoppers, who opened their wallets a little bit despite a still struggling economy, fewer discounts than last year and limited variety on store shelves, according to newly released data. A late boost from procrastinating consumers and an extra day of shopping between Thanksgiving and Christmas increased total retail sales, excluding automobiles and gas, 3.6% over the year-earlier period through Christmas Eve, according to MasterCard Inc.'s SpendingPulse unit. Still, excluding the extra shopping day, the sales increase would have been closer to 1%, MasterCard said. While some retail sectors fared better than others, overall "I'd call it a good season because the profits will be good," said Maggie Gilliam, president of Gilliam & Co., an independent retail research and advisory firm in New York. Retailers are increasingly confident that the shopping season this year performed substantially better than last year's, when consumer appetites for anything but essentials were minimal and stores cut their prices to the bone to try to lure customers. Despite these efforts, the 2008 holiday season was the worst in decades. This year, store owners believe they navigated the tough economic terrain better by discounting a few items and offering other promotions, but keeping prices relatively steady for much of their inventory. This set up a game of chicken, with consumers hoping for signs of panic among retailers that would prompt last-minute price drops and retail executives betting that signs of a possible economic recovery would cause customers to finally give in and shop. "From August through November, we saw sales of nonfood items rise in the mid-to-high single digits," said Richard Galanti, chief financial officer at Costco Wholesale Corp. "We saw a heck of a lot of sales in December, too. Even sales of discretionary items picked up, but remember that was against weakness a year ago." The holiday retail sales results were in line with industry forecasts, which had ranged from a 1% drop to a 2.6% increase. But the last week of the month is expected to provide an added boost, as shoppers head to malls for after-Christmas sales and to redeem gift cards that are projected to have been sold in higher numbers this year. In Manhattan, Saks Fifth Avenue was mobbed Saturday morning with shoppers eager to partake in the 70% off sale on designer clothing that lasted until noon. Bradley Schleyer, a 34-year-old Manhattan resident in the manufacturing business, picked up a Ralph Lauren fleece vest for $150 and a Robert Graham button-down shirt for $60. "The deals are good, but the prices are still pretty high this year," Mr. Schleyer said. View Full Image Associated Press Early morning shopper Josie Yumul, left, takes advantage of a sale at Target in Colma, Calif., the day after Christmas. During the same period last year, overall retail sales fell 3.4% as the global financial crisis, the sharp decline in the stock market and a deep recession dragging into its second year chastened shoppers. This year, with shoppers worried about the highest unemployment rate in decades and hampered by restricted access to credit, retailers expected a pretty lackluster holiday and planned accordingly. "Last year was more of a free fall, while this year is more about stability," said Michael McNamara, vice president of research and analysis for MasterCard Advisors, in an interview Sunday. Nonetheless, this year's season got off to a slow start, with sales over the Thanksgiving weekend rising just 0.5%, according to the National Retail Federation. By last Sunday, only 70% of shoppers had finished their holiday shopping, compared with 80% a year ago, according to the International Council of Shopping Centers, a Washington-based trade group. But the group still expects sales to rise 1% for the season. Journal Communitydiscuss“ I thought sales would be down this year as a result of increased unemployment but America's lust for shopping never ceases to amaze me. ” —Michael Landskroner Several sectors showed gains, including electronics and jewelry sales, rising 5.9% and 5.6%, respectively. Overall apparel sales and sales at luxury emporiums were relatively flat, and department-store sales fell 2.3%, according to Mastercard SpendingPulse, whose data are based on sales activity in the MasterCard payments network and estimates for all other payment forms, including cash and checks. Lord & Taylor, a privately held department store with 46 stores mostly in the Northeast, is evidence that retailers must remain nimble. Its chief executive, Brendan Hoffman, said Lord & Taylor bet that sales would be up during the holidays, so it kept inventories stable instead of cutting back, sensing an opportunity to steal market share from competitors that might be out of stock on key items. Associated Press "Business was better than we feared it would be," Mr. Hoffman said, so raising inventory levels "paid off." Many of the big retailers are now expected to post sales ahead of their modest plans, particularly Macy's Inc., Costco., Target Corp. and Kohl's Corp., according to Charles Grom, a retail analyst at J.P. Morgan Chase & Co. "They all had a pretty good month," Mr. Grom said. None of the retailers would comment directly on December sales results, which will be released Jan. 7. With less merchandise to clear in the next few weeks, some stores are bringing in new winter apparel that they manufactured at lower costs so they can immediately mark the items down and not hurt margins, experts said. Stores such as J.C. Penney Co. are also stocking new spring merchandise for juniors to take advantage of gift-card redemptions. Sales of store-branded gift cards are expected to rise 1.9% this season, according to Mercator Advisory Group. As predicted, sales over the Internet notched relatively strong growth in the season, rising 15.5%., according to MasterCard. Although online sales tend to wind down by the weekend before Christmas as free-shipping offers expire, a snowstorm that walloped the East Coast from North Carolina to all points north the Saturday before Christmas meant that many shoppers had little choice but to turn to their computers to finish off their gift lists. Retailers continued to offer promotions on their Web sites through Christmas and beyond. Teresa Mannix tied together Best Buy Co.'s online and in-store discounts to snare a Dyson vacuum cleaner the day after Christmas at the company's Manassas, Va., store. She placed her order on the Web and then picked it up at the store, saving time and at least $100, she said. —Elizabeth Holmes contributed to this article. Write to Ann Zimmerman at ann.zimmerman@wsj.com and Rachel Dodes at rachel.dodes@wsj.com