By Ylan Q. Mui
Washington Post Staff Writer
Friday, January 6, 2006

The holiday shopping season wrapped up with a strong finish as department stores posted solid December sales gains yesterday and teen-clothing retailers announced double-digit jumps.

Industry experts painted a rosy picture of the season after fretting several months ago that fuel and home-heating prices would result in lackluster sales. Analysts expect the good news to last through the month as shoppers spend their gift cards, which retailers are not allowed to count as revenue until they are redeemed.

"All in all, I think we should feel very good about this season," said Janet Hoffman, director of North American retail for consulting firm Accenture Ltd.

The International Council of Shopping Centers said yesterday that December sales at chain stores rose 3.2 percent over sales in December 2004. The trade group put total holiday sales at a "moderate" 3.5 percent increase over the same period of 2004.

Other industry groups reported better numbers. Market-research firm ShopperTrak said total retail sales grew 4.4 percent in December, compared with the same month in 2004, with the flood of shoppers in the week leading up to Christmas salvaging what it called a "relatively flat holiday season." Meanwhile, Visa USA said charges on its credit and debit cards rose 17.5 percent this holiday season over the same period in 2004.

The trouble spot came from an unlikely source: Wal-Mart Stores Inc. The world's largest retailer came out swinging in November, with blockbuster promotions on the day after Thanksgiving driving shoppers to line up outside its stores in the bitterly cold early-morning hours.

But Wal-Mart lost momentum in the middle of last month, according to Bernard Sosnick, an analyst with Oppenheimer & Co. December sales at stores open at least one year -- also known as comparable-store sales, a key measure of performance for retailers -- rose 2.2 percent for both Wal-Mart and Sam's Club stores and 1.9 percent for Wal-Mart box stores alone.

Analysts said it has become ever more difficult for a behemoth such as Wal-Mart to continue growing. The December sales figure is within the company's forecast growth of 2 to 4 percent, albeit on the low end.

"The 2004 season revealed that Wal-Mart is not invincible," wrote Sosnick in a note to clients, referring to stumbles the previous Christmas. "The 2005 holiday season did not erase that impression."

Target Corp. said its comparable-store sales rose 4.7 percent last month compared with December 2004, regaining footing after it lagged behind Wal-Mart in November for the first time in 2 1/2 years.

Still, big-box discounters overall posted only moderate gains last month despite their promotions. The ICSC said sales at discounters rose 2.6 percent -- outpaced by department stores.

Nordstrom Inc. reported December comparable-store sales growth of 7.7 percent over December 2004, and J.C. Penney Co.'s sales rose 2.2 percent. December comparable-store sales at Federated Department Stores Inc. increased 3.4 percent. The company recently acquired the Hecht's chain, but its sales are not included in that figure.

Year-over-year comparable-store sales jumped 2.4 percent last month at luxury retailer Saks Inc. after a disappointing November, and same-stores sales increased 8.6 percent at Neiman Marcus Group Inc.

Hoffman called the results a "radical difference" from where department stores had been in previous months and said the gains may have been a one-time gift from shoppers. Specialty apparel stores performed weaker than expected, she said, giving department stores a chance to lure in more customers.

"I'm not convinced that they've in fact gotten to the root cause of all the challenges," she said.

Department stores have been struggling, squeezed by discounters and high-end retailers. Sears Holdings Corp. stood out this holiday season for its glum year-over-year comparable-sales results: an 11.9 percent decline at Sears stores and a sluggish 1 percent increase at Kmart.

Two of the brightest spots were online shopping and specialty teen retailers. Nontravel spending online reached $19.6 billion during the holidays, a 25 percent jump over the 2004 season, according to ComScore Networks, a market-research firm. Amazon.com said it posted record sales this season and expects sales to have grown 24 percent during November and December.

Leading the way among teen retailers was Abercrombie & Fitch Co., which reported that December comparable-store sales skyrocketed 29 percent over December 2004. Aeropostale Inc.'s sales jumped 11.4 percent, and American Eagle Outfitters Inc. rose 9.8 percent. And the Wet Seal Inc. reported sales growth of 38.5 percent last month, compared to a drop of 11.8 percent in December 2004 sales.

C. Britt Beemer, chairman of America's Research Group Ltd., a consumer-behavior research firm, said success illustrated the importance of relevance to younger consumers -- a problem with which Wal-Mart and many department stores continue to grapple.

"You're either on-trend or you're dead," he said.