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Retailers get last-minute gift in December sales surge

By Ylan Q. Mui
Washington Post Staff Writer
Friday, January 8, 2010; A16

Retailers pulled off a better-than-expected holiday season as rising consumer confidence -- and a last-minute shopping spree -- pushed sales higher in December, according to results released Thursday.

For about three dozen of the country's biggest chains, sales at established stores increased an average of 2.8 percent in December from a year ago, according to the International Council of Shopping Centers (ICSC), a trade group. Sales for the last two months of the year jumped 1.8 percent, compared with a record 5.6 percent drop in 2008 -- marking the strongest holiday performance in three years. The ICSC had forecast a 1 percent increase.

Though performance among individual retailers remained mixed, several chains beat expectations. Target sales jumped 1.8 percent in December. Gap rose 2 percent after a 14 percent decline last year. TJX, which owns TJ Maxx and Marshall's, shot up 14 percent, and the company raised its earnings forecast for the fourth quarter.

"We are extremely pleased," TJX chief executive Carol Meyrowitz said. "We believe consumers will remain focused on value as the economy improves."

The results reflect sales at stores open at least a year -- a key measure of health known as same-store sales -- for national retailers that often act as bellwethers for the rest of the industry. Official sales results spanning the entire retail sector are scheduled to be released by the Commerce Department next week. But Thursday's numbers reveal that after two years of asceticism, shoppers are willing to loosen their purse strings for the right deal.

"As they gained more confidence that their household situation was going to be okay as the holiday approached, they went out and did their spending," said Frank Badillo, senior economist with consulting firm Retail Forward. According to one of the firm's surveys, fewer than one-third of consumers said their investments were worse off than last year, down from more than half of shoppers last year.

Local store owner Valerie Lucas said she saw those traffic patterns play out in her downtown District shop, Coup de Foudre, which sells high-end lingerie. She had expected sales this holiday to be flat and began to worry about her performance when November turned out tepid.

But her fears were dispelled in December when shoppers suddenly turned out in droves and her sales skyrocketed 20 percent. They snatched up so much merchandise -- from silk chemise sleepwear to designer bustiers -- that she is scrambling to restock before Valentine's Day.

"It was like a blizzard," Lucas said. "It was a great way to end the year." Retailers began touting holiday promotions as early as September, but consumers were reluctant to bite until the very end. November sales were lackluster despite retailers' aggressive discounting. Traffic crept up throughout December, with a strong push the week before Christmas, according to the ICSC. And the day after Christmas ranked as the third-biggest sales day of the year, according to research firm ShopperTrak, after the major snowstorm that pummeled the East Coast a week earlier displaced many sales.

Still, Badillo said individual retailers' performance varied widely. Value teen retailer Aeropostale posted a 10 percent gain in same-store sales in December compared with a year ago while rival Abercrombie & Fitch fell 19 percent. Ross stores rose 12 percent, but Hot Topic declined 11 percent.

Discount stores continued their strong run last month. Target's 1.8 percent sales growth was due to heavier traffic and purchases across a broad range of categories, from electronics to health goods, the company said. The cheap-chic retailer hopes to continue that momentum with the launch of a new promotion this week called the Great Save. In place of Christmas merchandise, stores are selling bulk items such as 35-packs of water normally found at warehouse clubs. It is also bringing in "treasure hunt" products not typically found in Target stores, including brands such as Calvin Klein and Samsonite.

"We obviously know that consumers are in a different mindset, and they're looking for ways to stretch their dollars," Target spokesman Joshua Thomas said.

For Sears Holding, performance was mixed within the company. December same-store sales at its Kmart division jumped 5 percent, driven by toys, home goods and clothing. But its flagship Sears stores fell 4 percent, though a company spokesman said online sales were strong. On Thursday, Sears announced that it would begin selling 10 million products from third-party vendors and manufacturers on its Web site.

"I think that customers are ready to make the purchases," Sears spokesman Tom Aiello said. "They're just going to be so much more smart about it."

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