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Holiday Sales End Strong Thanks to Gift Cards

By Reuters
Published | Updated

NEW YORK – Gift card purchases helped boost U.S. retail sales in the final week of December, ending the year on a strong note after a holiday shopping season (search) that had seen a sluggish start.

While a late surge in spending generally offset the early weakness, some analysts are predicting that gift card redemptions (search) will continue to help pump up overall holiday season results in the coming weeks.

"As gift cards have increased in popularity, ... an increasing percentage of the holiday season has shifted into the week after Christmas," said Stephen Stanley, chief economist at RBS/Greenwich Capital.

According to two retail sales reports on Tuesday, sales in the last week of December were more than 4 percent higher than in the same week a year earlier. They were also up 0.2 percent last week compared with the prior week.

"Consumers continued to spend during the post-Christmas period and the performance over the last two weeks was a pleasant surprise to an uncertain and uneven season," said Michael Niemira, International Council of Shopping Centers (search) chief economist and director of research, in a report.

UBS analyst Linda Kristiansen said in a separate report that because retailers don't record sales of gift cards until they are redeemed, lagging sales early in the holiday season will likely be offset by strong sales in January.

People hoping to use their cards on holiday gifts and winter items may find few left as retailers clear their shelves to make room for spring merchandise.

"In general, stores were pretty conservative in their inventory strategies. They did not overestimate the Christmas season so they did not have a tremendous amount of merchandise to clear," Stanley said.

But as always in the retail business, winter weather will be important to the outcome of sales in the next month.

"By and large, a lot of times the weather kind of drives things, if there are a lot of snow storms and people can't get out to the stores that obviously tends to have a negative impact on sales," Stanley said.