Cold Weather Could Help Retail Sales

U.S. retailers grew hopeful Monday that a dusting of snow on the East Coast would put consumers in the Christmas shopping mood after what has so far been a ho-hum holiday sales season.

The Thanksgiving-to-Christmas period, which accounts for 23 percent of annual retail sales, began slowly this year, with high oil prices and a weak job market blamed for crimping spending, especially among lower-income earners.

New figures on Monday continued to give a mixed picture of the crucial spending season despite stores offering more discounts and extending operating hours until midnight, fueling expectations that sales growth would not match last year.

Privately run retail researcher ShopperTrak (search) said sales fell 7 percent to $6.7 billion on Saturday, compared with a year ago. The last Saturday before Christmas was the year's biggest shopping day in two of the past three years.

Credit-card company MasterCard (search), however, reported a 9.2 percent increase in transactions last weekend compared with a year ago.

The National Retail Federation (search), an industry group, remained optimistic about a last-minute dash to stores, saying consumers had only completed 81.9 percent of their shopping.

"With Christmas falling at the end of the week and many offices closed on Christmas Eve, consumers have extra incentive to procrastinate this year," said Tracy Mullin, chief executive of the NRF.

The NRF expects sales to rise 4.5 percent to $220 billion, versus an increase of 5.1 percent last year.

Another industry group, the International Council of Shopping Centers (search), expects sales to rise about 3 percent versus 4 percent last year.

Michael Niemira, chief economist of the ICSC, said in-store shopping was soft last weekend, but online shopping and sales of gift cards remained strong, which would help boost spending after Christmas as people spent their gift cards and hunted for bargains.

"Holiday sales will turn out to be better than the impression we have now, taking into account online and gift cards sales," Niemira said. "The next two weeks should give a boost to sales at the tail end of December."

Planalytics, which advises retailers on the weather, said bitter cold air and snow on the East Coast should create the most favorable pre-Christmas shopping week in four years.

"Coming on the heels of nearly four weeks of mostly unfavorable shopping conditions, the final week weather 'pop' will trigger sharp increases in demand for seasonal and holiday related items," Planalytics said in a weekly report.

But America's Research Group (search) said shoppers this year were looking for bargains, visiting more stores on average.

An ARG survey found 54.9 percent of Americans hit the stores last weekend with more than half shopping at No. 1 retailer Wal-Mart Stores Inc., which has cut prices after admitting it lost early season sales by not discounting.

Wal-Mart has forecast sales at U.S. stores open at least a year rising between 1 percent and 3 percent in December versus a 4.3 percent rise a year ago, typifying the season.

It said sales of winter-related items improved in the last week and gift-card sales were up significantly above last year.

ARG said J.C. Penney (JCP) department stores won crowds with offers of 50 percent to 70 percent discounts, drawing 17.3 percent of shoppers last weekend versus 15.3 percent a year ago.

The ARG survey of 800 shoppers found electronics continued to lead in growth percentages with 21.6 percent of consumers buying electronics, compared with 20.5 percent last year.

Toy sales, however, slowed, with only 36.2 percent of consumers buying toys this year versus 41.5 percent a year ago -- although this did not seem to shorten the long lines outside the flagship Toys R Us Inc. (TOY) store in New York's Times Square.

Three areas posting strong growth this season are gift cards, online shopping and luxury goods.

Sales of gift cards are expected to rise to $17.34 billion this year, up $100 million from last year, shifting about 10 percent of holiday sales to the week after Christmas as retailers cannot ring up gift card sales until they are used.

Online consumers spent $16.7 billion during the first six weeks of the 2004 holiday season, up 28 percent from a year earlier, according to reports Monday from Goldman Sachs & Co., Harris Interactive and Nielsen Netratings.

Upscale retailers have posted good sales so far this holiday with the Neiman Marcus Group reporting comparable-store sales rising 6.6 percent in November and Saks Inc.'s (SKS) Saks Fifth Avenue posting a 6.8 percent gain in sales.