December 28, 2010
Americans are splurging as though it’s 2007 again.
Shoppers spent more money this holiday season than even before the recession, according to preliminary retail data released on Monday. After a 6 percent free fall in 2008 and a 4 percent uptick last year, retail spending rose 5.5 percent in the 50 days before Christmas, exceeding even the more optimistic forecasts, according to MasterCard Advisors SpendingPulse, which tracks retail spending.
The rise was seen in just about every retail category. Apparel led the way, with an increase of 11.2 percent. Jewelry was up 8.4 percent, and luxury goods like handbags and expensive department-store clothes increased 6.7 percent. There was even a slight increase in purchases of home furniture, which had four consecutive years of declining sales. The figures include in-store and online sales, and exclude autos.
“For the past year or two, when I’ve seen growth in one area, it seems to come at the expense of another,” said Michael McNamara, vice president for research and analysis at SpendingPulse. “Here, things are actually all moving in the right direction.”
Of course, the broad increase was driven in part by higher spending on necessities like gas and food. And even with the across-the-board gains, some categories, like furniture and electronics, have still not climbed back to their prerecession levels.
Several retailers will report December sales in January, and they are trying to finish the month strong. A blizzard on the East Coast may have kept away shoppers on Dec. 26, when stores typically try to capitalize on store traffic for exchanges, returns and gift cards. But analysts said that the stores would not lose those sales — they would just be pushed later in the month, or into January.
The MasterCard data suggests that the pre-Christmas sales increase was the biggest in five years. Spending reached about $584.3 billion, compared with $566.3 billion in that period in 2007.
The 5.5 percent rise beat even the retail industry’s projections. The National Retail Federation was expecting a 3.3 percent improvement, and the ShopperTrak research service anticipated a 4 percent increase (both excluded automobiles, gas and restaurants).
“In the face of 10 percent unemployment and persistent housing woes, the American consumer has single-handedly picked himself off the mat, brushed his troubles off and strapped the U.S. economy on his back,” Craig R. Johnson, the president of the consulting firm Customer Growth Partners, wrote in an e-mail.
Analysts offered several theories for the rebound in spending while the unemployment rate remained stubbornly high.
Stocks have soared to their highest levels in more than two years, giving those with higher incomes greater freedom to spend. Luxury stores like Tiffany and Saks Fifth Avenue, for example, have been posting big sales increases.
Pent-up demand is also showing up among middle-income shoppers: in government surveys, consumers have been expressing rising confidence for the last five months.
The luxury segment started heating up in late summer, said Joel Bines, a director in the global retail practice at AlixPartners.
“That trickled down to the upper- to midtier consumer, and then the midtier consumer,” he said. Once the luxury market stabilized, confidence seems to have spread, “in the media, at work, with your friends,” he said.
The sales figures were bolstered by improved inventory controls among many retailers. After two years of heavy discounting, retailers cut the number of products they held in stock rooms, in an attempt to train shoppers to buy items at full price rather than wait for sales. The strategy seems to have worked.
Shoppers browsing through after-Christmas sales said in interviews that they were still hunting for deals, but they were also feeling that the economy was stabilizing after three years of merciless uncertainty.
In Pontiac, Ill., Gwen Hilsabeck rose at 4 a.m. Sunday for a 90-minute drive through snow flurries from her house to the upstate Woodfield Mall in Schaumburg, northwest of Chicago.
“I bought two dresses on sale at Ann Taylor, and I bought four dresses on the clearance rack at Nordstrom,” said Ms. Hilsabeck, a manager at a hospice company who said she had spent $800 to $900 so far.
“I’m spending more on myself because I’m starting to feel a little more at ease,” she said, “and my 401(k) has stopped going down.”
Where the snowstorms were not a factor, stores prepared for a wave of shoppers using gift cards. At J. C. Penney, Dec. 26 is usually the second-biggest day of the year in volume of transactions, including returns, exchanges and new purchases, said Myron E. Ullman III, the company’s chairman and chief executive.
J. C. Penney tries to attract teenagers, who are frequent recipients of gift cards, on Dec. 26 by bringing in new merchandise. People “have got money in their hand if they’ve got a gift card,” Mr. Ullman said.
Indeed, gift cards continued to be popular this year, and some shoppers said they were trying to maximize their value by using them during after-Christmas sales.
“It lets you shop the day after Christmas, so you can save a lot of money,” Shelly Lara, 42, an in-home nurse from Ashtabula, Ohio, said on Sunday.
She said that even though her family was doing fine financially, the Cleveland Clinic, which owned her company, had announced some layoffs, and her husband’s company had stopped contributing to his 401(k) for six months.
“There were some scares,” Ms. Lara said. “We wanted to make sure we got the most for our money.”
Stores seemed to have planned for the holiday season appropriately, with few resorting to the huge price slashing of the last couple of years.
“There was a good match between inventory and demand,” Mr. McNamara of SpendingPulse said. “I didn’t see any evidence of unusual discounting.”
For shoppers, that meant that the hunt for deals was a bit harder after Christmas this year.
“I remember a few years ago when you could double your money if you went shopping the day after Christmas,” said Kim Rayburn, 40, a hairdresser who was looking at costume jewelry at Forever 21 at Polaris Fashion Place in Columbus, Ohio, with her daughter Samantha, 12. “It’s not like that anymore. Now it seems just like a regular shopping day.”
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