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Holiday Retail Sales Slow

Fiscal Cliff, Hurricane Sandy Hurt Consumer Confidence

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U.S. holiday sales growth slowed by more than half this year after gridlock in Washington soured consumers' moods and Hurricane Sandy disrupted shopping.

Retail sales grew 0.7% through Dec. 24 from Oct. 28, MasterCard Advisors SpendingPulse said yesterday, without providing a dollar figure in the billions. Sales grew at a 2% pace in the same period a year ago. SpendingPulse tracks total U.S. sales at stores and online via all payment forms.

Americans became skittish as Washington approached the end of the year without an agreement to forestall higher taxes and automatic spending cuts -- the so-called fiscal cliff. And Hurricane Sandy interrupted shopping in stores and online after it slammed into the East Coast in late October.

"You are looking at modest to marginal growth from a year ago," Michael McNamara, a SpendingPulse VP, said in an interview yesterday. "Weather events and the fiscal debate both anchored the season in terms of growth. The media coverage, which did a good job of explaining the negative consequences of the fiscal cliff, created this negative trend in consumer confidence and spending."

The International Council of Shopping Centers reiterated today that it expects sales at retailers' stores open at least a year to climb 3% in November and December, slower than the 3.3% gain last year. Sales increased 0.7% in the week ending Dec. 22 from a week earlier, ICSC said in a statement. It predicted stronger sales this week, benefiting from purchases in the two days before Christmas. Clearance sales and gift-card redemption will spur sales, said Michael Niemira, ICSC VP-chief economist.

Mr. Niemera said he doesn't expect retailers to resort to "huge across-the-board type of reductions" in after-Christmas sales. Macy's , however, is doing its best to attract post-holiday shoppers with special sales and a new TV ad, which began airing Christmas Eve.

Consumer confidence fell in December to a five-month low, according to a Dec. 21 report. The Thomson Reuters/University of Michigan consumer sentiment index slid to 72.9, the weakest since July, from 82.7 in November.

Sales in the mid-Atlantic and Northeast regions, which account for 24% of national consumer spending, contracted 3.9% and 1.4%, respectively, Mr. McNamara said. Upper Midwest spending also was hampered by disruptive weather, he said. By contrast, sales in the South and West ranged from about 2% to about 4%, he said.

Luxury sales "struggled," pulled down by the New York region, which generates 20% of that category's U.S. sales and was hit hard by the hurricane, Mr. McNamara said. Apparel and consumer electronics sales performed in line with the national average, while the only bright spot was home-related merchandise, which benefited from the housing rebound, he said.

The hurricane also spurred the home category, Robin Lewis, a New York-based retail consultant, said in an interview yesterday. "Sandy reached into people's holiday pocketbooks to pull money out that we spend on gifts to spend on ruined appliances, household repairs," Mr. Lewis said.

Retailers "sabotaged" themselves by not offering greater discounts in the three days before Christmas, Burt Flickinger, managing director of Strategic Resource Group in New York, said today in an interview with Bloomberg Radio.

"Instead of having 50%-to-70-% off that the retailers had on Black Friday, it was buy one, get 50% off," Mr. Flickinger said. "Shoppers didn't see the bargains. And the shoppers are bypassing the shopping center, mall-based stores to shop at Amazon.com and other online providers."

ShopperTrak, a Chicago-based researcher of store traffic, on Dec. 19 trimmed its forecast for November-December holiday sales to a gain of 2.5% from a prior estimate of 3.3%.

The National Retail Federation has said holiday sales will rise 4.1% to about $586.1 billion this year, compared with a 5.6% gain in 2011. Sales for November and December account for 20% to 40% of U.S. retailers' annual revenue, according to the Washington-based trade group. Last year's fourth quarter generated 59% of Cincinnati-based Macy's 2011 profit.

Mr. Lewis said he views even marginal growth as good news given the headwinds in the fourth quarter. For the retail industry, "it's not going to be, 'Let's all break out the champagne. This is an incredible year,'" he said. "It's: 'We had a good year, all things considered.' The consumer was the little train that could."

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--Bloomberg News

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