"Year of the sweater" sees rising U.S. retail sales

DETROIT Tue Dec 14, 2010 12:40pm EST

Shoppers stroll along Condotti street during the Christmas season in downtown Rome December 21, 2009. REUTERS/Alessia Pierdomenico

Shoppers stroll along Condotti street during the Christmas season in downtown Rome December 21, 2009.

Credit: Reuters/Alessia Pierdomenico

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DETROIT (Reuters) - Demand is strong at David Dumas' South Carolina men's clothing store, but after being battered during the past two holiday seasons by the recession and financial market meltdown, he does not want to get too excited.

"I don't want to jinx it, but we are up 40 percent in December so far," he said. "It's been a fun fourth quarter."

This holiday season has so far been looking up for many U.S. retailers as people flocked to stores in greater numbers for the traditional "Black Friday" shopping kickoff, and many retailers said customers kept coming through the first part of December.

On Tuesday, the Commerce Department reported a 0.8-percent increase in U.S. retail sales in November, with a gain, excluding autos, of 1.2 percent that doubled expectations.

Also, two leading retail trade groups -- the International Council of Shopping Centers and the National Retail Federation -- raised their holiday sales growth forecasts due to the strong results.

The data and comments from store owners and shoppers suggest the U.S. economy is regaining strength and shrugging off fears of a double-dip recession that were seen this summer. Consumer spending makes up about 70 percent of that economy.

"The sun appears to be rising again in the retail world," said Lawrence Creatura, a portfolio manager at Federated Clover Investment Advisors.

In fact, Dumas, the 49-year-old owner of M. Dumas and Sons in downtown Charleston, credits a rebound in demand after a 7 percent sales decline in 2009 to the city's balmy winter weather and its strong tourism industry.

Retailers are happy and relieved to see more shoppers like Migna Cruz, who works at a hospital in Hoboken, New Jersey.

"I'm a little more confident and doing a little better," said the 44-year-old mother of four, who was shopping at a Kohl's in the Newport Center Mall in Jersey City.

Lane Cowan, a manager at Francesca's Collections, a women's clothing, jewelry and gift boutique in the affluent Kansas City suburb of Overland Park, Kansas, expects an improvement on last year's 10 percent sales increase.

"We have awesome traffic and we are beating last year," Cowan said.

The trends were just as promising on Saturday at several shopping centers managed by Taubman Centers.

At the company's Beverly Center in Los Angeles, sales were up mid-single digits to low-double digits on a percentage basis as tourists drove luxury purchases, while jewelry stores at the Woodfield Mall outside Chicago saw strong sales.

Heavy snowfall on Sunday affected shopping at some centers in the Midwest, but strong sales the rest of the week were offsetting that, Taubman said.

Despite the weekend snow, Mother Nature was largely cooperating.

"With a few exceptions, you couldn't ask for better weather nationally," said Scott Bernhardt, chief operating officer for Planalytics, which provides weather data for businesses.

"They're buying the TV and they're buying the scarf and the hat. We're calling it the year of the sweater because people are getting pushed into apparel," he said, adding that the recent Midwest snowstorm would not have a large impact on sales.

In fact, Troy Risch, executive vice president of stores for Minneapolis-based Target Corp, who had 20 inches of snow in his driveway on Sunday, was looking on the bright side. "What it has helped with is our boot sales, jackets."

The Commerce Department report continued the streak of good news in the retail sector as U.S. online retail sales for the first 40 days of the holiday shopping season jumped 12 percent to more than $21.95 billion, according to research firm comScore.

Analysts warn, however, that the results are being bolstered by discounting that could crimp retailers' profits.

"Everything is on sale everywhere," said Linda Sklaren, a New York lawyer shopping for holiday gifts for her husband and children at Saks' flagship store on Manhattan's Fifth Avenue.

A Consumer Reports study released on Tuesday suggested retailers may even have to increase discounting as fewer of those surveyed than last year planned December purchases.

For those who do not discount enough, however, Best Buy's fate awaits. The top consumer electronics chain posted a lower-than-expected quarterly profit and a surprising drop in same-store sales as demand for TVs slid.

While consumers are now shopping with more cash and less credit, some are still having to stretch for the holiday.

Jennifer Dulny, a 44-year-old Shawnee, Kansas, resident, said she and her husband withdrew money from their retirement account this year to help pay for Christmas presents for their two young children.

"Our kids still believe in Santa Claus ... and if you cut back for your kids it really just kills the magic," she said.

(Additional reporting by Barbara Liston in Orlando, Carey Gillam in Kansas City, Brad Dorfman in Chicago, Jon Lentz and Phil Wahba in New York, Verna Gates in Birmingham, Alabama, and Harriet McLeod in Charleston, South Carolina; Editing by Maureen Bavdek)

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