UPDATE 1-Canada's Dec retail sales growth lagged U.S.-Mastercard

Wed Jan 16, 2013 12:23pm EST

* Canada's 1.6 pct growth lagged 2.4 pct growth in U.S.

* Online sales jump 26 percent

TORONTO Jan 16 (Reuters) - Canadian retail sales grew by a tepid 1.6 percent in December, lagging even the disappointing gains posted in the United States, the month when holiday shopping peaks, according to data released by MasterCard on Wednesday.

Sales growth north of the border came in at less the half of the 4.3 percent rate that retailers delivered a year earlier, according to MasterCard's SpendingPulse, published by the payment company's research and consulting division.

The figure also fell short of growth in the United States, where sales rose 2.4 percent in December, capping off what analysts consider a lackluster holiday shopping season there.

The performance is bad news for Canadian retailers, already facing rising competition from U.S. chains expanding in Canada, and bracing themselves for the entry of Target Corp in the spring. The arrival of the No. 2 U.S. discounter is expected to shake up the industry across Canada.

In December, MasterCard released data for November that showed only 1.3 percent sales growth, compared with 4.2 percent a year earlier.

In early January, Hudson's Bay Co said sales growth at its established department stores had slowed in the nine weeks to Dec. 29. But an especially weak performance by the U.S.-based Lord & Taylor chain in wake of Superstorm Sandy pulled down the parent's overall result. Sales rose 6.7 percent at Hudson's established Canadian department stores.

At rival Sears Canada Inc, by contrast, same-store sales fell 5.8 percent in the nine weeks to Dec. 29. Apparel retailer Reitmans Canada Ltd showed a 2.4 percent decline for the same period.

ONLINE SHOPPING SOARS

The news was better in e-commerce, as online sales in Canada jumped 26 percent. MasterCard said the sector is growing more quickly than in the United States, where sales rose 12.6 percent.

To be sure, online retail has emerged more slowly in Canada. In some cases, if shoppers want to buy from a major retailer, they still must order from sellers based in the United States, contending with higher shipping costs and import duties.

Online sales were still a relatively small part of total sales, only 6.6 percent, but the segment has now grown more than 20 percent year-over-year for 15 consecutive months.

MasterCard said grocery sales were higher than average, compared with the month's sales over the last five years. Sales rose 1.3 percent, following a 1.9 percent gain last year. Gasoline sales fell 6.7 percent.

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