UPDATE 1-US holiday sales rise but discounts to hit margins -NRF

Tue Jan 14, 2014 12:50pm EST

By Phil Wahba

NEW YORK Jan 14 (Reuters) - U.S. retail sales rose 3.8 percent in the 2013 holiday season, the National Retail Federation said, but the trade body warned that deep discounting could hurt retailers' profits.

Retailers offered the biggest promotions since the 2008 recession to get shoppers to spend, but many slashed profit forecasts last week because of the deals.

"Retailers needed to get out there earlier with promotions to capture shoppers' annual holiday budget," NRF Chief Economist Jack Kleinhenz told Reuters.

"The top line is fine - the bottom line is going to be the issue for these retailers."

The data, based on U.S. government figures, was just shy of the 3.9 percent rise the NRF forecast in October. The industry body looks at U.S. sales in November and December, excluding automobiles, gasoline stations and restaurants.

Earlier in the day, the U.S. Commerce Department reported better-than-expected broader retail sales for December.

A week ago, data firm ShopperTrak gave a pessimistic view of holiday season sales, saying growth between Thanksgiving and Christmas fell to 2.7 percent from 3 percent a year earlier.

ShopperTrak also said fewer customers visited stores during the holiday season.

Many retailers are set to report their quarterly earnings in the next couple of weeks, which will show their performance during the holiday season.

Kleinhenz said 2014 was expected to be better for retailers as the U.S. economy and jobs market improve, but they might have to continue offering discounts for the next few months.

"They have conditioned consumers to expect discounts. Retailers don't have a lot of opportunities to raise prices," he said.

The NRF will issue its 2014 retail sales forecast in early February.

The U.S. Commerce Department said December retail sales, including automobiles, gasoline stations and restaurants, rose 0.2 percent from November.

Economists polled by Reuters were expecting a 0.1 percent rise. Sales rose 4.1 percent from a year earlier, according to the department.

The data was adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.

The NRF said total retail sales rose to $601.9 billion in November and December, below its estimate of $602.1 billion.

Non-store holiday sales, an indicator of online sales, grew 9.3 percent to $95.7 billion.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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