Retail sales rose in December, helping set a record high in 2011
Strong December caps a record year, but deals meant lower profits for many companies
Joyce Smith / The Kansas City Star
Holiday sales inched higher in December, helping retailers enjoy a record 2011 and boosting expectations that consumers will continue spending in the new year.
But December sales increases came with a big caveat for many companies — lower profits.
The Commerce Department reported Thursday that retail sales — including clothing, autos and gasoline — grew 0.1 percent in December to a seasonally adjusted $400.6 billion, the second straight month that sales had topped $400 billion. Never before had monthly sales reached that level.
December’s results, though, were boosted partly by auto purchases. Excluding auto sales, overall sales actually fell 0.2 percent. It was the first such drop since May 2010.
For all of 2011, sales totaled a record $4.7 trillion. That was a gain of nearly 8 percent over 2010 — the largest percentage increase since 1999.
In all, sales have surged 20 percent from the low point of the recession that began in late 2007. Monthly sales are even 6 percent above their prerecession high. The figures confirm evidence that the economy was strengthening as 2011 ended.
“The retail market is thawing, not melting,” said Jeff Green, president and chief executive officer of the retail consulting firm Jeff Green Partners. “Sales were up, better than I expected. If consumer confidence stays up — meaning that more jobs are created and the housing market levels off — sales will continue to be up a bit in 2012.”
Retailers resorted to heavy discounting that started earlier in the year, became deeper and lasted longer than ever before. Consumers responded, coming out in droves, especially on Black Friday and the day after Christmas. But those days also are among the biggest promotional days of the year.
The damage from discounting showed up at department stores, which reported an overall sales decline of 0.2 percent in December from the same month in 2010. During the past week, Kohl’s, J.C. Penney and Target lowered their fourth-quarter earnings forecasts.
Some specialty stores also suffered. American Eagle Outfitters, for example, bumped up sales by 15 percent to $887 million during the holidays compared to a year ago. But the company said its heavy discounting would result in lower fourth-quarter profits.
“American shoppers are saying, ‘With the little money I have left, I want to maximize my dollars,’ ” said C. Britt Beemer, chairman of America’s Research Group.
As middle-class consumers trade down, they are boosting sales for stores that have traditionally catered to the lower-income shopper. Family Dollar’s sales were up 7.6 percent during the quarter ending in November, and another discounter, Dollar General, is so bullish it plans to open 625 more stores this year.
Meanwhile, some traditional department store companies are cutting back, such as Sears Holding Corp., which plans to shutter up to 120 of its Kmart and Sears stores.
Consumer electronics, usually among the biggest traffic drivers, saw sales fall 5.9 percent this holiday season. Best Buy’s sales were flat compared to the 2010 holiday season, despite hot sellers such as tablet computers, mobile phones and electronic readers.
With overall retail sales up 0.1 percent nationwide last month, local shopping centers are generally expecting single-digit increases based on feedback from tenants. Area shopping centers won’t have final holiday numbers until the end of January.
The Country Club Plaza benefited by adding new names, such as H&M, Kate Spade New York and Sur La Table, to its mix.
At Zona Rosa in the Northland, general manager Rosemary Salerno called it a “positive” season, with traffic up 9.2 percent in November and December, compared to the same period in 2010.
Overland Park’s Oak Park Mall said tenants such as Bath & Body Works, Victoria’s Secret, Macy’s and Nordstrom did as well locally as they did nationally.
Macy’s reported a 6.6 percent increase in sales in the final five weeks of the year, thanks partly to a strong start with its first nationwide midnight opening for Black Friday.
Dillard’s December was up 3 percent, with sales of shoes and cosmetics among the best sellers, while the home and furniture categories were not as popular.
Wal-Mart, the nation’s largest retailer, has not released its holiday sales results.
Some specialty store chains even sold out of their winter wear and are bringing in transitional and light-weight clothing earlier than usual, along with Valentine’s Day merchandise, to keep their shelves fully stocked.
Area specialty stores said they profited by upping their customer service.
Meagan Doyle, owner of Addie Rose Boutique in Leawood’s Parkway Plaza, said sales were steady all last year, with a surge in August when her young women customers headed back to college. Business was also strong a week before Thanksgiving and a couple of weeks before Christmas, she said.
“I do feel consumer confidence is up,” Doyle said. “My customers are careful how they spend their money, but they are spending.”
Retailers typically rely on gift-card redemptions to boost their January sales, but this year consumers are hanging onto them a little longer, experts say.
Unseasonably warmer weather slowed down sales for the first week of January by 5.4 percent, according to the International Council of Shopping Centers, the largest week-over-week decline since mid-1989.
Bloomberg and The Associated Press contributed to this report.