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12/28/2010

Holiday Sales Up 5.5% to $584 Billion, Surpassing 2007 Totals

Early reports of 2010 holiday sales indicate retailers had their best season since the pre-Great Recession year of 2007. For the 50 days before Christmas, retail sales (excluding auto sales) rose 5.5% compared to the same period last year, according to MasterCard Advisors SpendingPulse. That increase translates into total retail sales of about $583.4 billion, compared to $566.3 billion for the same period in 2007, according to published reports.

SpendingPulse, which uses MasterCard data as well as surveys of other forms of payment, reported increases in several key retail categories. Apparel sales rose 11.2%; jewelry sales climbed 8.4%, and non-jewelry luxury sales increased 6.7%. The electronics sector was a laggard, with a modest 1.2% increase over 2009.

Online sales were a particular bright spot this year, rising a projected 15.4% to $36.4 billion, according to MasterCard's SpendingPulse eCommerce Index.

"If last year's holiday story was about gaining some stability, this year's is about getting back to growth," said Michael McNamara, vice president of research and analysis for SpendingPulse. "The 2010 holiday period is categorized by strong year-over-year growth in apparel and continued strength in e-commerce. We also saw a noticeable return in spending in the larger ticket items, as exemplified by the solid growth in jewelry, luxury and even the furniture category."

Several groups that track retail sales had revised their spending estimates upward in the weeks prior to Christmas. The International Council of Shopping Centers, which focuses on chain store sales, revised its November-December holiday season sales forecast upward by 0.5 percentage points on December 21, to an increase ranging from 3.5% to 4%. In mid-December, the National Retail Federation (NRF) revised its holiday forecast upward from 2.3% to 3.3% based on improvements in a range of economic indicators as well as early sales figures.

"The start to the holiday season has surpassed all expectations," said Mathew Shay, NRF president and CEO in a statement announcing the revision. "While employment data is still a concern, we are starting to see improvement in other economic indicators that support an increase in our forecast. In order to sustain this momentum for retailers and the U.S. economy, there must be a renewed focus on jobs as we enter the new year."

As Shay indicates, a continuing high unemployment rate of 9.8%, coupled with consumers' desire to avoid racking up credit card debt and gas prices of $3 per gallon on average, could make retailers' holiday sales celebrations short-lived.

Even Mother Nature said "Bah! Humbug!," with a December 26 blizzard that effectively stopped travel along the Eastern Seaboard from the Carolinas to New England. The day after Christmas is one of the five busiest shopping days of the year, but with trains, planes and automobiles all snowbound, retailers will have to rebuild momentum with discounts and promotions to entice customers back into stores.