Financial thoughts

It seems that consumers blinked this holiday season.

Rather than bet on heavy post-Christmas discounts, holiday shoppers loosened their purse strings a bit and spent a little more this season, according to data released Monday, giving merchants some reason for cheer.

Spending rose 3.6 percent in November and December, according to MasterCard Advisors’ SpendingPulse, which estimates all forms of payment including cash. Adjusted for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent rise. That was still better than the flat sales analysts had predicted.

The spending bounce means retailers managed to avoid a repeat of last year’s disaster even amid tight credit and double-digit unemployment. Profits should be healthier, too, because stores had a year to plan their inventories to match consumer demand and never needed to resort to fire sale clearances.

However, improved pricing and tighter inventories also means a tougher time for after-Christmas shoppers. The discount pickings were slimmer in many stores, while deep discounts were often limited to slow-moving items.

"It may be 70 percent off, but is it anything you want to buy?" asked Robert Buchanan, an assistant professor of finance at St. Louis University. "Nobody has any inventory."

Buchanan said he noticed low inventories over the weekend in some lines of goods at many stores at West County Mall in Des Peres, and at St. Louis Galleria in Richmond Heights, plus at Kohl’s in Crestwood, and Costco and Target stores in south St. Louis County.

"Almost without exception, inventories were light," he said.

It was a complaint shared by many local shoppers Saturday, when consumers began searching for the after-Christmas sales.

Shoppers looking for big sales should act quickly because there are relatively few leftovers to clear out.

"Retailers are much more nimble this year," said Marshal Cohen, an analyst at Port Washington, N.Y.-based market research firm NPD. "Their ‘Plan B’ is to have new receipts at the ready."

Cohen said he noticed J. Crew and Coach were two that had restocked shelves with new items last week.

Improving consumer sentiment aided holiday sales of discretionary items, said David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore.

"Consumer sentiment for higher-income folks has been improving faster as of late," Schick told Bloomberg News on Monday. "That is driving some of the better spending coupled with the fact that we are comparing with a dramatic drop-off in the more discretionary categories last year."

At Mid Rivers Mall in St. Peters, however, the economy continues to weigh on visitors.

Jason Caimi, 27, and his wife, Jen, 26, of Elsberry, brought their daughter Addilynn, 2, to the mall Monday. But the couple weren’t looking for after-Christmas sales. They went to get out of the house and let her play.

The Caimis are teachers, and they said their financial situation has improved, largely because they aren’t using credit cards and have focused on paying off debt.

Frugality and paying only with cash played roles in their holiday shopping, too.

"We didn’t buy anything full price," Jen Caimi said. She added that pre-Christmas deals were better this year.

Meanwhile, Delores White, 50, of O’Fallon, Mo., came to the mall to return a few items that didn’t fit.

White said she feels less confident than before about the economy going forward, primarily because jobs remain difficult for people to find, she said. "Everything is pretty much at a standstill," she said. She hopes it will turn around, though.

"I’m praying on it," White said. "That’s all I can do for everybody’s sake."

Now, merchants are facing big hurdles to lure shoppers back in January amid lean inventories and what appear to be weak gift card sales. Gift card sales are recorded only when they are redeemed.

Stores count on a post-Christmas boost because of the growing importance of January on the retail sales calendar. Last year, the week after Christmas accounted for 15 percent of overall holiday sales, according to ShopperTrak, a research firm.

Retail consultant Burt P. Flickinger describes gift cards as "the lifeblood" of the post-Christmas season because shoppers typically spend more than the value of the cards. "Retailers with a disappointing December are going to need January to survive," Flickinger said. "Inventories are even too low for retailers."

A better picture of how retailers fared during the holiday will be known Jan. 7, when many report December sales.

Buchanan says that at least the first half of 2010 will be tough, if not fatal, for some stores.

"In this recession, in this continuing lethargic consumer economy, retailers are still under tremendous pressure," Buchanan said.

Those suffering the most could be "middle of the mall" specialty stores not near an anchor store, he said.

"Every one of those retailers at places like West County and the Galleria is paying high rent," Buchanan added. "Those specialty retailers have low margins for error."

Tim Bryant and Shane Anthony of the Post-Dispatch contributed to this report. So did The Associated Press and Bloomberg News.

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