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Stores need strong finish

Bargain-hungry Americans will need to go on a post-Christmas spending binge to salvage this holiday shopping season.

Despite the huge discounts and other incentives that stores offered leading up to Christmas, U.S. holiday sales so far this year have been the weakest since 2008, when the nation was in a deep recession.

So stores now are depending on the days after Christmas to make up lost ground: The final week of December can account for about 15 percent of the month's sales, and the day after Christmas is typically one of the biggest shopping days of the year.

Stores, which don't typically talk about their plans for sales and other promotions during the season, are known for offering discounts of up to 70 percent after the holiday. This year, they're hoping to lure more bargain hunters who held off on shopping because they wanted to get the best deals of the season.

The Macy's location in Herald Square in New York was bustling with shoppers Wednesday. There were a variety of deals throughout the store: candy dispensers for 70 percent off, various men's clothes were "buy one get one free," belts for 50 percent off, a bin of ties for $9.99.

Ulises Guzman, 30, a social worker, was shopping in the store. He said he waited to shop until the final days before Christmas, knowing that the deals would get better as stores got more desperate. The strategy worked. He saw a coat he wanted at Banana Republic for $200 in the days before Christmas but decided to hold off on making a purchase; on Wednesday, he got it for $80.

"I'm not looking at anything that's original price," he said.

The shopping rush after Christmas illustrates just how important holiday sales are. Consumer spending accounts for 70 percent of economic activity, and many retailers can make up to 40 percent of their annual revenue during the two-month holiday period at the end of the year.

In the run-up to Christmas, analysts blamed bad weather for putting a damper on shopping. In late October, Hurricane Sandy battered the Northeast and mid-Atlantic states, which account for 24 percent of U.S. retail sales. That, coupled with the presidential election, hurt sales during the first half of November.

Shopping picked up in the second half of November, but then the threat of the country falling off a "fiscal cliff" gained strength. Lawmakers have yet to reach a deal that would prevent tax increases and government spending cuts set to take effect at the beginning of 2013. If the cuts and tax hikes kick in and stay in place for months, the Congressional Budget Office says the nation could fall back into recession.

Still, the National Retail Federation, the nation's largest retail trade group, said Wednesday it is sticking to its forecast for sales in the November and December period to be up 4.1 percent to $586.1 billion this year. That's more than a percentage point lower than the growth in each of the past two years, and the smallest increase since 2009 when sales were up just 0.3 percent.

Kathy Grannis, a spokeswoman for the group, noted that the trade group's definition of holiday sales includes food and building supplies.

"Stores have a big week ahead, and it's still too early to know how the holiday season fared, at this point," she said.

>>By the numbers

0.7 percent

Increase in sales of electronics, clothing, jewelry and home goods in the two months before Christmas compared to last year, according to the MasterCard Advisors SpendingPulse report, well below the 3 to 4 percent growth that analysts had expected and the worst year-over-year performance since 2008.

Stores need strong finish 12/26/12 [Last modified: Wednesday, December 26, 2012 8:59pm]
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