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After Gains in Holiday 2009, Retailers Anticipate Improving 2010

Holiday sales showed improvement in some key sectors and at least one leading indicator suggests that retailers are anticipating better prospects in 2010.

The major retail categories followed by Mastercard SpendingPulse demonstrated year-over-year improvement from Black Friday through Dec. 24, although an extra day in the 2009 holiday season versus 2008 boosted results by two to four percentage points in each case. Overall, SpendingPulse had 2009 holiday sales up just under four percent.

Electronic commerce had a particularly good 2009 with an 18 percent gain in the Black Friday through Christmas Eve period and a 16 percent advance in the Nov. 1 to Dec. 24 time frame. Consider also that ecommerce was relatively strong in last year's holidays, so the comparison isn't against declines on the scale some other categories saw. The sector improved year-over-year in every week of the season with double digits increases registered in all but one.

Although it had a tough season, the apparel sector demonstrated modest improvement. Specialty Apparel finished down about a half a percent for the season beginning Nov. 1 but in the Black Friday to Christmas Eve period, it gained a little over two percent. While that's an improvement and evidence of some sector momentum, the extra day in the 2009 season is responsible for much or all the gain. Women's Apparel sales slipped a little less than half a percent for the season beginning on Nov. 1 but gained almost two percent in the Black Friday to Christmas Eve period, with the extra day, again, weighing significantly.

From Nov. 1 to Dec. 24, Men's Apparel gained four percent and footwear sales did even better, up five percent.

Electronics sales started strong in November, fell off during the first two weeks of December and spiked in the week prior to Christmas, with the roller coaster ride finally delivering a six percent improvement for the season beginning Nov. 1 and Black Friday.

Similarly, the Jewelry sector had its ups and downs but ended the two months up almost six percent. Sans Jewelry, the luxury sector gained one percent.

With retailers maintaining lean inventories for this holiday season, profits should be better -- even in retail sectors showing weak sales gains -- than was the case at the end of last year when screaming clearance sales of 70 percent off and more clobbered earnings. Certainly, tight inventories were a theme for the recent holiday season as retailers avoided stocking up too heavily on goods in the face of uncertain demand, yet evidence is emerging that some store operators are anticipating a better climate â€" and more sales opportunity â€" in 2010.

The recently released Port Tracker report from the National Retail Federation and IHS Global Insight indicated that after more than two and a half years of declines, cargo volume at the container ports that handle most of the retail imports to the United States should begin gaining in 2010 on a year-over-year basis.

U.S. ports surveyed handled 1.18 million Twenty-foot Equivalent Units â€" basically trailers of the kind that the big trucks pull -- in October, the most recent month for which actual numbers are available. Those numbers represented a four percent gain from September as retailers hit their busiest shipping month of the year but also a 14 percent decline from October 2008, so marking the 28th month in a row to see a year-over-year decline. Retailers determined to keep inventories tight played a role in the lower numbers.

The Port Tracker study's estimate for November landings was 1.09 million Twenty-foot Equivalent Units, down 12 percent from last year, while December is forecast at 1.05 million TEU, down one percent from last year, and January 2010 is forecast at 1.02 million TEU, down four percent from January 2009.

Port Tracker anticipates year-over-year declines turning in February, when preliminary data suggest cargo landings will total just over 972,000 TEU. The total would mark a 16 percent increase over February 2009. After that, March 2010 is forecast at 1.02 million TEU, a six percent gain over March 2009, and April 2010 is forecast at 1.08 million TEU, a nine percent advance over April 2009. Port Tracker forecasts only six months in advance, but the outlook is encouraging and consistent with a recent prediction for improving employment in the spring. Based on the evidence of import orders, retailers must agree with that prediction, as unemployment is considered the major damper on consumer spending in the recovery

The import gains expected in 2010 also are consistent with trends that emerged this year. "The second half of 2009 has seen an improvement with 'less bad' year-over-year numbers compared with the first half," IHS Global Insight economist Paul Bingham noted.

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