Retailers post strong holiday sales

This year’s buying among strongest since 1999, analyst says

Discount signs adorn the window of a clothing store Monday as last-minute shoppers finished up their Christmas lists at a mall in Denver.
Discount signs adorn the window of a clothing store Monday as last-minute shoppers finished up their Christmas lists at a mall in Denver.

It's too soon to know the full picture about holiday retail sales through the end of the year. But a wave of post-Christmas data puts the industry on track to meet record-breaking expectations.

On Wednesday, MasterCard SpendingPulse -- which tracks retail spending trends -- said Christmas sales had seen the strongest growth in the past six years, surging 5.1 percent to more than $850 billion. Meanwhile, Amazon touted strong sales on millions of Amazon devices, and broad use of the company's free holiday shipping perks.

"In sales terms, this has definitely been a very strong holiday -- one of the best since 1999," said Neil Saunders, managing director of research firm GlobalData Retail. "Momentum in the consumer economy, confident shoppers and more discipline from retailers have all helped to boost spending."

MasterCard SpendingPulse reported on holiday shopping from Nov. 1 through Dec. 24. Cold and wet weather posed some problems during Black Friday and the run-up to Christmas, but shoppers still managed to open their wallets. Apparel saw a growth rate of 7.9 percent compared with last year, according to the report.

Department stores, though, finished the season with a 1.3 percent decline from 2017, in part because of store closings. Still, online sales growth for department stores climbed 10.2 percent.

"From shopping aisles to online carts, consumer confidence translated into holiday cheer for retail," said Steve Sadove, a senior adviser at Mastercard and the former CEO of the department store chain Saks.

That kind of volume presents a challenge for logistics services like FedEx Corp. and United Parcel Service Inc. In 2013, a larger-than-expected surge in last-minute online shopping caught UPS off guard and forced it, Amazon and other retailers to offer refunds to customers who didn't receive their orders in time for Christmas.

This year, UPS said it expects to deliver an average of more than 31 million parcels a day during the holidays and anticipates a peak-season total of about 800 million packages to rise 5 percent compared with last year's tally. To deal with the rush of deliveries, the company invested in automation and new facilities to add sorting capacity of 350,000 packages an hour to its U.S. system.

"We're so far pleased with the operational aspect of it," said Glenn Zaccara, a spokesman for UPS. "The investments that UPS made in the network, technology, people and planning across the season with our customers obviously paid off."

Amazon reported record-breaking sales of its own. In the U.S., more than 1 billion items shipped for free over the holidays with Prime. Even the company's free two-hour delivery through Prime Now saved shoppers in a pinch: the last Prime Now delivery on Christmas Eve was made at 11:30 p.m. in Berkeley, Calif. The shipment included a Lego Super Heroes Captain America Building Kit, a Hallmark card, Greek yogurt and shampoo.

(Amazon founder and chief executive Jeffrey Bezos also owns The Washington Post.)

Amazon also reported that more than 50 percent of items sold in the company's stores this Christmas season came from small and medium-sized businesses.

Retailers know that to position themselves for strong sales, they have to meet customers wherever they're looking to buy, Saunders said. Stores, along with easy online shopping options, hooked consumers who went searching for both.

Even with the encouraging early sales figures, Saunders said, he's keeping an eye on profit numbers. Retailers are facing a "toxic mix of rising costs," he said, with higher labor and tariff costs weighing on their bottom lines.

"The main question now is can retailers keep this performance going as we move into 2019," he said. "Investors are very nervous about the prospects which is why retail stocks have taken a bit of a beating."

The National Retail Federation expects sales in November and December to increase between 4.3 percent and 4.8 percent over 2017, reaching up to $720.89 billion. That forecast compares with an average annual increase of 3.9 percent over the past five years. (Labor Day handed the industry a running start: Americans spent a record $2 billion online that day alone.)

November retail sales increased 5 percent over last year, according to the retail federation, putting Christmas spending on track to meet the organization's overall forecast. Strong consumer confidence was one driver, said Katherine Cullen, the federation's director of industry and consumer insight -- and will be important to watch given recent volatility in the stock market, Cullen said.

"Next year, besides the stock market, there's also tariffs," Cullen said. "There are some things that may start to impact consumer confidence, and we are keeping an eye on that."

Information for this article was contributed by Molly Schuetz of Bloomberg News and by staff members of The Associated Press.

Business on 12/27/2018

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