By  on January 14, 2014

WASHINGTON — Consumers took advantage of heavy discounting as the holiday season came to a close in December, driving up sales at apparel and accessories stores and general merchandisers, but pulling back on spending at department stores, the Commerce Department’s monthly sales report showed Tuesday.

Apparel and accessories stores posted a seasonally adjusted 1.8 percent increase in sales to $21.5 billion in December compared with November, while department stores posted a 0.7 percent decline to $14.4 billion. General merchandise stores, a category that includes discounters and department stores, saw a 0.1 percent increase in sales to $55.3 billion.

On a year-over-year basis, sales at apparel and accessories stores were up 5.2 percent in December, while sales at department stores fell 3.3 percent. General merchandise stores posted a 1.5 percent increase compared with a year earlier.

“Apparel and accessories stores were among the big winners,” said Scott Hoyt, director of consumer economics at Moody’s Analytics. “While some of that was payback for modest declines in November, the year-over-year sales were up 5.2 percent, so clearly those stores did well by broader measures.

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“Department stores were the opposite story,” Hoyt noted. “They are really struggling to attract consumers right now.”

Bill Lynch, vice president and director of investments at Hinsdale Associates, said department stores “by and large reported disappointing results,” apart from Macy’s, which he noted performed “extremely well.”

“I think mainstream consumers have had relatively weak income growth and a lot of people have struggled from paycheck to paycheck, in terms of meeting daily needs,” Lynch said. “Those who are more affluent and hold a stock portfolio benefited from the wealth effect last year due to the fact that the stock market was so strong. It made people feel wealthier and more apt to spend.”

Overall retail sales rose 0.2 percent in December and were up 4.1 percent compared with a year earlier.

The National Retail Federation said holiday retail sales (November and December sales combined) rose 3.8 percent to $601.8 billion, in line with its projection of 3.9 percent and $602.1 billion. The NRF also noted that nonstore sales, including e-commerce, grew 9.3 percent to $95.7 billion in that time period.

“Retail sales have been volatile all year, and the holiday shopping season was no exception,” said Jack Kleinhenz, chief economist at the NRF. “Solid job growth in the months of October and November led to a more confident consumer and healthy holiday shopping season for many retailers. While economic and policy uncertainties remain, the economy seems set for steady growth in the new year.”

But economists warned that the discounting could hurt retailers’ margins.

“Undoubtedly, some of the increase came at the expense of margin,” Kleinhenz said. “Retailers are still stressed, and a long-term promotional environment may actually hurt the bottom line. As consumer confidence grows, there will be less need for retailers to heavily promote and discount their offerings.”

“This report confirms that this holiday shopping season was not very kind to many retailers,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight. “Heavy discounting and weak foot traffic hurt many retailers on the per-unit margins.

“It is clear that many retailers have learned that heavy discounting can do damage to revenue growth and profits,” Christopher said. “This may lead to less discounting and a little more restraint next holiday shopping season.”

In the overall economy, retail sales edged up 0.2 percent to $431.9 billion, slightly ahead of expectations. A big decline of 1.8 percent in auto sales last month slowed down the pace of sales gains in the economy.

“Retail sales had a good month; however, discretionary items suffered while necessities did well,” Christopher noted. While autos, furniture, electronics, sporting goods and department stores “took a hit,” apparel had a “strong month” due to unseasonably colder weather, he added.

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