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Christmas was good to retailers this year.

This story first appeared in the December 27, 2010 issue of WWD. Subscribe Today.

Even as concerns remain over the consumer mood in 2011, retailers have entered the last leg of the holiday season — the week between Christmas and New Year’s — expecting another wave of spirited shopping and feeling good about the outcome so far.

And that’s particularly true in apparel and accessories. This past weekend, retailers and analysts concluded those categories performed the best during holiday 2010 after several years when the sector lagged in favor of electronics and toys. Skyrocketing online and mobile shopping, robust gift card sales, tax cut extensions, rebounds in luxury goods and men’s wear, and free shipping of online orders also spurred sales growth this year.

Pundits forecast the holiday season will see anywhere from 3 to 5 percent gains over last year, and believe “frugal fatigue’’ set the stage, whereby consumers became tired of holding back after two years of belt tightening and emerged eager to shop for themselves as much as for gifts. The volume improvements, along with the solid inventory and expense controls, and aggressive planned-in-advance promotions, have elevated expectations for healthy fourth-quarter margins and profits.

No doubt, Sunday’s storm blanketing the Northeast and mid-Atlantic regions and reaching 10 to 12 inches in some locations deterred traffic at many malls and put a dent in sales. Yet the blizzard did little to dampen the mood. The day after Christmas is traditionally one of the biggest volume days of the year, leading to a bustling retail week characterized by returns and exchanges, gift card redemptions and price cuts hitting new highs. Major sales at such stores as Saks Fifth Avenue, Bergdorf Goodman and Nordstrom kicked off Sunday.

“The day after Christmas is a very important day,” said Brendan Hoffman, president and chief executive officer of Lord & Taylor. “It looks like today [Sunday] is starting out strong. Maybe people were getting out early to beat the snow, but the storm will certainly affect the malls. You can’t control the weather, but we’ll get through it. Up until today, we were up double digits. I don’t know what the storm will do, but the customer has been continuing to respond. This season, gains were across the board. For Lord & Taylor, it’s been the best Christmas in a number of years — five years for sure.”

“It’s a top 10 day for us,” said Pete Nordstrom, president of merchandising, Nordstrom Inc., referring to Sunday, which marked the start of the chain’s half-yearly men’s wear sale. “Sales of gift cards were up this year so I think that bodes well for today going forward through January.”

“We continued to do better than our plans,” Nordstrom added. “We’ve been exceeding sales growth plans. Sales have been growing faster than inventory for several months. Inventories are really lean. Merchandise is flowing in well. Newness drives the business. We are having a really good regular-price season. Clearance is not dominating the business like a couple of years ago. Shoes, particularly women’s in all price points, were really strong. It’s been that way for over a year.” He cited Uggs and Toms as standouts. “Jewelry has been good across all price points, and the watch business has been really good.”

“In terms of store traffic, conversion rates, sales and, for most retailers, margin performance — this is what a good Christmas looks like,” said Craig R. Johnson, president, Customer Growth Partners. “It’s going to be the best year-over- year sales growth in at least five years —in the 6 percent range for the November-December period, excluding auto sales, restaurants and gas.”

Johnson estimated America’s retail sales totaled $521 billion, brick-and-mortar and e-commerce combined, far surpassing the $508 billion registered in 2007, the last year before the recession. Apparel-accessories, he said, would be up in excess of 7 percent, marking the strongest growth since 1999 when the category rose 7.3 percent. “The single biggest factor is there’s a lot of pent-up demand,” Johnson said. “People are out buying again.” He said men’s wear, accessories and toys have been strong, while electronics have been more mixed, with unit sales up but dollar sales down due to deflation on flat-screen TVs.

Though precise sales results won’t be available until next week when many major retailers report December comparable-store sales, it is believed that Macy’s, Toys ‘R’ Us, Home Depot, Lowe’s, Tractor Supply, Nordstrom, Target, Costco, Lululemon, Kohl’s, Tiffany, Ross Stores, Anthropologie and Zumiez, among others, had winning holiday performances. Abercrombie & Fitch is showing improvement with sharper prices and discounts domestically, while overseas stores remain less promotional.

On the other hand, Sears, Talbots, American Eagle, Zale and Wal-Mart seem to be falling short.

Neiman Marcus and Saks Fifth Avenue came through the season on an up note, with the luxury sector showing renewed life. At Neiman’s, “We saw customers back in the stores. They were shopping, clearly not at the rate of before the recession, but better than what we expected,” said Ginger Reeder, vice president of corporate communications, Neiman Marcus Group. “Women’s accessories, handbags, shoes and some jewelry stood out. Men’s did well and it’s been awhile since we’ve been able to say that. Customers are responding to new things. As resort and spring merchandise come in, they respond.”

“We feel pretty good about the season,” noted Ginny Hershey-Lambert, Bergdorf Goodman’s executive vice president and chief merchant. She said there’s been a good response to “positive, fun items” such as Paul Morelli meditation bells or those items that represent tradition and investment, such as Monica Rich Kosann heirloom lockets. She also cited products with fur and cold weather items, specifically coats from Moncler and Loro Piana. “I feel like the foreign traffic and tourism seem to be a little better than last year and that our core clients continue to be loyal,” Hershey-Lambert added.

Regarding traffic in the store on Sunday, Hershey-Lambert said despite the storm, “It seems to be OK. We started our after-Christmas sale. Women are happily buying shoes,” offered at 50 percent off, while ready-to-wear is running 60 percent.

“It’s everybody’s sentiment that luxury is back, and I think in a big way,” observed Henri Barguirdjian, ceo of Graff in America. “We certainly saw it at Graff with double-digit increases in sales. New York was phenomenal, almost 30 percent ahead. We had a lot of South American clients, particularly Brazilians, and we started to see a Mainland Chinese customer for the first time in a significant way.

People are feeling more relaxed with the economy,” he continued. “Maybe we have turned the corner. Obviously, unemployment is a big factor. Still people are a bit more confident. We sold quite a few very important stones. Precious stones, like gold and art, are a nice refuge for a small percentage of your assets. Also, color is back. We sold a lot of colored stone jewelry, more so than in past four, five years. Clients are looking for original design and colored stones. I am very bullish for next year.”

“I think the season has been exceptional,” said Joel Bines, managing director, AlixPartners LLP. “It’s certainly been well planned by the retailers. My mall walks and store visits tell me that the promotion activity, while very loud, appears to be based on [advanced] plans. There’s real signage and merchandise stacked out for ‘bogos’ [buy-one, get one at a percent off]. I would call it ‘organized promotional chaos.’ It gives consumers impression of deep discounts but it’s already [baked] in the merchandise plan.

“Apparel is going to come out as the big winner,” Bines added. “We’re calling 2010 ‘The Year of the Sweater.’ People are buying apparel again for lots of different reasons. For starters, over the last two years, apparel retailers have done a much better job of getting the price-value equation right for the customers. They’ve become really expert in driving cost out of the manufacturing, over the last two years, as retailers looked inward on how to maintain margin in a declining sales environment. They also really benefited from enormous pent-up demand.”

Among the season’s best-selling products: handbags, shoes, luxury items, men’s wear, electronics — particularly iPads and smart phones — jeggings, jeans in new silhouettes and statement jewelry.

The big question is what happens right after the holiday. “[Next year] is going to be extremely challenging,” Bines said. “The raw material input prices on products are way up. The price of gold, the price of cotton and the costs surrounding logistics and transportation are all way up. That will put pressures on margins in 2011, forcing [retailers] to have higher prices or lower margins and I don’t think the consumer is ready for higher prices.”

He’s also concerned about fuel costs. “What I hear about the price at the pump going into 2011 makes me nervous. That’s one number that really changes consumer behavior. When the price to fill up the tank jumps $5 or $10, that causes consumers to take a step back.”

“The cost of manufacturing and sourcing is a real issue,” said Nordstrom. “Right now, it hasn’t started to play itself out exactly, but it means prices are going to go up to some degree. I don’t think we can absorb all of it. It depends on how much. Two or three percent yes. Ten to 15 percent is another story.”

“Pricing obviously is a concern,” added L&T’s Hoffman. “It will depend on the category, but we are not going to compromise on quality. The customer will still be able to find great values and promotions. We’re bullish. All of our customer metrics is looking upwards. We continue to invest money in our stores.”

But for now, Hoffman and other retailers want to bask in the Christmas glow.

As reported, the National Retail Federation raised its holiday sales forecast two weeks ago to a 3.3 percent increase versus its previous outlook for a 2.3 percent increase. While brick-and-mortar sales were up, online shopping excelled, with comScore measuring a 12 percent increase in sales for the Nov. 1 through Dec. 22 period, with $28.36 billion spent online to that date, the firm noted.

In a significant shift, online shopping was more spread out than in past years, with buyers shopping on Thanksgiving Day and as late as Dec. 23, rather than only on Cyber Monday and midseason. For the week ended Dec. 19, spending was up 14 percent over the year before, to $5.5 billion.

“Shopping on Christmas Eve was good,” said Susan Lyne, chairman of Gilt Groupe. “Christmas Eve shopping for us would be obviously self purchases and people who are not doing something else on Christmas Eve. I’m surprised we did as much revenue as we did. We sold about 6,000 units on Christmas Eve day and did probably 25 percent of what we do on a typical day, and 20 percent more of what we were seeing at the height of the shopping period.” The shipping deadline for Gilt was Dec. 21, and Dec. 23 for expedited shipping.

The week ending Dec. 4 was Gilt’s biggest of the season. “It was clearly the week when our members went into high gear to buy their Christmas gifts,” she said. “For the entire holiday shopping period, which is the day after Thanksgiving to the 23rd, we were up over 60 percent year over year.”

Gilt focused more on giftable items this year. Anything nonsized was popular, including jewelry, cashmere, handbags, candles, furniture, rugs, gourmet food, Best Made Co. axes, Leatherman tools, vintage watches, Vespa scooters and socks. Unusual sales such as the Volkswagon Jetta, vintage Rolex watches, admittance to race car driving schools and snowboarding trips in Japan drove a lot of traffic, she said.

Traffic and sales coming from mobile was up about 20 percent over the holidays, typically from 6 to 9 percent on weekdays and about 20 percent on weekends, said Lyne.

As for the coming year, “I think there is more optimism about the economy and the state of people’s personal economics,” she said. Helping factors are a good market and certainty about taxes. “The more people know how to plan for the coming year, the better they feel,” Lyne said. Gilt also expects mobile to continue to grow. “It’s like having a store in your bag,” she said.

Sales were also strong for GSI Commerce, which owns Rue La La and runs Web sites for more than 500 customers, including Ralph Lauren, Kate Spade, Levi’s, American Eagle Outfitters and Calvin Klein.

“For the past several days, online shopping has held up well,” said GSI Commerce executive vice president strategy and marketing Fiona Dias. “The biggest change we see this year is customers are shopping closer to Dec. 23. They are more confident in online shopping and buying later. A few years back, customers would be reluctant to buy after mid-December for fear of packages not arriving. This is no longer the case.”

Nonetheless, although GSI’s cut-off for shipping by Dec. 24 was Dec. 23 at 10 p.m. Eastern time, its biggest day was Cyber Monday and its biggest week Thanksgiving week. The company expects a strong January, partly thanks to gift card redemptions and returns and exchanges, said Dias.

At the stores, some of the hottest last-minute gift categories at Kmart and Sears included consumer electronics such as flat-screen TVs and digital cameras, apparel including coats and cozy knits, home appliances and toys, said spokesman Tom Aiello, adding that Kmart lowered prices on more than 1,400 “must-have” toys of the season. For example, all Nerf Sports items were 30 percent off, Toy Story toys were marked down 20 percent and Mattel games, 25 percent.

Sears’ last-minute deals for Dec. 22 to 24, included 40 percent off a Kenmore Energy Star conventional dryer, regularly $659.99, sale price, $395; a Keurig B40 Single Serve Coffeemaker, regularly $119.99, sale price, $109.99; a choice of Craftsman Nextec Lithium-Ion Multi-tool or Hammerhead Auto Hammer, on sale for $79.99, the lowest price ever. Coats, fleece, sweaters and sleepwear for the family was reduced 50 percent to 60 percent and one-carat diamond heart jewelry, regularly $299.99, was on sale for $99, plus all other fine jewelry was reduced up to 60 percent.

Kmart’s last-minute buys included Kodak’s M530 digital camera, regularly $99.99, sale price, $79.99; the Garmin Nuvi 265W navigation system, sale $99.99, a $50 savings; cozy socks, regularly $8, sale price, $4; Pink K women’s slippers, starting at $3.99, and Coleman men’s boots,$14.99 for select styles.

Aiello said this holiday season Sears and Kmart saw two big new trends that included more customers using “our Buy Online-Pick Up in Store option than ever before.” There was also an increase in the number of customers using mobile apps and the mobile-enabled (WAP) site Sears2go whose app produced big savings on selected products. “This is validating our approach to rapidly enhance shopping for our customers by fusing our online, mobile and store experiences,” Aiello said. “For example, on Cyber Monday we had a Sunday circular with QR codes. When customers scanned the code with their mobile device, they were brought directly to that sale item on their mobile device and could purchase it for in-store pick-up to save money on shipping.”

Taubman Centers Inc., which has car counters in some of its malls, reported that Beverly Center in Los Angeles was up midsingle digits in terms of the number of cars counted between Black Friday and Christmas Eve while Dolphin Mall in Miami was up double digits. “Stores surveyed at a variety of our shopping centers across the country said that they were trending up midsingle digits to double digits for the holiday season on average,” said spokeswoman Karen MacDonald. “The strongest categories included apparel, footwear and luxury.” But she also noted that the storm did reduce traffic at some malls Sunday, including Stamford Town Center in Stamford, Conn., where heavy snowfall was expected, and Woodfield Mall in Schaumburg, Ill., which was already covered with snow.

Target offered consumers a way to save money while helping others: in the final week leading to Christmas, shoppers could trade in used cell phones, video games and iPods at Target Mobile centers to get credit towards any Target purchase.

The retailer said that more shoppers than ever are using mobile technology and that a last-minute option this season has been Target Mobile GiftCards that consumers load to their phones then text to recipients.

Wal-Mart extended cut-off dates for free shipping on some 60,000 products to Dec. 20 at 11:30 p.m. Meanwhile, site-to-store pick up was extended from Dec. 17 last year to Dec. 20 this holiday season. Also, the Pick Up Today program for online orders placed up to Dec. 23 at 6 p.m. could be picked up that same day at select Wal-Mart locations.

The world’s largest retailer offered last-minute deals and gift card bundles for popular gifts this season, such as a $20 gift card with the purchase of a Nintendo DSi, $149; a $50 iTunes gift card with the 8GB iPod Touch, $225, and new Facebook credit gift cards in $5, $10 and $15 denominations when purchased in stores and $10 and $25 denominations when bought online. The gift cards can be used to buy social games.

J.C. Penney said holiday staples such as Godiva chocolates along with Discover Kids and Sharper Image and pets are categories that “have made it back onto the list this season,” a spokesman said. “We have a big Animal Planet gift statement. We’re also seeing a return to stocking stuffers. We’re offering some fun and innovative products at $4.99 and $9.99 price points that have been very popular such as photo coasters for $9.99 and travel bingo, $4.99.”