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story.lead_photo.caption Shoppers look for post-Christmas discounts at Valley View Mall in Roanoke, Va. The National Retail Federation said Friday that holiday sales reached $691.9 billion as shoppers stepped up their spending in the brightening economy.

Finally, some good news for the nation's retailers: Americans spent more than expected this Christmas season, fueling the strongest growth in holiday retail sales since the end of the recession.

Holiday sales rose to $691.9 billion in November and December, marking a 5.5 percent increase from the year before, according to the National Retail Federation. The lobbying group had forecast holiday spending growth of 3.6 percent to 4 percent.

"Whether they shopped in-store, online or on their phones, consumers were in the mood to spend," Matthew Shay, president and chief executive of the retail federation, said in a statement.

Separately on Friday, the U.S. Commerce Department said retail sales grew 0.4 percent in December and 0.9 percent in November. Taken together, analysts said, that represented the best holiday spending performance since 2005.

"The basic storyline here is that holiday sales were extremely strong," said Chris Christopher, executive director of research firm IHS Markit. "Growth more than surpassed expectations, even though we're seeing a structural shift in the industry as shoppers move online."

Economists said a number of factors, including a growing economy and booming stock market, helped spur spending growth. The nation's unemployment rate is at a 17-year low, and wages are inching up, giving consumers enough confidence to fill their carts, whether in stores or online. Online spending grew 11.5 percent during the holidays to $138.4 billion.

Holiday sales grew in every retail sector except sporting goods, according to the National Retail Federation. Sales of building materials and supplies grew 8.1 percent from 2016, while furniture rose 7.5 percent and electronics grew 6.7 percent. Sales of clothing and accessories were up 2.7 percent.

"The market conditions were right, retailers were doing what they know how to do, and it all worked," Jack Kleinhenz, the retail federation's chief economist, said in a statement. "The economy was in great shape going into the holiday season, and retailers had the right mix of inventory, pricing and staffing to help them connect with shoppers very efficiently."

Many retailers say they saw a bump in sales during the important holiday season. Kohl's reported a 6.9 percent increase in holiday sales at stores open at least one year, while sales rose 3.4 percent at both Target and J.C. Penney.

Macy's reported 1.1 percent growth in same-store sales during that period, led by increased demand for active apparel, shoes, dresses and coats. "Consumers were ready to spend this season," Jeff Gennette, Macy's chief executive, said in a statement. "We saw improved sales trends in our stores and continued to see double-digit growth on our digital platforms."

For decades, the holiday season has been a critical time for the nation's retailers, and analysts said that was particularly true in 2017. Retailers closed a record 7,000 U.S. stores last year, while dozens of big-name companies, including Gymboree, RadioShack and BCBG Max Azria, filed for bankruptcy.

Some of last year's success could be a turning point for the industry. "We think the willingness to spend and growing purchasing power seen during the holidays will be key drivers of the 2018 economy," Kleinhenz said.

The season got off to a strong start, with roughly 70 percent of Americans reporting that they went shopping -- either online or in person -- over Thanksgiving weekend. That momentum continued into Cyber Monday -- the first day back at work for many Americans after Thanksgiving -- when consumers spent a record $6.59 billion online, making it the largest Internet shopping day in history, according to data from Adobe Analytics.

Target has said that 70 percent of its online sales in November and December were fulfilled by stores that were used either to ship online orders or as pickup points for customers who ordered online. The company is now shipping online orders from 1,400 of its 1,800 stores to offer faster delivery.

Tom McGee, president and CEO of the International Council of Shopping Centers, says of those holiday shoppers polled who ordered goods online and picked them up at the store, 90 percent bought more once they were at the stores.

And retailers other than Amazon are trying to expand their options to offer same-day delivery. Macy's and Best Buy are using startups like Deliv. Target recently acquired Shipt, which will mean same-day delivery services from about half of its stores early this year. Wal-Mart bought a startup called Parcel as it aims to offer same-day delivery to New Yorkers.

And Wal-Mart, which has been buying smaller online companies and trying to strengthen its hand against Amazon, is converting about 10 of the 63 Sam's Clubs it is closing into e-commerce centers.

"As retail continues to evolve, we believe these physical assets will be subject to stricter scrutiny as to their role in each company's overall strategic plan, with 'pruning' and re-allocation such as Wal-Mart is doing with Sam's the rule rather than the exception," said Charles O'Shea, Moody's lead retail analyst.

It's not something every retailer can do. Ken Perkins, president of research firm Retail Metrics, believes that only big-box retailers could convert stores into fulfillment centers because of the sheer size needed.

Analysts are keeping an eye on retailers saddled with heavy debt loads because of leveraged buyouts. Among those on Moody's watch list are Nine West Holdings, J. Crew and Bon-Ton Stores Inc. The Wall Street Journal, citing people familiar with the matter, reported Friday that Bon-Ton is continuing discussions with its debt holders as it gets ready for a likely bankruptcy as soon as February.

Business on 01/13/2018

Print Headline: Season's retail gains best in years

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