- The Washington Times - Friday, February 8, 2008

Cash-strapped consumers used the gift cards they got in December to buy essentials such as gasoline and groceries instead of new clothes and electronics in the new year, handing the nation’s retailers their worst January in more than three decades.

Last month’s meager increase in sales was the worst January sales rise since retailers started keeping records in 1970, according to the International Council of Shopping Centers’ (ICSC) tally of 43 retailers released yesterday. The New York trade group found that January sales at stores open at least a year, an important retail indicator, rose just 0.5 percent compared with the year before.

Retailers such as Macy’s Inc., Nordstrom Inc., Kohl’s Inc. and Target Corp. reported a drop in sales, while Wal-Mart Stores Inc. reported a small increase that missed expectations.

Luxury retailers and department stores were hardest hit. Drug stores and discounters such as Costco were the only categories to show a significant gain, signaling that shoppers were hunting for bargains.

Many retailers blamed the poor economy for the losses.

Wal-Mart, the world’s largest retailer, said in a conference call that sales at its stores rose a slight 0.5 percent last month as gift-card redemptions fell below expectations.

“Customers appear to be holding gift cards longer and sometimes using them more often for food and consumables,” the retailer said.

Just half of last year’s holiday gift cards have been spent, according to a survey by TNS Retail Forward, a Columbus, Ohio, retail-research group. Some gift cards, particularly those tied to specific stores, haven’t been used at all.

“Retailers see that shoppers are holding onto the gift cards longer this year and some are planning to spend some of their value for Valentine’s Day,” said Ayuna Kidder, a TNS economist.

Gift cards, which aren’t counted in retailers’ books until they’re cashed in, typically give January sales a significant lift. Shoppers usually return to the malls that month to use their cards and take advantage of post-holiday sales.

Gift-card popularity has spiked in recent years as retailers have gussied-up cards with decorations and consumers have come to regard them as acceptable presents. Shoppers spent a record $26.3 billion on gift cards last holiday season, according to the National Retail Federation (NRF), a Washington trade group.

Tempering yesterday’s discouraging results is the fact that January is typically the worst month for retail sales anyway, followed by February, according to the ICSC.

Still, the disappointing figures could fan fears of recession since consumer spending, including spending on services, constitutes about two-thirds of the American economy.

Retailers said the results are additional evidence the economy needs the economic-stimulus package that Congress is expected to send to President Bush today.

“It’s not a big shock that consumer spending activity is a little bit on the weaker side,” said Scott Krugman, spokesman for the NRF. “It highlights the importance of passing that stimulus package sooner rather than later.”

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