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Weak December sales blamed on bad weather

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POSTED: Thursday, January 6, 2011 - 6:50pm

UPDATED: Friday, January 7, 2011 - 10:23am

December wasn't the month retailers had banked on, but overall, holiday sales were up compared to last year.

Retailers reported a robust start to the holiday shopping season, but high unemployment and the fragile economy still had many consumers reining in their wallets.

Holiday sales soared 3.8 percent from 2009, the jolliest increase in four years.

The trend to spend started 50 days before Christmas with shoppers shelling out more for gifts than expected, including buying more luxury goods.

"If you look at the market right now you are seeing sort of a bifurcation in that the luxury or the more affluent consumer has come back in force but on the lower end we actually still see some resistance," says Sterne Agee analyst Kenneth Stumphauzer.

It created a mixed bag for some retailers.

Target, Gap and Macys all reported a drop in December.

That along with a blizzard in the Northeast made for a frugal finish.

"I think the numbers overall prove to be a little bit disappointing. It turned out that mall traffic in the month of December was down three percent and retailers across the board, with maybe Abercrombie being the exception, actually saw declines in traffic at their stores," says UBS analyst Roxanne Meyer.

Analysts say even though consumers showed a boost in confidence this past holiday season, retailers are bracing for a slower start to the spending year.

"The first quarter of last year was very strong and I think there was pent up demand in first quarter of last year now we're in more of a normal spending trend and I think that we could see sales soften quite significantly in the first quarter so that's one reason to be cautious on these names particularly in light of these very disappointing December results," says retail analyst Liz Dunn.

Experts say the key to boosting consumer confidence and spending this year will be creating more jobs and lowering unemployment.

Those all important job numbers are due out Friday.

A drop in the number of people filing for jobless benefits is expected.

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