Retailers shore up holiday profits on thin inventories

New York City Monday’s news that holiday spending rose 3.6% over last year has been followed by more positive tidings -- but more for retailers than their customers.

According to a Tuesday report by the Associated Press, retail profits will get a boost from inventories so low that merchants have had to restock shelves, a rare move this soon after Christmas.

While that’s good news for retail bottom lines, it means slim pickings for shoppers hoping for after-Christmas clearance sales.

"Retailers are much more nimble this year," NPD analyst Marshal Cohen told AP. Cohen said he noticed J. Crew and Coach were two that had restocked shelves with new items last week.

Because their ordering was in line with weak demand, retailers were able to sell more items at higher prices, which is critical to profits. Last year, profits were hammered by fire-sale discounts to get rid of excess merchandise.

"The latest holiday shopping season wasn't a rip-roaring success, but at least it met or slightly exceeded expectations," said John Lonski, chief economist of Moody's Capital Markets Research Group. "Consumer spending is indeed in a recovery mode, which brightens prospects for 2010."

Spending rose 3.6% from Nov. 1 through Dec. 24, compared with the same period last year, according to MasterCard Advisors' SpendingPulse, which estimates all forms of payment including cash. Adjusted for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1.0% rise. That was still better than the flat sales analysts had predicted.

After-Christmas traffic also appears to be relatively robust, though it isn’t yet clear how much people are actually spending.

A better picture of how retailers fared during the holiday will be known Jan. 7, when many report December sales.