Disappointing Holiday Sales May Spell Deep Discounts

Morning Business Memo

Are you heading back to the mall with post-Christmas returns?

The holiday shopping season was disappointing for many retailers, and that could mean deeper than expected discounts at some stores. Retail industry analyst Marshal Cohen says merchants are stuck with inventory they need to clear out. "They've got new merchandise coming in right behind it and they recognize that it's really now about recouping what sales they've lost and the lack of excitement. So look for the sales to carry through for most of January but not much further than that."

A new report from Mastercard Advisors Spending Pulse says holiday sales grew by just 0.7 percent in the eight weeks from the end of October through Christmas, the smallest gain since 2008. Earlier forecasts looked for a 3 or 4 percent gain. Sales declined in much of the Northeast and Mid Atlantic states after devastation from Superstorm Sandy.

Another drag appears to be falling consumer confidence because of expected fiscal cliff tax hikes. A recent University of Michigan index showed confidence at a five-month low. The International Council of Shopping Centers today is expected to issue new forecasts for December and holiday sales.

Today offers another chance for retailers. Last year, analysts say shoppers spent more than $7 billion on the day after Christmas. The bargains have become a post-holiday tradition as gift returns are made by shoppers still in a spending mode.

Richard Davies Business Correspondent ABC NEWS Radio ABCNews.com twitter.com/daviesabc

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