December should bring some cheer to US retail sales

By Brad Dorfman - Analysis

CHICAGO (Reuters) - December is likely to be a bit more cheerful for U.S. retailers and their stocks as lower gasoline prices, a shorter holiday shopping season and pent-up demand help sales, despite the recession.

Many U.S. retailers reported sharply lower November sales results for stores open at least a year on Thursday , but the steep declines prompted some investors to bet the sector had hit rock bottom.

"There's no question there's some pent-up demand," Stifel Nicolaus retail analyst Richard Jaffe said, noting that, during the past three months, consumers had saved and paid off credit cards instead of spending.

But while December sales might look better when compared with November, 2009 is likely to be another tough year for the consumer, analysts said. That means investors pouring money into retail stocks that seem cheap should tread carefully.

"People are starting to feel better about things, but my question is, what has changed for consumers?" said Patricia Edwards, a retail consultant at Storehouse Partners.

Home values have fallen, credit has tightened and more people are losing jobs, Edwards noted.

Retailers may be helped somewhat by falling gasoline prices and more consumers are likely to shop for the holidays in December because Black Friday, the traditional kickoff to the holiday shopping season, fell later this year.

"We could see a little rally here because (the retail environment) is going to feel better, but I don't think it is going to be better until at least the middle of (next) year," Edwards added.