Holiday Gift Cards Could Still Boost January Retail Sales

January retail sales could still get a boost from unused holiday gift cards, according to Merrill Lynch Economist David Rosenberg.

Shoppers in search of quick and easy gifts snapped up $27.8 billion of the cards in November and December, according to a survey released on Tuesday by the National Retail Federation.

That figure outpaced the $24.8 billion in spending on gift cards that the trade group had initially estimated.

The stronger-than-expected gift card sales could be welcome news to U.S. retailers which posted disappointed December sales, hurt by unseasonably warm weather and procrastinating
shoppers demanding deep discounts.

Those retailers are now trying to entice shoppers to come back to their stores to redeem their gift cards in January.

Retailers, which can only book revenue after the cards are used, count on customers spending more than the value of the card once they walk through their doors.

According to the trade group's survey, which was conducted by BIGresearch, shoppers said they had spent less than half of the value of their gift cards by the second week in January.

The "January gift card story (is) coming to fruition," Rosenberg said, in a research report.

Notably, almost 51% of shoppers who had redeemed holiday gift cards said they spent additional money beyond the value of the cards.

"January and February tend to be slow months for shopping, so retailers will be doing everything possible to bring customers into the stores to spend holiday gift cards," said Tracy Mullin, president and chief executive of the trade group, in a statement.

Two recent studies showed evidence that retail sales are strong.

The International Council of Shopping Centers survey reported sales rose 4.8% year-over-year, while Redbook announced sales of 2.8%.

The results from ICSC outpaced the 3.0% gain that was expected, Rosenberg said.

"The gift-card boom is likely part of the reason for the good sales results - gift cards were up over 30% in December and recent survey data suggest that 40% of gift cards are redeemed in January," Rosenberg said.