Buyers try to play gift cards right

Judy Cody of St. Paul took to the snowy streets at 7:15 a.m. for the day-after Christmas sales. In quick succession, she hit Kohl's, Herberger's and Macy's and planned to stop by closeout retailer Tuesday Morning before calling it a day.

"I'm returning, exchanging and spending gift cards from last year even," said Cody, as she made her way through Rosedale Center in Roseville with bags of goodies for herself and family.

Retailers trying to squeeze as much out of a lackluster holiday season as possible rang in the post-Christmas season on Wednesday by throwing open their doors early and slashing prices, just as they've been doing for weeks.

The outlook isn't promising. Anxious consumers appear worried about paying more for fuel and food just as home values are falling and credit is drying up.

MasterCard Spending Pulse reported Wednesday that retail sales grew 3.6 percent between the day after Thanksgiving and Christmas Eve compared with last year, at the low end of its expected range. And news that December's sales at Target Corp. likely will fall well below expectations sent its stock tumbling on Wednesday when trading resumed.

The shopping season's savior could come in the form of gift cards.

"Gift cards are center stage," said Britt Beemer of America's Research Group. "Returns have been driven down to nearly zero because of them."

Nearly 60 percent of Americans planned to buy gift cards this year, according to the National Retail Federation, with sales estimated to top $26.3 billion. That's up from $24.8 billion last year and $18.5 billion in 2005.

Retailer's don't get to count gift cards as sales until consumers actually redeem them, an accounting issue that has extended the holiday shopping season into January. Because gift-card redemptions typically peak in the first week after Christmas, struggling retail chains may have one last shot at pulling off modest gains, said Michael McNamara, vice president of Research and Analysis for MasterCard Advisors.

"This post-season period has been increasing in importance in terms of overall sales for the last couple of years," said McNamara, whose Spending Pulse reports track national data on all payment forms, including cash and checks. "So the story might not be completely done yet."

With much of Minnesota getting a fresh coating of snow Christmas Day and into Wednesday, mall traffic was slow to pick up speed. But as the day wore on, several Twin Cities malls reported healthy traffic as shoppers dug out of as much as 6 inches of snow in Mankato and Lakeville and more than 4 inches in Minneapolis and St. Paul.

At the Mall of America in Bloomington, which recorded about 5 inches of snow, spokeswoman Anna Lewicki Long said sales were slow when the mall opened at 8 a.m., but picked up considerably by early morning.

This year's holiday retail season has been erratic. Strong sales the week after Thanksgiving came nearly to a screeching halt as floods, ice storms and snow socked different part of the country in the middle part of the holiday shopping season.

Procrastinators flooded to the malls last week helping to lift sales by 2.8 percent, the highest weekly gain in December, the International Council of Shopping Centers reported Wednesday.

"The chips weren't really lined up for a blockbuster year for overall spending," said McNamara of MasterCard Advisors.

Gift-card fever

But on Wednesday, gift-card shoppers were out in full force.

Anthony Villalobos was one of them. The 11-year-old from St. Paul couldn't take his eyes off of the "Smack Down vs. Raw" wrestling video game. He'd gotten a Nintendo Wii for Christmas and was at Target with his dad to make use of $70 in cash and gift certificates.

Cahlor Stedman, 15, of Shoreview, showed up at Best Buy in Roseville at 7:30 a.m. with three Best Buy gift cards burning a hole in his wallet. He was on the hunt for games and accessories to go with his new PlayStation 3.

Best Buy spokesman Brian Lucas said the retailer was focused on helping shoppers like Stedman find the extras to go along with holiday gifts.

"If they got an iPod, maybe they want to get a case and headphones to go with it," he said. "Movies, music and games are big categories for us today. We've put them front and center."

Electronics remained a hot spot for the season. Yahoo! Shopping reported Wednesday that Nintendo Wii emerged as the most sought-after product, while the Apple iPhone remained a staple on shoppers' lists.

Despite bargains that began earlier than ever this year, deals of 70 percent and more abounded on Wednesday.

Herberger's offered an extra $10 off a $10 or more item, a deal Suzanne Wettschreck, 57, of Andover used to buy a bright blue bathrobe, once priced at $50, for $12.

But since being forced into early retirement in March after nearly 30 years at Securian Financial Group, Wettschreck joined millions of other Americans who cut back on her shopping this year.

"Now I'm just bargain hunting, looking for good deals for my grandchildren" she said. "With a fixed income, you gotta live on what you got."