Retailers report surprisingly weak Dec.

NEW YORK (AP) - Retailers sealed their strongest holiday sales increase since 2006, as a robust November more than offset spending that tapered off in December.

For investors, whose expectations were riding high, the December figures were disappointing. But retail revenue still rose significantly.

Combining November and December, holiday revenue at stores open at least a year rose 3.8 percent over last year, according to an index compiled by the International Council of Shopping Centers. That's the biggest increase since 2006, when the same figure rose 4.4 percent.

The index tailed off to a 3.1 percent increase in December after a 5.4 percent rise in November.

A blizzard took a bite out of sales in the week after Christmas. Early holiday discounts, which started in October, had shoppers finishing more of their shopping before the December rush.

"The overall season was good, but the strength came from the beginning of the season," said Michael P. Niemira, chief economist at International Council of Shopping Centers. "This is kind of a wake-up call. It's back to reality. (December reports) show that consumers are pretty frugal, and sales are uneven."

As merchants reported their figures Thursday, many retailers including Target Corp., Costco Wholesale Corp. and Cincinnati-based Macy's Inc. reported gains below Wall Street expectations. Bon-Ton Stores Inc.'s sales were virtually flat and company officials blamed the severe snowstorms.

Among the winners was Abercrombie & Fitch Co., based in New Albany, Ohio, which saw robust gains that beat Wall Street estimates.

The figures are based on revenue at stores opened at least a year and are considered a key indicator of a retailer's health.

The disappointing December figures were surprising given earlier data from MasterCard Advisors' SpendingPulse and anecdotal evidence that pointed to a strong December.

The holiday 2010 had very few nail-biting moments — aggressive discounting on holiday goods as early as late October brought in consumers, giving stores better than expected sales for November. Based on reports from malls, shoppers bought more than expected and threw in more items for themselves.

Strong online sales, which some retailers don't include in their monthly figures, brighten the spending picture as well. Americans spent 13 percent more online this holiday season, ringing up a record $30.81 billion in online sales, according to comScore, an Internet research firm.

Still, December figures that disappointed investors underscore the challenges retailers face in getting shoppers back in the malls in the coming months when there's no reason to buy.

Among the retailers who disappointed investors was Target Corp. Its 0.9 percent increase in revenue at stores open at least a year fell well short of analysts' 4 percent estimate. Its shares fell $ 3.81, or 6.5 percent, to $55.13.

Sales for key gift categories were pulled forward into November, Target Chairman and CEO Gregg Steinhafel said in a statement, and merchandise with lower profit margins made up a higher portion of sales than expected.

Gap Inc. suffered a surprise 3 percent drop in December. Analysts had expected a 2.6 percent increase.

Among department stores, Macy's revenue at stores opened at least a year rose 3.9 percent, below the 4.5 percent estimate. But the combined November and December figure rose 4.6 percent. The company is sticking to its profit outlook for the fourth quarter.

J.C. Penney Co. posted a 3.7 percent increase, helped by strong sales of fine jewelry and women's accessories. Analysts had expected a 3.3 percent gain. Bon-Ton said its revenue at stores opened at least a year rose 0.1 percent. The company said that the Northeast blizzard shaved off between 1.5 and 2 percentage points.

"After a strong start to the holiday season in November, sales and traffic trends for our brands were less consistent in December," Sabrina Simmons, chief financial officer of Gap, said in a statement.