U.S. retailers should post another month of strong sales gains for December, capping their best holiday season since 2007, amid doubts that shoppers will keep spending as enthusiastically in the new year.

Wall Street analysts expect top U.S. chains to report that sales at stores open at least a year, or same-store sales, rose 3.3 percent in December.

That would come on top of a 2.9 percent jump a year earlier, when the economic recovery started taking hold, but slower than the 6 percent increase reported for November.

Shoppers turned out in greater numbers this year, buoyed in part by pent-up demand after two seasons of frugality and a general sense that the economy is finally improving.

Still, Wall Street is fretting that shoppers will put their wallets away for a while, now that Christmas is over.

People have tended to shop during the times they need to, like holidays or back to school, said Nomura analyst Paul Lejuez. During off periods, they haven't been coming out.

Deeming the holidays a success will hinge on whether department stores, teen apparel chains and others were able to lure shoppers without going overboard with promotions.

A good December might not mean a great January, February, March, Lejuez said.

Chains such as Target Corp, TJX Cos Inc, J.C. Penney Co Inc and Abercrombie & Fitch Co will report sales numbers on Wednesday and Thursday.

Analysts are watching this week's reports for changes to sales and profit forecasts. They want to know whether the December sales gains were bought with profit-eroding price slashing, in which case retailers might hold off on raising their own profit forecasts even if sales are up.

So far, though, most analysts say the season's discounting was not out of line.

Last week's massive blizzard that dumped as much as three feet of snow on parts of the U.S. Northeast likely put a small dent in December sales. Research firm ShopperTrak has estimated that $1 billion in retail sales may have been postponed due to the storm. International Council of Shopping Centers chief economist Michael Niemira told Reuters the snowstorm could lower the December sales growth rate by 0.5 percentage point, though some purchases may show up in January.

February's Valentine's Day is important for specialty retailers such as jeweler Tiffany & Co, but retailers have to wait until Easter, in late April, for the next major shopping occasion.

The spending recovery helped the S&P Retail Index rise 23.4 percent in 2010, compared to the broader S&P 500's increase of 11.7 percent. However, the index has stalled since early December on fears the rally has run out of steam.

(For a graphic comparing same-store sales and the S&P Retail Index please see: http://r.reuters.com/teb54r )

WINNERS & LOSERS

December's biggest winners are expected to include department stores such as Macy's Inc, J.C. Penney and Kohl's Corp as enough shoppers are on sounder financial footing for them to trade back up to those chains from off-price retailers.

Department stores have also won shoppers away from specialty clothing stores by ramping up their exclusive lines.

At the same time, with unemployment still near 10 percent, discounters still draw shoppers and should report some of the biggest gains, aided all the more by their forays into fresh food and, in Target's case, a push into consumer electronics that has damaged Best Buy.

Deutsche Bank analyst Bill Dreher named Kohl's, upscale department store Nordstrom Inc and Target among his top stock picks.

Still, whether Target can keep its streak in electronics is tough to determine given its aggressive pricing and deeper inventory, said Janney Capital Markets analyst David Strasser.

Target and other retailers that cater to a lower-income group, including off-price retailer Ross Stores, may struggle later this year if gas prices keep rising, said Richard Hastings, a consumer strategist at Global Hunter Strategies.

Ross and TJX Cos, parent of the T.J. Maxx and Marshalls chains, sell brand name merchandise, much of it excess inventory returned from department stores, at steep discounts. In December 2009 TJX was a standout with a 14 percent jump in same-store sales. For December 2010, analysts predict a 2.8 percent decrease.

December was also a big test for teen retailers, particularly Aeropostale, which reported weak November sales and, according to the New York Post, has hired a strategic advisor to fend off any unwanted advances by buyout firms.

Analysts expect Abercrombie & Fitch to report a same-store sales increase of 9.3 percent, aided by higher prices and more modest promotions than its peers.

In contrast, Aeropostale and American Eagle Outfitters slashed prices on many items throughout the holiday season and are expected to report only modest same-store sales declines for December.

(Reporting by Phil Wahba; Editing by Phil Berlowitz)

Retail