NEW YORK (CNNfn) - It's not clear whether American shoppers will be in a serious spending mood this holiday season, but they'll be opening up their wallets more than last year, experts say.
Last year's holiday retail sales were a miserable disappointment to store owners who had expected a great season. When shoppers stayed home after Thanksgiving, stores were forced to slash prices in order to dump huge inventories. Profits plummeted.
But this year, the economy is cooperating. Investors are making money in the bull market, and inflation remains almost nonexistent. Consumer confidence is at a 28-year high, while unemployment is at a 24-year low. Tax law changes could spawn even more spending.
"For the majority of shoppers, times are as good as you're going to expect," said Bernard Sosnick, an analyst with Genesis Merchant Group Securities. "I think there's going to be a degree of celebratory spending."
The warm weather produced flat sales in September and the beginning of October, but the numbers should improve as the temperatures get colder, said Steve Kernkraut, a retail analyst with Bear Stearns.
"Most stores are filled with polar fleece and sweaters, but in 85-degree heat when people are wearing shorts, it's hard to sell those items," Kernkraut said.
Part of the reason for last year's slump was that the economy -- and consumer confidence - weren't nearly as strong, Kernkraut said.
Same store sales, which compare the increase over the previous year, rose a scant 2.5 to 3 percent in 1996, said Kurt Barnard, president of Barnard Retail Trend Report. He's predicting the figure will be 3.5 to 4 percent this year.
Barnard is less optimistic that Americans will be in a mood to shop, but he doesn't think the season will end so dismally as in 1996.
"Consumers still aren't in a spending mood," Barnard said. "This year is going to be modestly better. The emphasis is on the word 'modest.' "
Barnard thinks people will be putting their money in discount stores rather than luxury merchandise. The net result won't be a huge windfall because consumer income has remained flat, he said. He thinks stores such as T.J. Maxx, Marshall's, Wal-Mart, and Sears will have a much better season.
"They feel they no longer need to go broke when they go shopping," Barnard said. Stores have less inventory this year, so they won't be forced to have early season sales.
But Sears has had its share of troubles recently. The company's stock dropped 11 percent this week after it warned it wouldn't meet fourth-quarter profits because of uncollected credit-card debts.
Sosnick doesn't think Sears' credit card problems will affect overall holiday sales because it doesn't represent a majority of shoppers. But it doesn't bode well for Sears and banks that offered consumers sweet credit card deals in the past several years, he said.
"Here we're dealing with a minority of shoppers who are in distress, overextended with credit and facing bankruptcy," Sosnick said.
-- Martine Costello