NEW YORK CITY-Lehman Bros. retail analyst Robert Drbul predicts a 3% increase in holiday sales this year, a figure that is 1.5% less than the National Retail Federation’s projection. The firm is also lowering its same-store sales estimate for department stores this month to a 1.4% year-over-year increase from 3%. Most retailers will release their November sales data Thursday.

If Lehman’s holiday sales estimates hold true, the 3% jump would be below retailers’ 5.2% spurt last year. Chain stores will have a harder time measuring up to their performances in 2003 because of increased fuel costs and a weak labor market, says a report issued by the firm. Last year was helped by favorable income growth and low interest rates.

One thing retailers have going for them is more shopping days, 29 this year compared to 27 in 2003, Drbul notes. More than one-third of holiday sales will occur during the week before Christmas, his report says. However, Christmas falling on a Saturday could hurt the companies because they will have one less weekend selling day.

The report says Lehman is “enthusiastic about Target’s differentiated merchandising initiatives for the holiday season, including a broad assortment of décor items, toys, electronics, entertainment and food.” It is also noted that Target has the capability to double its US store count, which is currently at 1,313 units.

Lehman’s team traveled to various stores over the holiday weekend and reported that Sears, Target and Wal-Mart were all crowded with customers. The team also noted that wholesale clubs such as Costco and BJ’s, which have both posted favorable monthly same-store sales results were not as full.

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