Holiday sales reach 6-year high, new report finds

BERKELEY, Calif. (KGO) -- The Fourth Street promenade in Berkeley was packed with shoppers Wednesday evening, the day after Christmas.

"We are still working. Always work after you retire. So much more fun to have money," says Cathy Leestma, with a laugh. She is among the many shoppers who spent more on gifts this holiday season.

RELATED: What you need to know about returning unwanted holiday gifts

And the numbers prove it. A new report published on Wednesday by Mastercard shows an increase in holiday spending, up by more than five percent. That's the strongest in six years, sales totaling $850 billion.

Giovanni Compiani, with the Haas School of Business, says consumer confidence is up, despite the government shutdown and a jittery stock market. He believes the new tax cuts boosted consumer spending.

"Consumers look forward, and plan (ahead) multiple months or even multiple years," says Compiani. "People anticipate having more money in the future as well." Which means they will spend more.

RELATED: Post-Christmas sales bring out shoppers in Bay Area

Many retailers benefited from strong holidays sales like, Rabat, a specialty store that sells high-end shoes and accessories in Berkeley. But with online competition for digital dollars, strong sales doesn't always mean strong profits.

"If even if our vendors are going on sale before Christmas, we have to price match. So for us, we have to do more homework," says Moody.

Competitive pricing may have brought in shoppers, but early discounts also means they lose profit.

RELATED: Got an unwanted gift card? Here's how to turn it into cash

"We met our numbers, but we met our numbers by losing in margin," says Moody.

The one thing missing from this new report is people returning gifts. Professor Compiani says with the easy return policy of many online stores may end up skewing numbers.

For example, someone may buy 3 pairs of shoes in different colors, pick one, and then return the others. So he says won't be until end of January when we have a better understanding of holiday sales.