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Imagine a nation without the Postal Service.

No more birthday cards and bills or magazines and catalogs filling the mailbox. It’s a worst-case scenario being painted for an organization that lost $8.5 billion in 2010 and seems headed deeper into the red this year.

“A lot of people would miss it,” says Tony Conway, a 34-year post office veteran who now heads the Alliance of Nonprofit Mailers.

Businesses, too.

The letter carrier or clerk is the face of the mail. But hanging in the balance is a $1.1 trillion mailing industry that employs more than 8 million people in direct mail, periodicals, catalogs, financial services, charities and other businesses that depend on the post office.

Who would carry mail to the Hualapai Indian Reservation in the Grand Canyon? To islands off the coast of Maine? To rural villages in Alaska? Only the post office goes to those places and thousands of others in the United States, and all for 44 cents. And it’s older than the United States itself.

Ernest Burkes Sr. says his bills, magazines and diabetes medication are mailed to his home in Canton, in northeast Ohio, and he frequently visits the post office down the street to send first-class mail, mostly documents for the tax service he runs. As his business increased over the past three decades, so has the load of mail he sends, and it’s still pretty steady.

“I don’t know what I’d do if they’d close down the post offices,” said Burkes, who doesn’t use rival delivery services such as UPS or FedEx. “They need to help them, just like they helped some of these other places, automobiles and others.”

Postmaster General Patrick Donahoe is struggling to keep his money-losing organization afloat as more and more people are ditching mail in favor of the Internet, causing the lucrative first-class mail flow to plummet.

Donahoe has a plan to turn things around, if he can get the attention of Congress and pass a series of hurdles, including union concerns.

“The Postal Service is not going out of business,” postal spokesman David Partenheimer said. “We will continue to deliver the mail as we have for more than 200 years. The postmaster general has developed a plan that will return the Postal Service to financial stability. We continue to do what we can on our own to achieve this plan and we need Congress to do its part to get us there.”

He acknowledged that if Congress doesn’t act, the post office could reach a point next summer where it doesn’t have the money to keep operating.

That wouldn’t sit well with Mimi Raskin, a wine and antiques store owner in Grants Pass, Ore., who likes her birthday card mailed. “If you get a birthday card on the Internet, it’s like, well, I didn’t care about you enough to go to a store, buy a card that suited your personality, and mail it,” she said.

Donahoe and his predecessor, John Potter, have warned for years of the problems and stressed that the post office will be unable to make a mandated $5.5 billion payment due Sept. 30 to a fund for future medical benefits for retirees.

A 90-day delay on the payment has been suggested, but postal officials and others in the industry say a long-term solution is needed.

Donahoe has one. It includes laying off staff beyond the 110,000 cut in the past four years, closing as many as 3,700 offices, eliminating Saturday delivery and switching from the federal retirement plan to one of its own.

Cliff Guffey, president of the American Postal Workers Union, called the proposal “outrageous, illegal and despicable.”

A contract signed in March protects many workers from layoffs. Guffey said the attempt to change that now “is in utter disregard for the legal requirement to bargain with the APWU in good faith.” Other unions, including the National Association of Letter Carriers, are negotiating their contracts with the post office.

Yet Donahoe’s efforts are drawing praise from people such as Conway, the head of the nonprofit mailers, who says these are necessary steps that officials have shied away from in the past.

Several bills proposing ways to fix the agency are circulating in Congress. One, by Rep. Darrell Issa, R-Calif., would impose a control board to make the tough decisions.

When it was first introduced, the bill was perceived as “way out there,” Conway said. But as the postal financial problems have become more obvious, “you’re seeing people thinking maybe it isn’t that extreme.”

Gene Del Polito, of the trade group American Association for Postal Commerce, said now that Donahoe has offered a plan, “why not give him the authority do to do what needs to be done.” If that fails, then a control board could be instituted, he said.

Closing offices seems an easy way to save, but members of Congress never want cuts in their districts, and while the public may mail less, people still want their local office to stay open.

The changes that Donahoe are proposing would mean a different post office, but one that still operates for people such as Jovita Camesa, who’s 75 and lives in a downtown Los Angeles retirement complex. She said she’s sending more first-class mail than ever due to her expanding circle of grandchildren.

Camesa said she wouldn’t think to use the Internet for those birthday and holiday greetings, or start going online to seek out the articles she now reads in the issues of Vogue, Readers Digest, Prevention and other magazines that are delivered to her. “I’m not interested in the Internet or computers,” she said. “I’m very traditional.”

Ellen Levine, editorial director of Hearst Magazines, told a Senate hearing that the Internet has not eliminated the need for mail delivery of magazines.

“Nearly all publishers use the United States Postal Service to deliver their magazines to subscribers,” she said. “While most consumer titles are also available on newsstands, mail subscriptions will remain the major component of hard-copy magazine circulation in the United States for the foreseeable future.” Overall, Levine said subscriptions account for about 90 percent of magazine circulation.

Olive Ayhens, an artist who lives in Brooklyn, N.Y., says she pays her bills online but still uses first-class mail. She was mailing announcements of her newest gallery opening; one was going to her son in London.

“Less than a dollar, I’m sending to London,” she said during a stop at the James A. Farley Post Office in Manhattan.

The internet, along with the advent of online bill paying, has contributed to a sharp decline in mail handled by the post office, from 207 billion in 2001 to 171 billion last year. Although the price of stamps has increased from 34 cents to 44 cents over the same period, it is not enough to cover the post office’s bills, in part because of higher labor costs.

Yet one of the biggest problems isn’t mail flow or labor or other costs. Rather, it’s a requirement imposed by Congress five years ago that the post office set aside $55 billion in an account to cover future medical costs for retirees. The idea was to put $5.5 billion a year into the account for 10 years. That’s $5.5 billion the post office doesn’t have.

No other government agency is required to make such a payment for future medical benefits, so why not drop it for the post office.

Like everything in Washington, it’s not that simple.

The Postal Service is not included in the federal budget, but the Treasury Department account that receives that payment is.

That means that when the post office deposits that money, it counts as income in the federal budget. So, if it doesn’t make the payment, the federal budget deficit appears $5.5 billion bigger, something few members of Congress are likely to favor.

In announcing his bill, Issa warned of a need to avoid a “bailout” of the post office, which does not receive taxpayer money for its operations.

Others, however, have characterized the $5.5 billion payments as a post office bailout of the federal budget because it makes the deficit appear smaller.

“We have made that argument,” said Del Polito. But it has been rejected with the argument that the payments are required by law and ending them requires a change in the law.

That problem of appearing to increase the federal deficit creates a reluctance to deal with the matter directly, Del Polito said.

So where does that leave the post office and those Americans who don’t have access to the internet?

Sen. Joe Lieberman, I-Conn., suggested more people start sending passionate letters as a way to save the agency.

As good an idea as love missives may be, they are unlikely to be enough.

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Associated Press writers Jeff Barnard in Grants Pass, Ore.; Deepti Hajela in New York; Bob Johnson in Montgomery, Ala.; Kantele Franko in Columbus, Ohio; and Jacob Adelman in Los Angeles contributed to this report.

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AIG, one of the largest global insurance companies, reported earnings of $1.8 billion in the second quarter, reversing a loss of $2.7 billion a year ago.

American International Group Inc.’s equity stake in insurance company AIA, which went public in Hong Kong in October, produced income of $1.5 billion. Its income from both property casualty and life insurance were slightly lower than last year. AIG’s earnings in the second quarter last year were wiped out by a $3.3 billion goodwill impairment charge for discontinued operations.

AIG reported earnings per share of $1 per share. Operating income of 69 cents per share was below the 94 cents that analysts were expecting.

In January, the insurance firm laid the groundwork to start repaying the American taxpayer the $182 billion in bailout money received during the financial crisis. AIG paid back a portion of the government’s loans and renegotiated the rest of the package which led to the government owning a 92 percent stake in AIG.

The U.S. government is closely monitoring AIG’s performance, because American taxpayers’ investment is at stake. The government plans to sell its shares over the next two years. On May 27, the government sold 200 million shares, reducing its stake in AIG to 77 percent.

“Our continued improving operating results should provide a catalyst for the U.S. Treasury to sell its shares at a profit for the taxpayers,” said AIG CEO Robert Benmosche.

AIG’s property and casualty business reported operating income of $789 million, compared to operating income of $955 million in the second quarter of 2010. The business had $539 million in catastrophe losses related to tornadoes in the Midwest, Southeastern and Northeastern regions of the United States, and also an earthquake in New Zealand in June.

The life insurance division, SunAmerica, reported income of $743 million, compared to $858 million in the second quarter of 2010. Its earnings fell due to reduced income from investments. However, its premiums and deposits were up 23.7 percent to $6.1 billion from last year.

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Some 120 foreign activists were being held in Israeli jails Saturday, awaiting possible deportation, after arriving at Tel Aviv’s airport over the weekend as part of a solidarity mission with the Palestinians, a government official said.

Others who managed to get through Israeli border controls traveled to the West Bank where some joined a demonstration against Israel’s separation barrier. Associated Press Television footage showed some foreign activists, along with Palestinians, cutting through the barrier’s barbed wire fence with clippers. Another protester started a small brush fire.

The Israeli military said about 150 protesters gathered near the barrier just north of Jerusalem. Some threw rocks at soldiers who fired tear gas to disperse them, the army said. There were no reports of serious injuries.

One of the activists, Michael Berg, 36, from St. Louis, said he attended the protest but was not involved in vandalism. Organizers said a small number of the foreigners who participated in cutting the fence were among those who had flown in on the solidarity mission, while others had arrived in the West Bank previously.

The Palestinians oppose the barrier as a land grab because it frequently juts into the West Bank, swallowing up Palestinian farmland and properties. Israel says the structure, built in response to a wave of suicide bombings a decade ago, is a security measure.

Israel had previously expressed concern about the “fly-in,” saying it feared some of those trying to reach the West Bank would engage in violence.

Initially, some 600 foreign activists planned to fly to Tel Aviv over the weekend for what they said would be a peaceful weeklong mission in the West Bank. Israel controls all access to the West Bank, and those trying to reach it have to enter through Israeli-held crossings.

Israel took a series of measures to try to avert the mass arrival and weed out those it considered troublemakers. Israeli authorities, using information gathered on Facebook, Twitter and other websites, compiled a blacklist with more than 300 names and asked foreign airlines to block those on the list from boarding Tel Aviv-bound flights. Hundreds more landed at Tel Aviv’s airport over the weekend, and more than 400 were questioned by police, said Interior Ministry spokeswoman Sabine Haddad personal business card.

Of those, 130 were detained and six sent home immediately, she said. Another four signed forms promising not to participate in violent activities and were granted entry to Israel, she said. Haddad said all those currently in detention were offered to be released if they signed the forms.

The remaining 120 were being held at two Israeli jails while they weighed their options, Haddad said. It was not clear when they would be deported.

Palestinian organizers of the “Welcome to Palestine” movement estimated that anywhere from 12 to 100 foreigners had managed to reach the West Bank through the fly-in, with others expected in the coming days. Some traveled in earlier in the week while others appeared to have concealed their intentions.

Berg said he was not questioned at the airport and speculated that was because he did not say he wanted to “visit Palestine” as others had done. “I am a Jew and what is happening here is wrong,” Berg told The Associated Press. “I don’t want what is happening in the West Bank to be done in my name,” he said.

Mustafa Barghouti, a Palestinian organizer of “Welcome to Palestine,” said the movement planned additional gatherings throughout the West Bank.

“Israel is stupid. They believe they will stop us,” he said. “We are in touch with foreign activists who will join us in coming days and weeks. We will continue throughout the summer.”

The activists are trying to draw attention to life in the West Bank under Israeli occupation, including travel restrictions. Israel controls all access to the territory, which it captured in the 1967 Mideast war and which the Palestinians hope to make part of an independent state, along with Gaza and east Jerusalem.

Israel has been jittery about the arrival of foreign activists since a deadly naval raid on an international flotilla that tried to break Israel’s blockade of the Gaza Strip last year. Recent anti-Israel protests, including deadly clashes along the frontiers with Lebanon and Syria, have added to those concerns.

At any given time, hundreds of foreigners, including activists and aid workers, are in the West Bank.

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A judge has ordered car dealership Moore Jaguar to turn over property and equipment to M&I Bank or risk seizure by the sheriff’s department.

The order means even the shiny silver Jaguar sign that fronts Manchester Road could be headed for the auction block.

Judge Steven Goldman signed a court order Tuesday that allows M&I Bank to seize customer lists and files, cash, artwork, trailers and motor vehicles from the Moore Jaguar dealership at 14116 Manchester Road in west St. Louis County.

M&I Bank alleges Moore Jaguar, Missouri’s only Jaguar dealership, is in default on a loan of nearly $5 million.

Michael Daming, an attorney representing Moore Jaguar, said he had not yet seen M&I’s recent court filing or the judge’s order and declined to comment on M&I’s allegations.

If the dealership does not turn over the property, the court order allows the bank to lock or disable the property and allows the sheriff of St. Louis County to “affix notice to the collateral, identifying it is the possession of M&I Bank.” The court order does not include the real estate where the dealership is located, which is owned by a separate legal entity led by Ron Moore.

Moore Jaguar and Ron Moore have been wrangling in the courts with lenders since the start of the year. The dealership stopped selling new vehicles earlier this year, but Daming said the dealership is selling and servicing both new and used Jaguars now.

Moore Jaguar filed for bankruptcy protection in January but consented to a dismissal of the bankruptcy in April. Steven Goldstein, an attorney representing Moore Jaguar in the bankruptcy, said in April that the dealership had reached agreements with all of its lenders, and Ron Moore was seeking to sell the dealership.

But M&I Bank’s court filings this week allege the $5 million it’s owed has not been repaid.

Bruce LeMoine, an attorney representing M&I, declined to comment on the case. Calls to Jaguar North America were not returned.

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Korean Air showed off its first Airbus A380, outfitted with a unique full business class upper deck, in a pair of special flights Thursday, a day before the launch of regular international service.

Korean Air Lines Co., South Korea’s largest airline, is the sixth global carrier to introduce the hulking aircraft and the first in Northeast Asia to take delivery. The plane is manufactured by Toulouse, France-based Airbus.

The jumbo passenger jet rolled down the runway at Incheon International Airport west of Seoul on Thursday in the first of two demonstration flights. It flew east across South Korea and out over the ocean, passing low near the Dokdo islets that lie in waters between South Korea and Japan before returning.

The two islets are claimed by both countries. Seoul, however, controls them and stations a contingent of police there. The territory is known as Takeshima in Japan.

Korean Air’s A380 begins international service Friday with roundtrip flights from Incheon to Japan’s Narita airport, near Tokyo, and then from Incheon to Hong Kong later the same day.

Air France, Germany’s Lufthansa, Dubai-based Emirates, Australia’s Qantas and Singapore Airlines also fly the A380.

Cho Yang-ho, Korean Air’s chairman and CEO, said that the introduction of the jet is part of the airline’s emphasis on service.

“This is another step to show our customers our comfortable and efficient airplanes,” Cho told The Associated Press on the day’s first flight, for journalists. A second demonstration flight for VIPs was also scheduled Thursday.

Cho emphasized the airline’s special configuration in which the upper deck is devoted solely to business class seats. Korean Air is so far the only airline to utilize the A380 in such a way.

Korean Air plans service to Bangkok beginning next month, to New York in August, to Paris in September and to Los Angeles in October, the airline said.

Keith Stonestreet, Airbus’ product marketing director for the A380, said that Korean Air’s launch of the plane helps his company promote market acceptance for it in Asia, which he called the “key market” for the future.

“We’re looking to the growth of the Asian airlines as being a core part of the business,” Stonestreet said. China Southern Airlines will be the next carrier in the region to take delivery later this year, with Malaysia Airlines System and Thai Airways International set for 2012, he added.

Korean Air has ordered a total of 10 A380s. The airline has also chosen to go with the fewest number of seats _ 407 _ of any airline flying the plane so far. Air France and Lufthansa have the most seats at present with 525 to 530, Stonestreet said.

Air Austral, which flies between Paris and La Reunion in the Indian Ocean, plans to take the A380 in an all economy configuration of 820 seats, he said.

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European Central Bank Governing Council member Jens Weidmann said the central bank may no longer be able to accept Greek sovereign debt as collateral in its refinancing operations if bond maturities are extended.

“A prolongation of Greek government bonds in an environment of prevailing strong doubts about the sustainability of public finances would make it impossible to accept them as collateral for refinancing operations under the existing rules,” Weidmann, who heads the Bundesbank, said at a conference in Hamburg today. “Consequently large parts of the Greek financial sector would be cut off from funding.”

Weidmann’s comments add to signs of a division between ECB policy makers and political leaders, who this week floated the idea of extending Greece’s debt repayment schedule as the nation struggles to meet the terms of last year’s 110 billion euro ($157 billion) rescue. Weidmann’s colleagues Lorenzo Bini-Smaghi and Juergen Stark have also ruled out any restructuring of Greek debt, saying it won’t solve the crisis.

Weidmann said such a move “would do nothing to improve other factors that determine the sustainability of the current debt level” such as economic growth prospects.

“In addition, the risks for contagion to other countries would significantly rise,” he said.

The euro dropped after the remarks, and traded at $1.4169 as of 5:15 p.m. in Frankfurt. It was at $1.4309 yesterday.

‘Insufficient Collateral’

“The ECB is clearly against this and trying to fight hard with almost everything it has to make sure the debate goes in the direction it wants to,” said Nick Kounis, chief European economist at ABN Amro NV in Amsterdam.

Proposals to extend debt maturities “seem to assume implicitly that the Eurosystem would provide financial means against insufficient collateral,” Weidmann said paydayloans. “But such a monetization of public debt cannot be tolerated.”

Fitch Ratings downgraded Greece’s credit rating to B+ from BB+ today and said a reprofiling of Greek debt would “trigger a credit event and default rating.”

The ECB last year suspended the minimum credit-rating threshold for Greek bonds after the country’s banks were shut out of credit markets for funding. Banks can borrow as much money as they need for up to three months against collateral.

‘Blurring’

ECB policy makers have called on governments to toughen austerity measures and step up efforts to restore investor confidence in the 17-member currency union. The central bank has provided banks with unlimited liquidity over three months and also purchased government bonds to fight the debt crisis.

“Instead of blurring the responsibilities of monetary and fiscal policy even further, fiscal policy must take up its responsibility in fighting the sovereign-debt crisis in the respective countries and at the European level,” Weidmann said.

Weidmann also signaled he’s in favor of scaling back non- conventional measures set up during the crisis.

“Sticking to non-standard policy measures for too long will not only change the perception of risk in financial markets in an undesired manner but will also preserve inefficient banking structures,” he said. “The question is not whether an exit from non-standard monetary policy is necessary, but when it will take place.”

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Cardboard box maker Smurfit-Stone Container Corp. reported a $54 million profit for the first quarter that ended March 31, or 54 cents a share, compared to a net loss of $91 million, or 35 cents a share, a year ago.

Smurfit-Stone has dual headquarters in Creve Coeur and Chicago.

Net sales for the first quarter, $1.58 billion, increased 8 percent compared with $1.46 billion in the first quarter a year ago.

Norcross, Ga.-based Rock-Tenn announced its plans in January to buy Smurfit-Stone for $3.5 billion. The sale is set to close in the second calendar quarter of 2011.

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If the Internal Revenue Service is able to hire more enforcement agents, will the federal budget deficit shrink?

The White House says yes. President Obama’s budget for 2012 includes millions more dollars to enforce the tax code — money that the IRS would use to identify and pursue tax cheats.

Turns out, IRS agents make good on the investment, collecting $3 to $4 for every greenback spent tracking down money owed to the government. The funds help bring down the deficit.

One problem: The IRS is facing a potential big cut in its budget.

The Republican spending plan for the rest of the fiscal year would strip the IRS of $600 million in funding — including $285 million from the agency’s enforcement budget. In addition to their fervor to cut spending, some Republicans want to starve the IRS of resources it needs to implement last year’s health care reform law.

But the IRS says that cuts of that size would reduce revenue collection by at least $4.1 billion as the agency rolled back enforcement activities.

Democratic lawmakers are crying foul, saying that if the GOP was serious about the deficit, it would be giving more money to the IRS.

The agency is already feeling a budget crunch, because it has been stuck at 2010 funding levels after lawmakers failed to pass a budget even though the fiscal year began 159 days ago.

The GOP plan for the remaining seven months of the fiscal year stands in stark contrast to the approach being pursued by Obama.

The White House has asked for more money for the IRS in each of its budgets, and wants a 9% increase from current levels in 2012.

Over the last decade, the agency has sharply increased the number of audits, liens and property seizures it carries out. The IRS believes that such enforcement results in additional gains as more Americans pay their taxes out of fear of an audit.

If Obama’s budget were to make it through Congress, the IRS estimates that the increase in its enforcement budget would boost general revenue by more than $1 Faxless payday loans.3 billion annually by 2014.

It’s easy to see the plan’s appeal — revenue goes up, while tax rates and spending levels stay static. Any money spent on increased IRS enforcement is easily covered by the returns.

But not everyone is convinced by the IRS argument that increased enforcement means more tax revenue.

"Nobody checks if those return rates are valid, or where the law of diminishing marginal returns kicks in," said J.D. Foster, a senior fellow at the conservative Heritage Foundation.

Even more suspect, according to Foster, is the IRS claim that its enforcement efforts result in a secondary deterrent factor that encourages Americans to pay their taxes.

"It’s the silliest argument of all," said Foster. "If the the IRS gets a billion more for enforcement, does anybody know that? Of course not."

Some disagree, including Robert McKenzie, a member of the IRS Advisory Council and lawyer at Arnstein & Lehr, who worked at the IRS collection division in the 1970s.

McKenzie says the effect is very real, because in the "dark recesses of every American mind" exists a healthy fear of an IRS audit.

For the IRS, the threat of cuts wouldn’t just mean less money for enforcement, it would also mean cutting back on jobs.

If funding drops by $600 million, the agency might be forced to lay off thousands of workers, according to Colleen Kelley, president of the National Treasury Employees Union, which represents IRS employees.

"If [the House bill] passes, there is no way you can make that money up in anything other than at some point … cutting a lot of positions," Kelley said.

McKenzie, for one, thinks politics should be left aside.

"I think it’s mom and apple pie. Find people and ask them to pay the correct amount of tax," he said. 

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Judges of a top Italian court began deliberating Thursday on whether to uphold a law shielding Premier Silvio Berlusconi from two trials in Milan.

The Constitutional Court must decide if the legislation complies with the constitution, including the principle that all are equal under the law. It is expected to issue its ruling later Thursday.

If the court rejects the law, Berlusconi’s two trials, on corruption and tax fraud charges respectively, will resume.

Berlusconi insisted this week that his government’s stability will not be affected by the decision, and that he is “totally indifferent as to whether the trials are suspended or not.” He called the trials “ridiculous.”

But any decision will be fraught with political repercussions, and a rejection would deal a blow to a premier already weakened by sex scandals, a fight with an ex-ally and a shaky parliamentary majority.

The legislation suspends court proceedings for up to 18 months if the defendant has a “legitimate impediment” stemming from being premier or a member of government.

The law drew accusations that it was tailor-made for the premier, but Berlusconi’s lawyer told the Constitutional Court in a hearing this week that the legislation is necessary to safeguard the right to a fair defense and that the Italian criminal code already envisages cases of legitimate impediment, such as grave sickness no fax payday loan.

Italian media reports say the 15-judge court is almost evenly split and might seek a compromise solution rather than a clear-cut ruling.

One option would have the Constitutional Court allow judges trying the cases to decide whether to accept the claims of legitimate impediment.

Berlusconi is accused of bribing British lawyer David Mills to lie in court in the 1990s to protect Berlusconi’s interests. Mills was convicted in 2009 of having taken a $600,000 bribe, but the guilty verdict was overturned last year when Italy’s highest criminal court ruled the statute of limitations had expired.

In the other trial, Berlusconi is accused of tax fraud in the purchase of TV rights by his Mediaset broadcasting empire. An offshoot investigation wrapped up last year and might lead to another indictment if the immunity law is overturned.

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Holiday sales lost speed in December after a strong surge in the prior month, with many store chains reporting softer-than-expected monthly results Thursday.

A heavy snowstorm in the Northeast during the crucial post-Christmas sales weekend, combined with deep discounting, surging online sales and shopping fatigue most likely dampened the strong momentum that retailers enjoyed in November.

"Retailers’ same-store sales numbers are looking a little softer than expected," said Ken Perkins, president of RetailMetrics. "All indications last month showed that malls were crowded and people were shopping. So this is a little puzzling that December won’t be a blowout sales month."

According to some early same-store sales results Thursday, many specialty clothing chains missed analysts’ expectations for the month, according to sales tracker Thomson Reuters.

Same-store, or sales at stores open at least a year, are an important gauge of a retailer’s performance.

Among them were teen apparel retailer Hot Topic (HOTT) with a sales decline of 1.7%.

Also among teen-oriented stores, Wet Seal’s sales fell 2.1% and Zumiez sales rose 9.2%, less than expected.

Discounter Target (TGT, Fortune 500) suffered a big miss, logging a gain of just 0.9% compared to estimates for a 4% increase, and No. 1 clothing chain Gap’s (GPS, Fortune 500) sales fell 3% despite heavy discounts in December.

Target’s big miss is expected to raise concerns about Wal-Mart’s holiday sales. The world’s largest retailer and discount giant, which struggled with weak sales throughout last year, had hoped to rev up year-end sales with very aggressive price cuts thorughout the holiday season.

Wal-Mart does not report monthly sales but is expected to provide December and holiday sales figures when it reports its quarterly results on Feb. 22.

Among department stores, Macy’s (M, Fortune 500) reported a 3.9% same-store sales increase versus expectations for a 4.5% increase.

"Sales in December were strong at both Macy’s and Bloomingdale’s, consistent with our high expectations, despite snowstorms that disrupted after-Christmas shopping along the East Coast," said Macy’s CEO Terry Lundgren, said in a statement.

However, high-end chain Nordstrom emerged a winner, posting a strong 8.3% sales gain that blew past estimates for a 3.4% rise. Its peer Saks celebrated a strong 11.8% sales surge.

Best showing since 2006: Thomson Reuters, which monitors monthly sales for a group of 28 large chains, including Macy’s, J.C. Penney (JCP, Fortune 500), Target (TGT, Fortune 500) and Nordstrom (JWN, Fortune 500), said December same-store sales for the group increased 3.1%, down from its initial forecast for 3.4% gain, but better than the 2.9% increase a year earlier.

December’s gain followed a 6% sales surge for the group in November, and marks a 15-month streak of increasing same-store sales.

Retailers tally their holiday sales by looking at total purchases in the November-December months combined. Those two months are critical for merchants because they can account for as much as 50% of their sales and profits for the full year.

Thomson Reuters retail analyst Jharonne Martis said same-store sales for the two months combined increased 4.4% in 2010, making it the best holiday sales season for sellers since 2006, when holiday sales grew 4.6%.

"Yes, December was a little disappointing but final holiday sales were still good," said Martis, adding that many high-end sellers came out strong as consumers also traded up from discount and specialty chains.

Perkins agreed. "2010 holiday sales might not have been the best in five years but in four," he said. "Not bad at all."

The National Retail Federation expects holiday sales to have increase 3.3% versus a slight 0.4% gain in 2009.

What’s in store for 2011: Looking ahead to how 2011 plays out, Perkins says Americans typically take a breather after their year-end shopping marathon.

"I think the first quarter will be slow for sales as consumers rebuild their balance sheets," he said.

Roberts Samuels, retail analyst with Phoenix Partners Group, spotted some other headwinds for consumers this year.

"The price of gas is rising. That will hit discretionary budgets," he said.

Retailers and manufacturers have also been absorbing higher raw cotton prices in 2010.

"Retail prices of cotton clothing could rise this year as retailers pass along some of the costs onto consumers," he said  

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