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NEW YORK (AP) _ Moody’s Investors Service said it has begun to consider merchants’ online sales when determining their credit ratings amid a boom in e-commerce.

In a report released Monday, the New York-based credit rating agency said that in terms of raw dollars, Internet retailing “is beginning to live up to its promise,” even though Internet sales still account for a small percentage of the overall retail business – about 6 percent, according to Forrester Research Inc.

According to estimates by Forrester, online sales are expected to reach $204 billion this year, up 17 percent from last year, and are projected to exceed $300 billion in the next five years. Soaring oil prices should only fuel their momentum as shoppers turn more to online buying than shopping at the local mall to save on gas, Moody’s said.

The robust online sales growth is a stark contrast to the retail industry’s anemic same-store sales growth, which are sales at stores opened at least a year. Online sales results are not included in retailers’ same-store sales figures, which are considered a key indicator of a retailer’s health. But Moody’s noted in its report that stores can use their online sales to offset slowing growth in same-store sales. It pointed out that Gap Inc. lessened the blow of its 4 percent decline in same-store sales in fiscal 2007 with a 23.7 percent growth in online sales to $903 million.

Meanwhile, J.C. Penney Co. partly compensated for its unchanged same-store sales performance in fiscal 2007, with a 15 percent growth in online sales, to $1.5 billion. Moody’s said the trend continues into 2008, with direct sales at Limited Brands Inc.’s Victoria’s Secret unit rising 11 percent in the first quarter, which offset in part its 8 percent same-store sales decline.

Moody’s said it upgraded J. Crew Group Inc.’s rating in December to Ba2 from Ba3, citing its strong online business. In May, Moody’s downgraded its outlook for Limited Brands to negative from a “stable” rating partly because of execution flaws in its online business.

Moody’s noted that accelerating online sales also raise some key challenges for merchants, including how much of a given decline in same-store sales is the result of sales shifting to the Internet. Another issue is whether retailers will keep opening stores to please Wall Street or embrace a more conservative approach, which could be at the expense of the “all important consumer lure” of a storefront in cities and malls, Moody’s said.

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