By Brad Dorfman
CHICAGO (Reuters) - Wal-Mart Stores Inc led U.S. retailers in posting disappointing December same-store sales on Thursday, and it cut its quarterly earnings forecast despite being the store of choice in a recession.
Wal-Mart, the world's largest retailer, said sales at U.S. stores open at least a year rose 1.7 percent, excluding gasoline sales. Analysts on average had forecast a 2.8 percent increase, excluding fuel.
Shares in the company fell nearly 7 percent in premarket trading, putting pressure on major U.S. index futures.
"Due to the difficult economy and severe winter weather in some regions, the holiday season was more challenging for retailers than expected," said Wal-Mart Vice Chairman Eduardo Castro-Wright.
The company said groceries and health-related products saw mid-single-digit percentage sales gains in December, while sales of clothing and jewelry were soft.
Wal-Mart now expects earnings of 91 cents to 94 cents a share from continuing operations for the fourth quarter that began on November 1, down from its November forecast of $1.03 to $1.07.
Retailers across the board offered deep discounts to try to move merchandise in the recession, a strategy that hammered profits in their fourth quarter, which generally includes January.
Several companies warned investors that their earnings would disappoint for the quarter that included the 2008 holiday shopping season.
Research firm Retail Metrics forecasts a 19.3 percent drop in retailers' fourth-quarter earnings, with that decline widening to 27.5 percent if Wal-Mart is excluded.
Clothing seller J Crew Group Inc now expects a loss of 24 cents to 29 cents a share for the quarter instead of the profit of 5 cents to 10 cents it previously forecast.
Limited Brands Inc, which saw December same-store sales fall a worse-than-expected 10 percent, said it expected a fourth-quarter profit of 55 cents to 70 cents a share, below the average analyst estimate of 88 cents compiled by Reuters Estimates.
"This holiday period was the most difficult in memory due to the overall macroeconomic situation," Zale CEO Neal Goldberg said in a news release. "This environment dictated a very aggressive promotional stance with a focus on cash flow and inventory levels."
Zale said same-store sales fell 22 percent in December and 19.5 percent for the entire November-December holiday period.
With consumers reeling from a recession, job uncertainty, tighter credit and falling stock portfolios, analysts see little reason for retail to rebound in the first half of 2009.
(Additional reporting by Martinne Geller in New York; Editing by Lisa Von Ahn)
