By Brad Dorfman
CHICAGO (Reuters) - Wal-Mart Stores Inc led U.S. retailers in disappointing December same-store sales and profit warnings on Thursday, sparking fresh recession concerns that hit stock and currency markets.
Nearly a dozen retailers, including Macy's and Target Corp, told investors that profits would take a further hit in the fourth quarter, which includes key holiday sales.
The U.S. recession, job losses and winter storms right before Christmas contributed to the worst holiday shopping season in up to four decades.
Wal-Mart, the world's largest retailer, said sales at U.S. stores open at least a year rose 1.7 percent, excluding gasoline, worse than Wall Street's expectation of a 2.8 percent increase. It also cut its profit forecast for its fourth quarter, which began on November 1.
The company's shares fell 7.6 percent, leading a 0.3 percent decline in the Standard & Poor's retail index.
The Wal-Mart news also tempered wider market appetite for risk on Thursday, pushing U.S. stocks lower, helping U.S. Treasury debt prices to extend their gains in a safe haven bid and prompting a tumble in the U.S. dollar against the yen.
Other retailers posting big share declines were Abercrombie & Fitch Co., down 6.5 percent after saying that fourth-quarter profit would be significantly below its previous forecast, and jeweler Zale Corp, which fell 7.4 percent.
Wal-Mart said groceries and health-related products saw mid-single-digit percentage sales gains in December, while demand for clothing and jewelry was soft.
"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 report from Wal-Mart was the latest sign of how the recession has prompted consumers to cut down on any but the most essential purchases.
"The economy is in real difficult shape here, and their core consumers, lower- and middle-income consumers, that have really been flocking there cut back on discretionary spending," said Ken Perkins, president of research firm Retail Metrics.
REPEATED MARKDOWNS
Retailers across the board offered deep discounts to lure shoppers in the holiday season, often repeatedly marking down items like clothing as traffic to stores proved weak.
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.
Of 22 retailers that reported sales on Thursday morning, 11 beat sales estimates, 10 missed and one matched, according to Thomson Reuters.
But beating sales estimates won't necessarily help profits.
Macy's same-store sales fell 4 percent in December, besting the average analyst estimate of a 5.3 percent drop. But the company cut its fourth-quarter profit forecast on expectations for a steeper decline in November-January.
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 previously forecast.
Gap Inc posted a 14 percent drop in same-store sales, worse than the 9.3 percent average forecast, and said fourth-quarter profit would be worse than analysts expected.
"This holiday period was the most difficult in memory due to the overall macroeconomic situation," Zale CEO Neal Goldberg said in a news release. The company said same-store sales fell 22 percent in December and 19.5 percent for the entire November-December holiday period.
Even retailers that had better-than-expected sales said the improvement came at the expense of margins.
Department store operator J.C. Penney Co Inc said same-store sales fell a less-than-expected 8.1 percent, but the company had to aggressively cut prices to help sales in the later part of the month.
(Additional reporting by Martinne Geller in New York, Jessica Wohl in Chicago and Karen Jacobs in Atlanta; Editing by Lisa Von Ahn)
