Many chains expected to post softer Dec. sales

ATLANTA (Reuters) - Many U.S. retailers are expected to report disappointing December sales later this week, hurt by everything from the challenging economy to unfavorable weather to the calendar, which shifted more holiday sales to November.

Though media reports say apparel sales picked up after Christmas, analysts said some retailers' quarterly earnings estimates are at risk as higher gasoline prices and recession fears in the face of a still-weakening housing market weigh on consumer spending.

"We do believe that traffic was lighter compared to last year and also promotionally driven," Credit Suisse softlines retail analyst Paul Lejuez said on Tuesday during a conference call previewing December sales.

"We really do question what is likely to drive the consumer through the mall to shop for apparel this spring," he added.

Expectations for December sales at stores open at least a year were further dampened by weak sales trends from Target Corp and Talbots Inc, controlled by Japan's Aeon Co Ltd. Talbots said last week it plans to close 78 stores focused on kids' and men's apparel.

On Monday, Circuit City Stores Inc offered more bad news when it said December same-store sales fell 11.4 percent despite strong demand for fancy TVs and video games.

The market was rattled again on Tuesday when the CEO of AT&T Inc cited softness in consumer phones and Internet services, stunning investors who figured telecoms would be shielded from a U.S. economic slowdown.

Electronics sector leader Best Buy Co is due to report same-store sales on Friday.

But Credit Suisse analyst Gary Balter said Circuit City's sales woes were mainly of its own making, since the chain let go its most experienced staffers last year.

"Don't take (the Circuit City report) and say this is bad for Best Buy," he said.

Many hope the electronics sector was a key destination for gift buyers over the holiday season.

"We saw some very good numbers from electronics and e-commerce over the holiday season," said Kamalesh Rao, director of economic research at MasterCard Advisors.

But Rao said same-store sales is a retail measure that is more heavily focused on department stores and apparel chains, two subsets that were weaker holiday performers.

Retail leader Wal-Mart Stores Inc is expected to post low-single-digit-percentage same-store sales growth for December, likely outperforming rival discounter Target, which cut its monthly same-store sales view last month.

Retail chains expected to post the strongest December sales include Pacific Sunwear of California Inc, Aeropostale Inc, Costco Wholesale Corp and TJX Companies Inc, Lazard Capital Markets said in a research note.

CALENDAR SHIFT

Department stores such as Macy's Inc and Saks Inc warned last month that their December sales would weaken from November, hurt by a shift in the retail calendar that added selling days to the prior month.

JP Morgan this week cut quarterly earnings estimates for women's apparel retailers such as Cache Inc and Coldwater Creek Inc, citing the macro environment.

C L King & Associates analyst Mark Montagna lowered his fourth-quarter profit estimate for Limited Brands Inc by 7 cents a share, citing declining traffic and an expected December same-store sales decline of 6 percent.

Analysts have warned that other retailers could lower their earnings forecasts as increased promotions failed to yield higher sales during the holiday month.

Higher fuel prices and rising unemployment likely led to lower same-store sales at value chains such as Fred's Inc and Family Dollar Stores Inc, said Ivy Jack, a Lehman Brothers analyst.

Family Dollar cut its full-year forecast on Tuesday, saying customers were cutting their discretionary spending.

"It has been difficult for the dollar stores to drive traffic given the increased promotional activity of competitors, and the low-income consumer remains financially stretched," Jack said on Monday.

(Editing by Braden Reddall)