U.S. retailers take cautious view as holidays loom

By Nicole Maestri

NEW YORK (Reuters) - U.S. retailers are still sweating through the back-to-school shopping season, but an early chill has already crept into their prospects for the all-important holiday season.

Numerous retailers, from Wal-Mart Stores Inc to Target Corp to Ross Stores, have warned that the second half of the year will be more difficult than the first as the deteriorating housing market, higher fuel and food costs, and an undulating stock market take a toll on shoppers.

Wal-Mart cut its full-year earnings forecast last week, saying its customers are running out of cash by the end of the month, while Staples Inc's Chief Executive Ron Sargent said on Tuesday that he was "worried" about the current state of consumer spending.

Clothing chain Tween Brands Inc on Wednesday reduced its full-year earnings outlook, while Ross Stores joined the chorus, cutting its full-year earnings forecast because of "macro economic factors, recent results and projections from other retailers, and our own sales trend that slowed versus plan beginning in mid-July."

Retailers are preparing cautiously for the second half of the year, reducing inventory plans now to try to avoid costly markdowns or price wars later on.

"There's caution in the air," said Marie Driscoll, retail analyst at Standard & Poor's.

While saying it is too early to predict how holiday sales will unfold, Driscoll said that retailers will need to stock the "absolutely right product" this holiday season or expect to have to resort to cutting prices and matching competitors' discounts to win dollars from selective shoppers this year.

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