Wal-Mart and other U.S. retailers warn after dismal holiday

By Brad Dorfman

CHICAGO (Reuters) - Wal-Mart Stores Inc and other top U.S. retailers delivered 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 results confirmed that the U.S. recession, job losses and winter storms right before Christmas produced the most dismal holiday shopping season in nearly 40 years.

The International Council of Shopping Centers said holiday sales, which include November and December, fell 2.2 percent -- the worst result since it began compiling such data in 1970.

The new year is not expected to bring relief, with the ICSC forecasting a 1 percent decline in January sales at U.S. retail chains open at least a year, or same-store sales.

Wal-Mart, the world's largest retailer, surprised investors who have seen it outperform rivals as the store of choice in a downturn. Its U.S. December same-store sales 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.

While some retailers beat sales expectations, many of those did so only by slashing prices, which will hammer fourth-quarter margins.

"The sales numbers are not a lot worse than expected, but I think what's really going to take a toll on these companies is when you report earnings and you see what kind of discounts you had to have to pull the numbers," Morningstar analyst Joe Beaulieu said.

Wal-Mart shares fell 7.5 percent. The Standard & Poor's retail index rose 0.8 percent.

The Wal-Mart news weighed most of the day on U.S. stocks, helped U.S. Treasury debt prices extend gains in a safe haven bid and prompted a tumble in the U.S. dollar.

Overall, same-store sales fell 0.9 percent, according to the Thomson Reuters index of 35 stores, slightly better than the 1 percent decline forecast.

Excluding Wal-Mart, the drop was 3.6 percent, better than an expected 4.8 percent decline.

WEAKER JANUARY EXPECTED

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.