Wal-Mart and other retailers warn after weak December

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.

Many other retailers also warned about weak profits in their fourth quarter, which includes January and the all-important holiday shopping season. Among those warning were department store operators like Macy's Inc, which suffered as deep-discounting hammered margins in the weakest U.S. holiday season seen in nearly 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. On that basis, analysts on average had forecast a 2.8 percent increase.

The company's shares fell more than 8 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 demand for clothing and jewelry was soft.

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.