UPDATE 3-Discounts slam U.S. retailers' holiday season profits

Thu Jan 9, 2014 5:18pm EST
 
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By Phil Wahba

NEW YORK Jan 9 (Reuters) - Many large U.S. retailers slashed their earnings forecasts on Thursday because of steep discounts they offered during the holidays to persuade reluctant consumers.

The discounts boosted overall industry sales but hurt profits at many chains, including L Brands Inc, Family Dollar Stores Inc and teen retailer Zumiez Inc. Even retailers that reported big sales gains, like Kay Jewelers parent Signet Jewelers Ltd, were not spared.

Fewer store visits and aggressive pricing at the start of the season by big retailers like Amazon.com Inc and Wal-Mart Stores Inc left many chains with little choice but to offer sweeter deals. Many also had too much holiday merchandise, which was ordered in late spring when retail executives were feeling upbeat.

"The discounts needed to be deeper, and they needed to be longer," said Joel Bines, managing director of consulting firm AlixPartners.

The discounts did result in a stronger-than-expected 2.4 percent increase in December sales at nine retailers tracked by the Thomson Reuters Same-Store Sales Index.

Still, L Brands cut its holiday-quarter profit forecast on disappointing December sales at its Victoria Secret and La Senza chains.

While L Brands' sales at stores open at least year rose 2 percent last month, Wall Street had been expecting a gain of 3.7 percent, according to Thomson Reuters I/B/E/S. The company's shares fell more than 4 percent.   Continued...