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Weak holiday sales at Kohl's, J.C. Penney spell more trouble for stores

(Reuters) - Kohl's Corp KSS.N and J.C. Penney Co Inc JCP.N reported lower holiday season sales on Thursday, a sign that traditional brick-and-mortar retailers struggled to compete with record-breaking online shopping between Thanksgiving and New Year's Day.

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Kohl’s said it now expects full-year earnings to come in at the bottom end of an already lowered forecast, blaming weak demand for women’s apparel during the crucial shopping season.

The Menomonee Falls, Wisconsin-based department store operator’s shares fell 9% as it posted a 0.2% drop in comparable sales in November and December.

In a bid to drive traffic to its stores, Kohl's formed a partnership with Amazon.com Inc AMZN.O in 2017, allowing customers to buy products such as Echo dot speakers and returns online purchases at all of its stores.

Smaller rival J.C. Penney posted a 7.5% drop for the nine-week period ended Jan. 4, sending shares down nearly 8% in morning trading.

Plano, Texas-based Penney is losing business to larger rivals such as Amazon, Walmart Inc WMT.N and Target Corp TGT.N as well as discount retailers like TJX Cos Inc's TJX.N Marshalls and T.J. Maxx chains.

“E-commerce is definitely compromising the competitiveness of the physical assets of retailers,” CFRA Research analyst Camilla Yanushevsky said. “Amazon, Target and Walmart are really big names in this space and have squeezed out a lot of the little guys.”

Chief Executive Officer Jill Soltau has shifted Penney’s strategic priorities to refocus on the retailer’s once-thriving, higher-margin apparel business and chose to stop selling major appliances and limit its furniture offerings. The moves have contributed to near-term financial pain.

Data from Mastercard in December showed U.S. e-commerce sales in the period from Nov. 1 through Christmas Eve rose 18.8%, while overall holiday retail sales, excluding autos, rose just 3.4%.

Macy's Inc M.N, however, surprised investors on Wednesday with a smaller-than-feared drop in holiday season sales after trimming its own full-year forecast just two months ago.

In November, Kohl’s also cut its annual profit forecast by at least 40 cents per share to $4.75 to $4.95, blaming weakness in its women’s apparel.

Victoria's Secret owner L Brands LB.N on Thursday lowered its profit forecast for the fourth quarter after reporting a 3% drop in comparable store sales for the holiday period, but its shares rose slightly.

Reporting by Uday Sampath and Praveen Paramasivam in Bengaluru and Melissa Fares in New York; Editing by Saumyadeb Chakrabarty and Nick Zieminski

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