Sector Snap: Worries about holidays hurt retailers

NEW YORK (AP) -- Analysts are finding more reasons to be less optimistic about the holidays after a weak showing over Thanksgiving weekend, the traditional start to the holiday shopping period.

A lot is at stake since the November and December period account for anywhere from 20 percent to 40 percent of a retailer's annual revenue.

The latest evidence about a poor performance over Thanksgiving weekend came from clothing chain Express Inc. It lowered on Wednesday its full-year profit forecast and provided a fourth-quarter estimate that missed analysts' expectations. The reduced outlook came as the chain reported third-quarter profits that came below Wall Street expectations.

The chain also said that Thanksgiving week sales beat last year's results but did not meet its expectations.

Analysts will be closely watching November sales reports due out Thursday by a handful of retailers including The Gap Inc., Costco Wholesale Club and The Buckle Inc. While many major chains like Target Corp., Macy's Inc. and Wal-Mart Stores Inc. no longer report sales on a monthly basis, the remaining reports should offer good insight into how the Thanksgiving weekend fared. The figures are based on revenue at stores opened at least a year and are considered a key indicator of a retailer's health.

J.C. Penney Co. said Tuesday that a key sales measure jumped 10.1 percent in November, helped by a strong start to the holiday shopping season. The retailer is trying to recover from a botched transformation plan spearheaded by its former CEO Ron Johnson who was fired in April after 17 months on the job. J.C. Penney is focusing on the holiday shopping season as an opportunity to bounce back after a long sales slump. The company has lost more than $2.4 billion since late 2011.

"If we see sluggish results tomorrow, I think retailers are going to have to ratchet up discounts," said Ken Perkins, president of RetailMetrics LLC, a research firm. "They're going to have to do something to drive traffic. Otherwise, they're going to have very stocked shelves."

Perkins believes inventories are not out of whack yet, but they could soon be if the typical lull between Thanksgiving weekend and Christmas becomes more pronounced. He says if that's the case, stores will have to discount as much as 60 percent.

Michael Weiss, chairman and CEO of Express, said in a statement Wednesday that he had planned for a promotional holiday season but the chain anticipates promotions getting more frequent.

That would add to an already promotional start.

Target, Macy's and other retailers offered holiday discounts in early November and opened stores on Thanksgiving Day. The discounting grew more intense in the days before Thanksgiving as stores aimed to make up for season that is six days shorter than a year ago. Those tactics drew bigger crowds during the four-day Thanksgiving weekend, but failed to motivate Americans to spend.

A record 141 million people were expected to shop in stores and online over the four-day period that ended on Sunday, up from last year's 137 million, according to the results of a survey of nearly 4,500 shoppers conducted for The National Retail Federation.

But total spending was estimated to fall for the first time ever since the trade group began tracking it in 2006, according to the survey that was released on Sunday afternoon. Over the four days, spending fell an estimated 2.9 percent to $57.4 billion.

Here's a look at how some retailers are faring Wednesday:

American Eagle Outfitters Inc. shares fell nearly 3 percent to $16.09

Aeropostale Inc. shares fell nearly 4 percent to $9.36

Express Inc. shares fell nearly 23 percent to $19.08

J.C. Penney stock slipped nearly 4 percent to $9.73

Macy's Inc. shares fell nearly 2 percent to $51.87

Sears Holdings Corp, which operates Sears and Kmart, fell 8 percent to $50.96

Wal-Mart Stores Inc. shares fell 1.2 percent to $80

Meanwhile, the broader markets were mixed.