Wal-Mart's decline unsettles retail sector

But he added, “I think it will be a promotional Christmas. Stores will slash prices to drive consumers. And Wal-Mart is going to be first and foremost.”

Wal-Mart’s discount stores suffered a 0.5 percent decline, while Sam’s Clubs had a 2.0 percent increase.

One of Wal-Mart’s main problems is that its strategy to broaden its appeal to higher-income shoppers with upscale merchandise was poorly executed. It filled its fall clothing racks with too many trendy items like skinny jeans that shoppers just didn’t want.

Wal-Mart’s weakness dragged down the International Council of Shopping Centers-UBS same-store sales tally for November to 2.1 percent, below the original 3 percent growth forecast. Excluding Wal-Mart, the tally rose 4.0 percent.

Based on overall disappointing November results, ICSC pared down its growth forecast for the November-December period combined, forecasting a range of 2.5 percent to 3 percent, down from 3 percent.

While retailers have hopes for a decent season, there are concerns about how confident consumers are. The latest measure of confidence by the Conference Board fell during November, and reports of job cuts and buyouts could make consumers even more uneasy.

Thursday’s Labor Department report also raised questions about consumers’ comfort level.The department said 357,000 claims were filed last week, up 34,000 from the previous week. Economists said it was too soon to tell whether the unexpected increase indicated a weakening in the job market.

October figures on consumer income and spending issued Thursday showed that consumers had reason to be upbeat, at least during that month. The Commerce Department said incomes rose a healthy 0.4 percent, while spending rose 0.2 percent after a decline in September. The data was encouraging but does not guarantee that consumers shopping for the holidays will feel like spending freely — something that was clear the day after Thanksgiving, when shoppers focused on getting the best bargain, gravitating toward early bird specials and then leaving stores when the deals disappeared.

“This tells me that the customers is ever savvy about shopping for markdowns,” said John Morris, a managing director at Wachovia Securities “The next couple of weeks will be really telling.”

Target’s 5.9 percent same-store sales increase topped forecasts of a 5.7 percent gain. But Costco reported a 5 percent gain in same-store sales, below the 5.7 percent estimate.

Among department stores, Federated, which acquired May Department Stores Co. last year, reported a robust 8.5 percent same-store sales gain, beating the 4.8 percent estimate. Same-store sales include only Macy’s and Bloomingdale’s stores that existed before the deal closed. Federated also raised its December forecast.

Saks Inc.’s 7.2 percent gain in same-store sales beat the 7 percent estimate.

But results from Kohl’s Corp. and Penney were disappointing. Penney said same-store sales at its department stores rose 1.4 percent, falling short of the 3.7 percent forecast from Wall Street. Kohl’s had a 3.7 percent gain in same-store sales, below the 4.8 percent prediction.

Gap Inc., which is still struggling to find the right fashion formula, suffered an 8 percent drop in same-store sales, worse than the 5.4 percent forecast.

Teen retailers generally did well. Wet Seal Inc.’s 5.5 percent same-store gain beat the 4 percent estimate.

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