Thanksgiving sales dented by heavy discounting

Heavy discounting has done no good to US retail sales during

the Thanksgiving weekend as shoppers spent about 3 percent less than they did a year earlier, as per data collated by industry group National Retail Federation.

This has been the first decrease in sales for the period in four years, led by heavy discounting, as the NRF explained.

Retailers including Urban Outfitters Inc and Walmart Stores Inc are preparing for what is thought to be the roughest holiday shopping season since 2008 as customers become more budget-conscious and value-focused.

On the positive note, J. Crew Group Inc.'s third-quarter earnings rose 6.8 percent driven by better sales, what has not prevented the retailer to be hit by weaker margins. Comparable sales in stores – those including sales at stores open more than a year and direct sales – improved by 4 percent.

Privately owned J. Crew has reported a profit of 35.4 million dollars, for the period ended November, 2 and ahead last year´s same period´s 33.2 million dollars. Revenue also increased, reaching 618.8 million dollars. Nevertheless, gross margin was badly affected by increasing costs, falling to 43.9 percent from 47.3 percent last year.

Meanwhile, Express Inc (EXPR.N) was the last US retailers to forecast a weaker-than-expected holiday quarter on Wednesday. Express pointed at humble Thanksgiving sales that resulted in heavy discounting. Chairman and Chief Executive Officer Michael Weiss pointed out that Thanksgiving week sales were better than last year, but below expectations. “We had been planning for a promotional holiday season but we now expect the intensity of those promotions to reach heightened levels and we are updating our full year guidance accordingly,” he added.

On the back of the news, Express's stock fell as much as 24 percent in afternoon trading, making it the top loser on the New York Stock Exchange. "We don't see an end to the promotional environment ... that's the reality and we have to learn to deal with it," Weiss said on a call after Express posted a third-quarter profit that missed analysts' estimates, reported Reuters.

On a separate note, analysts at Trefis have warned that tough times are still in sights for American Eagle Outfitters and that the retailer will still see a weak performance in the third quarter. “American Eagle Outfitters (NYSE:AEO) has struggled with its growth due to a sluggish retail environment in the U.S. and weak customer response to its product offerings. During the first quarter of fiscal 2013, the retailer’s revenues and comparable store sales (CSS) slipped by 5 percent and 4 percent, respectively. This performance continued in the second quarter with 2 percent fall in revenues and 7 percent decline in CSS. Following the weak results, the company slashed its outlook for the third quarter. In line with its expectations, American Eagle reported decreases of 6 percent and 5 percent, respectively, in third-quarter revenues and CSS with its Sales Results release in early November. It also pre-announced above-guidance EPS of 19 cents from slightly better-than-expected margins.”