Last-minute shoppers save many retailers' holiday sales results; discounting erodes profits

NEW YORK (AP) -- A surge of last-minute shopping saved many retailers from a disastrous holiday performance, but the heavy discounting that fueled it was expected to hurt fourth-quarter profits.

December sales figures reported by the nation's largest retailers Thursday show discount and moderately priced chains, such as Wal-Mart, achieved better-than-expected gains. Department and specialty stores like Federated Department Stores, the Limited and the Gap continue to struggle, though sales didn't drop as steeply as expected.

''The last-minute surge really made a difference this holiday,'' said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd.

Niemira's survey of sales at 83 stores showed a 2.3 percent gain in December, far better than the 1.5 percent increase he had forecast.

Niemira said the increase means the Christmas shopping period will be the industry's worst since 1995. Analysts had expected it to be the worst in at least a decade.

''This may be a sign that the foundation of an upturn is at hand,'' Niemira said. ''It may suggest that we really hit bottom.''

Many analysts said retailers will likely continue heavy discounting to entice customers still nervous about job security and the economic situation.

Wal-Mart, whose same-store sales in December beat Wall Street estimates by 2.4 percent, said it wouldn't change its fourth-quarter earnings estimate. Same-store sales are sales at stores open at least a year.

BJ's Wholesale Club said competitive pricing contributed to lower-than-planned margins and it forecast a drop in its fourth quarter earnings, even though it had healthy same-store sales.

The nation's No. 2 discounter, Kmart, reported a 1 percent decrease in same-store sales. The company, whose stock was downgraded by analysts last week, said Wal-Mart, Target Stores and others had cut into its market share.

Other selected December sales figures for leading retailers:

--AnnTaylor Stores Corp., same-store sales down 2.4 percent; total sales up 7.7 percent.

-- Federated Department Stores, Inc., same-store sales down 8.6 percent; total sales down 8.7 percent.

-- Gap Inc., same-store sales down 11 percent; total sales unchanged.

-- J.C. Penney Co., same-store sales at its department stores up 5.4 percent; total company sales up 0.5 percent.

-- Sears, Roebuck & Co., same-store domestic sales down 2.4 percent; total sales down 1.6 percent.

Also Thursday, the Labor Department said the number of Americans filing new claims for unemployment benefits dropped during the first week of the new year, suggesting the wave of layoffs triggered by the recession and the terrorist attacks might be abating.