By Praveen Paramasivam and Nivedita Balu
(Reuters) - Retail heavyweights Kohl's Corp and Home Depot Inc sent a shiver through Wall Street on Tuesday, lodging weak results and annual forecasts that cast more doubt on the health of the U.S. consumer ahead of the crucial holiday shopping season.
Major chains have launched a raft of early promotions ahead of the Thanksgiving and Christmas period, which is six days shorter this year than last, worried about the impact of cut-throat competition and the shift to disruptive online players.
The ongoing U.S.-China trade war has also raised the cost of imported goods for many sellers as they fight to keep prices competitive, putting pressure on margins.
The No.1 U.S. home improvement chain (N:HD) cut its forecasts for both full-year sales and comparable store sales, while department store operator Kohl's (N:KSS) slashed its adjusted annual profit forecast range by at least 40 cents.
Shares in the two companies fell as much as 5.6% and 19% respectively, dragging down sector peers and weighing on Wall Street.
"There's intense competition and it's extremely dynamic. Consumers are looking to put more money into savings than before," said Camilla Yanushevsky analyst at CFRA Research.
According to a survey by the National Retail Federation, 79% of Americans are worried that tariffs will make their holiday shopping more expensive. The industry trade body has forecast U.S. holiday sales this year would rise about 4%.
Kohl's said on Tuesday the need to spend on promotions going into the holiday season would hurt annual earnings.
"We fully expect (the environment is) going to maintain within the holiday period because it always brings a new level of promotions," Chief Executive Officer Michelle Gass said.
POCKETS OF WEAKNESS
While the U.S. economy continues to expand, doubts about the risk of recession have dogged financial markets all year and a Commerce Department retail report last week suggested consumer spending was slowing faster than economists had expected.
The report also pointed to more weakness in some sectors than others, and results from retailers so far have told a similar story.
Food sales rose 0.5% in October and one of the country's biggest grocer, Walmart (N:WMT), last week said spending was healthy as it raised its earnings forecast.
(GRAPHIC: Retail sales are up but not across the board - https://fingfx.thomsonreuters.com/gfx/mkt/12/8892/8804/Pasted%20Image.jpg )
The Kohl's numbers, however, chimed with a 1% fall in clothing and apparel sales nationally. Sales of appliances and garden equipment in which Home Depot specializes were both down around half a percent in the Commerce numbers, although the chain itself said its own garden equipment and appliances sales rose.
Another hint of the direction of travel was results from off-price retailer TJX Cos Inc (N:TJX), which turned in a strong quarter of growth in customer traffic and sales as shoppers were drawn by the promise of its hefty discounts on upscale but off-season apparel and other products.
"In a soft economic environment, people are looking for bargains in retail," Yanushevsky said.