Nov. 8 (Bloomberg) -- Sales at Wal-Mart Stores Inc., Macy's Inc. and other U.S. retailers trailed analysts' estimates last month after record-high temperatures in the Northeast reduced demand for jackets and sweaters.

Seven out of 10 retailers reported sales below forecasts, according to Retail Metrics LLC. A 4.2 percent drop in the average U.S. home price in September and gasoline prices that are one-third higher than a year ago buffeted consumers, raising concerns that spending may slow as the holidays approach.

``There's still going to be a Christmas, but it's not going to be gangbusters, with people rushing out'' to go shopping, said Eric Beder, a retail analyst at Brean Murray Carret & Co. in New York.

Target Corp.'s sales at stores open at least a year surpassed its already-reduced forecast as consumers sought discounts. Macy's, the second-largest department store chain, J.C. Penney Co. and Kohl's Corp. said same-store sales declined.

Wal-Mart fell 31 cents to $43.62 as of 4 p.m. in New York Stock Exchange composite trading. Macy's lost 2 cents to $29.89. Target, the second-largest U.S. discount chain, fell 12 cents to $58.70. Kohl's dropped $1.71 to $49.16. The Standard & Poor's 500 Retail Index of 30 members declined 0.3 percent.

Gap Inc. rose after preliminary third-quarter profit surpassed analysts' estimates, adding $1.21, or 6.7 percent, to $19.36.

Holiday Spending

U.S. October retail sales increased 1.6 percent, the worst for October since 1995's 0.2 percent increase, the International Council of Shopping Centers said today. The results, based on 44 chains, missed the New York-based group's 2 percent forecast and suggest a slowdown in holiday spending.

About 30 percent of retailers' annual profits occur in the three months through January, according to ICSC Chief Economist Michael Niemira. The group has forecast November and December sales to gain 2.5 percent, the slowest in three years. The National Retail Federation anticipates the smallest holiday sales increase in five years.

``Consumers are slowing down, being more discretionary in their purchases, and retailers are going to have to be promotional,'' said Lauri Brunner, a retail analyst at Thrivent Investment Management in Minneapolis, which has $70.6 billion in assets. ``The promotions are starting earlier and earlier.''

Same-store sales are considered a key measure of a retailer's performance because it excludes locations that have recently opened or closed. Most retailers reported today.

Goldman Sachs

Separately, Goldman Sachs Group Inc. said its index of October sales, which tracks about 25 retailers, rose 1.2 percent, missing an estimate for an increase of 1.6 percent.

Consumers are shopping less at department stores and mall- based retailers and more at discounters, said Beder. Sales at stores open at least a year at Wal-Mart, the world's largest retailer, increased 0.4 percent, within the company's forecast for a gain as much as 2 percent. Results trailed the estimate of 1.1 percent, Retail Metrics said.

November sales will increase as much as 2 percent, Wal-Mart said. It introduced discounts on toys and other merchandise earlier this year and marked down 20 percent more items than last Christmas.

Target Sales

Target said October sales gained 4.1 percent, surpassing the average analyst estimate for an increase of 2.4 percent and the company's forecast of no more than 4 percent. Costco Wholesale Corp. said October sales rose 9 percent. TJX Cos., whose T.J. Maxx and Marshalls chains sell designer fashions at discounts, posted a 3 percent gain that beat estimates.

Discounting is ``the only way we're going to incent the customer to make that purchase,'' said Marshal Cohen, head retail sales analyst at NPD Group Inc.

Macy's said sales declined 1.5 percent, more than the 0.6 percent drop analysts estimated. J.C. Penney, the third-largest U.S. department-store chain, and Kohl's both reported unexpected drops in October same-store sales that missed analyst estimates.

Gap, the largest U.S. clothing retailer, said same-store sales last month fell 8 percent. The company said third-quarter profit was 28 cents to 30 cents a share. Analysts estimated 22 cents, on average, in a Bloomberg survey.

Nordstrom, Limited

Luxury retailers posted a 1.1 percent gain, the lowest since April 2003, Niemira said. Nordstrom Inc. had a 2.4 percent decline, missing analysts' estimates for an increase of 1.3 percent, according to Retail Metrics, a research firm based in Swampscott, Massachusetts.

Sales at specialty apparel retailers fell 5.9 percent, Niemira said. Limited Brands Inc., the owner of the Victoria's Secret lingerie chain, said same-store sales slumped 6 percent, four times the average analyst estimate for a 1.5 percent decline.

Chico's FAS Inc., Abercrombie & Fitch Co. and AnnTaylor Stores Corp., posted declines that trailed analysts' estimates. AnnTaylor reduced its full-year profit forecast, citing ``dramatic traffic softness'' and ``ongoing macroeconomic uncertainty.''

Consumer confidence fell last month to the lowest level in two years, the Conference Board said Oct. 30. A gallon of gasoline in the first week of November cost an average of $3.06, 36 percent above a year ago, the Agriculture Department said.

September's average median price for a house sale dropped the most in almost a year, to $211,700, the National Association of Realtors said Oct. 24.

Stricter lending standards and higher borrowing costs are making it more difficult to qualify for loans, pulling home prices down. Some economists say falling house values, by making owners feel less wealthy, may reduce consumer spending.

New York City posted the warmest October ever recorded, according to Planalytics Inc., a weather-consulting firm based in Wayne, Pennsylvania.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net.

Last Updated: November 8, 2007 16:11 EST