Oct. 11 (Bloomberg) -- J.C. Penney Co. and Nordstrom Inc., retailers that represent 15 percent of annual department-store revenue, reported September sales that were lower than analysts estimated and reduced their profit forecasts, signaling what may be the worst holiday shopping season in five years.

Wal-Mart Stores Inc., the world's largest retailer, said today that sales at stores open at least a year climbed 1.4 percent from a year earlier, at the lower end of its projection. The company boosted its third-quarter profit forecast on reduced costs.

Holiday purchases may slow as consumers cut back on spending amid higher food and fuel costs and the worst housing slump in 16 years. Clothing markdowns after an unseasonably warm September hurt retailers' profits as they approach the biggest sales period of the year. At least 13 retailers lowered their forecasts, and Nordstrom and J.C. Penney shares dropped more than 6 percent.

``Christmas is going to be weaker than last year,'' said Russell Jones, director of retail at consulting firm AlixPartners LLP. ``It doesn't look like retailers are doing anything that's exciting consumers and that tends to carry through to Christmas.''

U.S. sales in November and December probably will climb 4 percent this year, making the holiday shopping season the slowest since a 1.3 percent gain in 2002, the National Retail Federation said last month.

Macy's Inc., the second-largest U.S. department store chain, Gap Inc., the largest U.S. clothing retailer, Abercrombie & Fitch Co. and Limited Brands Inc. also posted sales that trailed analysts' estimates after unusually high temperatures in the eastern U.S. left sweaters and sweatshirts on store racks.

September Sales

September sales increased 1.7 percent, the International Council of Shopping Centers said today, based on a survey of 49 retailers. The figure is the smallest since same-store sales fell 1.9 percent in April and less than half the gain of September 2006. The sales period includes the first week of October.

Separately, Goldman Sachs Group Inc. said its index of September sales, which tracks about 25 retailers, rose 1.1 percent, missing an estimate for an increase of 2 percent.

Almost two-thirds of retailers posted same-store sales results below analysts' expectations, Retail Metrics LLC said.

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

Wal-Mart Forecast

Wal-Mart, which accounts for 1 of every $11 spent at U.S. retailers, said third-quarter profit will be at most 69 cents a share, up from its previous forecast of as much as 65 cents. October sales will be unchanged to a gain of 2 percent.

J.C. Penney dropped $4.73, or 7 percent, to $63.27 at 4 p.m. in New York Stock Exchange composite trading, the biggest decline in more than four years, while Nordstrom fell $3.64, or 7.5 percent, to $44.97. Wal-Mart advanced $1.31, or 2.9 percent, to $46.90.

Most of the eastern U.S. recorded temperatures 2 degrees to 6 degrees Fahrenheit higher than normal last month, according to Planalytics Inc., a Wayne, Pennsylvania-based weather consulting firm.

Warmer weather shaved 0.5 percentage point off of September same-store sales, ICSC Chief Economist Michael Niemira said. Today's results continue the slowdown in consumer spending from 2006, he said.

`Heavier Discounting'

``Retailers want to clear out back-to-school and fall merchandise to be ready for holiday goods,'' said Howard Tubin, a retail analyst at RBC Capital Markets in New York, said today. ``There may be some heavier discounting in October than originally planned.''

Same-store sales at luxury retailers climbed 4.9 percent, slower than the 8.1 percent average gain since February, said ICSC. Nordstrom, the Seattle-based department store chain, posted a 3.2 percent increase, below the 4.9 percent analysts' estimated, according to data compiled by Retail Metrics, a research firm based in Swampscott, Massachusetts.

The retailer lowered its third-quarter profit forecast to as little as 50 cents a share from at least 61 cents as it reduces inventories.

Saks Inc. said sales gained 7.7 percent, short of the 9.9 percent jump analysts estimated for the luxury retailer. Dallas- based Neiman Marcus Group Inc. said sales jumped 6 percent.

J.C. Penney

J.C. Penney, the third-largest U.S. department-store chain, said same-store sales dropped 4.6 percent. Analysts surveyed by Retail Metrics had predicted unchanged sales. J.C. Penney reduced its third-quarter profit forecast to as little as $1 a share from $1.28 per share. Kohl's Corp.'s said third-quarter profit may be at the low end of its forecast.

Target, the second-largest U.S. discount chain, said same- store sales increased 1.2 percent. Results missed analysts' estimates and came in below Target's already lowered forecast for a 1.5 percent to 2.5 percent gain. Full-year profit may now be below the $3.60 a share the retailer had forecast.

Limited, the owner of the Victoria's Secret lingerie chain, said same-store sales fell 4 percent, lower than estimates, and also reduced its profit projection. Teen retailer American Eagle Outfitters Inc. yesterday also cut its third-quarter forecast.

Macy's Results

Macy's said sales fell 2.7 percent, more than triple the drop analysts estimated. The retailer blamed warm weather in the Northeast and Midwest. Gap's same-store sales decline of 7 percent also missed estimates. Abercrombie & Fitch Co., the clothing retailer for teens and college students, said same-store sales dropped 4 percent, more than double the estimated loss.

Same-store sales at women's retailer Chico's FAS Inc. fell 8.3 percent, missing analysts' estimates of a 7 percent decline. Cato Corp.'s same-store sales drop of 7 percent was more the triple the decline estimated.

Children's Place Retail Stores Inc., the operator of the Disney Store clothing chain, said sales fell 3 percent. Analysts predicted a 0.2 percent gain.

Comparable store sales at Ross Stores Inc., owner of the Dress for Less discount chain, rose 6 percent, beating analysts' estimates of 1.1 percent growth.

Same-store sales at TJX Cos., AnnTaylor Stores Corp. and Aeropostale Inc. also exceeded what analysts anticipated.

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

Last Updated: October 11, 2007 16:27 EDT