Jan. 10 (Bloomberg) -- Wal-Mart Stores Inc. and Costco Wholesale Corp. posted December sales that exceeded analysts' estimates as shoppers increased spending at discount chains after feeling the pinch of higher gasoline costs and lower home prices.

The results provided a glimmer of hope after the worst holiday-sales season since 2002. Limited Brands Inc., AnnTaylor Stores Corp. and Kohl's Corp. cut their profit forecasts following declines in December sales.

Wal-Mart, Costco and TJX Cos. shares rose as discounters and wholesalers attracted customers grappling with the worst housing slump in 27 years and gasoline that costs more than $3 a gallon. Two-thirds of companies tracked by Retail Metrics LLC missed sales estimates, led by women's clothing makers and department stores, resulting in the worst holiday shopping season in five years.

``People are generally relieved that some of the earnings cuts aren't as bad as expected,'' said Lauri Brunner, a retail analyst at Thrivent Asset Management in Minneapolis, which oversees a $71 billion portfolio. ``It doesn't mean that there's not more bad news heading into 2008. Comparable-store sales are still negative, traffic is still down across the board and promotions may step up in January.''

U.S. retailers' holiday sales gained 2.2 percent, the slowest pace in five years, the International Council of Shopping Centers said today, based on results from 45 chains. The National Retail Federation, which releases its November- December figures next week, also predicts the smallest gain since 2002.

Two Months

Stores typically count on the final two months of the year for about a fifth of their annual sales.

The Standard & Poor's 500 Retailing Index rose less than 1 percent to 378.38 at 4:07 p.m. The index has dropped 7.7 percent this year through yesterday following an 18 percent decline in 2007.

Wal-Mart, the world's largest retailer, climbed $1.50, or 3.2 percent, to $48.40 in New York Stock Exchange composite trading. Marshalls' owner TJX climbed $1.83, or 6.9 percent, to $28.45, the biggest increase in more than four years. AnnTaylor dropped $3.65, or 15 percent, to $19.95, the most in more than six years.

``People thought the apocalypse was coming,'' said Eric Beder, a retail analyst at Brean Murray Carret & Co. in New York. ``It wasn't a total wipeout. There was good news from some discounters.''

U.S. retailers' December same-stores sales climbed 0.9 percent, below the ICSC's initial forecast. A calendar shift moved a week of holiday sales into November from December, hurting last month's results and helping November post a 3.5 percent increase, according to the council.

Department Stores

December comparable-store sales dropped 7 percent at department stores and 4.4 percent at specialty-apparel retailers. Same-store sales are considered a key measure of a retailer's performance because they exclude locations that have recently opened or closed.

Retailers faced a ``lull'' in sales until about Dec. 15 because of poor weather and people waiting for discounts, said Michael McNamara, vice president of research and analysis at MasterCard Advisors. Chico's FAS Inc. slashed merchandise by 50 percent to lure in customers as mall traffic slowed.

AnnTaylor said in a statement today that a ``double- digit'' decline in customer visits at its Ann Taylor and Loft chains and a ``highly promotional retail environment'' caused it to increase promotions, hurting margins. The company cut its full-year profit forecast.

Women's clothing retailers Chico's and Cato Corp. also cut profit forecasts today after reporting same-store sales declines that missed analyst estimates. Men's Wearhouse Inc. and American Eagle Outfitters Inc. reduced their earnings projections yesterday.

Consumer Spending

``You could run all the sales you want; if the consumer is not going to spend, he's not going to spend,'' Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, said today in an interview on Bloomberg Television. The firm oversees $77 billion in assets, including retailers' shares.

Macy's Inc., the second-largest department-store company, said sales dropped 7.9 percent, missing analysts' estimate for a 6.4 percent fall.

``Macroeconomic trends led customers to spend cautiously for the holiday,'' Chief Executive Officer Terry Lundgren said in a statement. Macy's fell 7 cents to $22.60.

Consumer Confidence

Consumer confidence fell to the lowest level in more than two years in December, according to the Reuters/University of Michigan index released Dec. 21. The December unemployment rate jumped to a two-year high, the Labor Department said Jan. 4. Federal Reserve Board Chief Ben S. Bernanke said today that ``downside risks to growth have become more pronounced.''

Gap Inc., the biggest U.S. clothing retailer, said same- store sales fell 6 percent, more than double Retail Metrics LLC's estimate for a 2.4 percent decline. Abercrombie & Fitch Co. said comparable-store sales retreated 2 percent. Analysts estimated a 0.9 percent decline, according to Swampscott, Massachusetts-based Retail Metrics.

Limited Brands, which owns the Bath & Body Works and Victoria's Secret chains, said fourth-quarter profit would be at the ``low-to-mid point'' of its forecast of 90 cents to $1.05 a share, after saying December same-store sales fell 8 percent. The average analyst estimate was for 4 percent decline.

Kohl's said December same-store sales fell 11.4 percent. Fourth-quarter profit will be at most $1.34 a share, less than the $1.47 estimated by analysts. J.C. Penney Co. also missed estimates and said fourth-quarter results would be at the low end of its forecast.

Wal-Mart Gains

Wal-Mart's December gains were driven by sales of food, prescription drugs and consumer electronics. TJX and Ross Stores Inc., which sell designer clothes at discounted prices, both raised their profit forecasts.

``People are really looking for value in this environment,'' Lori Wachs, a Delaware Investments fund manager who's based in Philadelphia and helps manage $100 billion, said today in an interview on Bloomberg Radio.

Neiman Marcus Group Inc., the privately held luxury retailer, posted a 2.9 percent increase. Nordstrom Inc.'s sales dropped 4 percent. Analysts expected a 3.8 percent decline at the luxury department-store chain.

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

Last Updated: January 10, 2008 17:28 EST