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SAN FRANCISCO (Reuters) - Investors may be in a merry mood, but U.S. retailers ranging from Target Corp to Saks Inc to Kohl's Corp are warning Wall Street to keep its expectations in check for this holiday season.
The broader U.S. stock market fell on Tuesday after discount retailer Target said it might be a stretch to meet Wall Street's fourth-quarter earnings forecast. It said early November sales were trending below its expectations, and shoppers had pulled back on discretionary purchases.
The comments were the most pointed effort to date by a retailer to lower holiday expectations, and reflected the sentiment of other industry titans such as Wal-Mart Stores Inc, the world's largest retailer, and department store operator Macy's Inc.
"In our view, sell-side analysts are somewhat more optimistic across most of our industry than we believe is warranted in light of the harsh realities of the current environment," Target's Chief Financial Officer Doug Scovanner said on the company's earnings conference call.
Investors have been piling into retail stocks since March, betting the worst has passed for the consumer and retailers' sales and earnings can only improve as shoppers once again begin spending.
The S&P Retail Index has jumped 77 percent since March 9, while the Dow Jones industrial average has risen 59 percent in that time.
But in the past week, retailers have made it clear that consumers are in no mood to splurge.
The all-important holiday shopping season kicks off in earnest on the day after U.S. Thanksgiving, also known as Black Friday, which falls on Nov. 27 this year.
Target said consumers are more disciplined in their spending and prefer buying cheaper private brands over name-brand items. While sales of discretionary merchandise, like apparel, improved in its recently completed third quarter, some of that demand has waned in early November.
"So much of this fourth quarter is going to be decided in the two days after Thanksgiving and four weeks prior to Christmas and nobody really knows at this point in time how good it's going to be," said Target Chief Executive Officer Gregg Steinhafel.
In early October, the National Retail Federation said it expected total U.S. holiday sales would fall 1 percent this year, compared with a drop of 3.4 percent drop in 2008.
Days after it issued the forecast, retailers reported stronger-than-expected September sales. The results raised investors' hopes that holiday sales could outperform as shoppers showed a willingness to spend on back-to-school merchandise.
That optimism faced a reality check earlier this month, when more than half of the U.S. retail chains that report monthly sales posted October results that fell short of Wall Street's heightened expectations.
"I think October...was good to bring expectations down," said Barclays Capital analyst Robert Drbul.
Upscale department store chain Saks, which slashed prices on its designer goods by 70 percent last Christmas, estimated on Tuesday that its fourth-quarter, same-store sales would be down "in the high single digits" after a year of double-digit declines in luxury sales.
While the luxury market may be improving, Saks said consumers remain "shell shocked" and will likely focus on value for some time.
If upscale shoppers are "shell shocked," middle- to lower-income income shoppers are also not ready to spend.
"Customers continue to tell us they're concerned about their own finances and unemployment," Wal-Mart U.S. chief Eduardo Castro-Wright said. "We recognize that some customers may be more cautious in their holiday spending."
The U.S. unemployment rate stands at a 26-1/2 year high of 10.2 percent, and Wal-Mart Treasurer Charles Holley said consumers would need to see a sustainable drop in the unemployment rate before they would feel more optimistic.
Retailers are planning for a cutthroat holiday season.
U.S. Walmart stores are slashing prices each week ahead of Christmas. On Tuesday, Walmart said it would offer fresh discounts on toys and electronics starting Saturday.
Walmart.com has also slashed prices on hotly anticipated books, igniting a price war with Amazon.com Inc.
Meanwhile, websites claiming to have copies of Target's advertising circular for Black Friday say the retailer will be selling a coffeemaker and a slow cooker for $3 each.
Target said it was "unable to confirm the accuracy" of pricing information posted online by other sites.
Kohl's Corp Chief Executive Kevin Mansell told Reuters last week that he was looking at new areas in which to offer exclusive brands, such as men's apparel and women's accessories, to lure shoppers.
"We recognize that in a lower spending environment that this is going to be all about winning market share," he said in an interview.
Additional reporting by Phil Wahba in New York, editing by Leslie Gevirtz