Analysis-deep sound warning for US retail profits discounts

NEW YORK, Dec 6 Reuters) — consumer discounts this holiday season have carousing, but it means thinner profit margins for retailers Wal-Mart Stores Inc., Neiman Marcus and car manufacturer, a red flag for investors who have ridden a sector rally all year round.

This week clothing retailers including Aeropostale Inc ' in the fourth quarter, guess Inc lowered profit forecasts and on Thursday, several big retailers, posted disappointing sales in the United States for November.

"We have an economy which is growing very fast. Prices in most cases come down, "said Jim McNerney, head of the Business Roundtable and Chief Executive of aircraft manufacturer Boeing Co, sharing the Roundtable survey opening on Wednesday.

"Every Member of the Business Roundtable, which represents half the US economy price pressure is confronted," he added.

Discounting is likely to continue as retailers seek to hold onto market share. Shares of retailers, big winners this year begin that look expensive, and some investors position themselves to a decline in profit.

"It is in a sense that the economy is recovering, there is an increase in sales, is still price pressure on retailers, especially the traditional, troubling," said Rick Meckler, President of LibertyView capital management in Jersey City, New Jersey.

Most large retail sectors their margins on earnings before interest and taxes, or EBIT have seen to decline from last year in the last quarter, according to Thomson Reuters StarMine. A group of 11 multiline retailers, including target and Macy's, have seen that this margin drop to 5.2 percent from 6 percent, while the auto companies by 3.6 per cent to 1.5 per cent have fallen.

A remarkable divergence is in stores, includes a series of luxury, clothing name and home improvement companies. Their margin is increased to 9.8 percent from 9.2 percent, partly because of Home Depot, Signet jewelry and O'Reilly automotive.

INVENTORY BUILDING

Great seller of apparel and gift ideas expected to face cost pressure in the entire last quarter. The newest report on the third quarter gross domestic product showed a surprising increase in inventories – specifying a few too optimistic sales lower expectations that through rates are set.

L Brands Inc, that parent of Victoria's secret, reported on Thursday that same store sales fell 5.5 percent, while analysts expected a decline of 1.1 percent. Profit margins had taken a hit due to reinforced offers but would not say how much to say. The company also noted that in the Victoria's secret online store down unsold clothes mark it.

Joel bines, managing director at consulting firm AlixPartners, said that the disorder at some retailers allow clothing suspect that many shops more were easy to sell, ordered, as she can and even luxury boutiques, which usually avoid, holiday discounting, in have gotten over the action for the first time since 2008.

"It will hurt all the edges. It is a "Beggar-thy-neighbour" battle for market share,' "he said."

On Wednesday more than 24 percent express shares fell in afternoon trading, so that the fashion retailer of the top losers on the New York Stock Exchange after it a weaker than expected holiday quarter surrounded by intensive promotions forecast.

Thomson Reuters data for consumer discretionary stocks show estimates of earnings growth for the fourth quarter rose 4.4 percentage points to 9.8 percent since Oct. 1 have fallen. The total saw S & P, its estimates fall 3.1 percentage points to 7.8 percent, but some keep the consumer has way.

"Estimates in this sector, aggressive", Adam Parker, U.S. equity Chief Strategist at Morgan Stanley, said has an "underweight" rating on discretionary within the sector.

The S & P discretionary in the sector of consumer group of stocks has 35.8 percent won this year, which ranks it among the 10 S & P sectors place, asked for only health care shares. But in the last five days discretionary sector 1.1 percent compared with a 0.6 percent decline in the overall S & P 500 has lost.

HEAVY DISCOUNTING

David Strasser at Janney capital markets said he expect stores to deep discounts through the rest of the holiday season offer middle and lower income buyers hesitate, are free to spend.