Wal-Mart, Kohl's: Holidays Could Be Rough

ANNE D'INNOCENZIO

NEW YORK (AP) — Shoppers' focus on staples such as socks and underwear is driving murky holiday outlooks at Wal-Mart and Kohl's, even as both posted higher third-quarter earnings Thursday.

Both signaled they plan aggressive discounting to hang on to customers and drive sales this holiday season.

Wal-Mart Stores' price-cutting campaign is bringing more shoppers in the door. But they're spending less when they get there because the goods are priced lower — because of deflation, especially for meat and dairy items, and discounts designed to bring people into its stores.

The price decreases at Walmart helped fuel a second consecutive quarterly decline in sales at U.S. stores open at least a year, a key measurement of a retailer's health because it excludes the effects of expansion. The company expects sales could continue to decline through the fourth quarter.

The discounts seems to be working. Company Treasurer Charles Holley told reporters Thursday that it has had "a very good" response to its aggressive price cutting on holiday items like its heavily advertised 12-pound turkey for $5. He added that Walmart.com has had "record hits" following price slashing on highly anticipated top book titles and DVDs. And Wal-Mart boosted its full-year profit outlook.