Big Retail Warnings Begin

Men's Wearhouse, American Eagle and Hot Topic each slash profit targets.
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Three retailers out with December sales data late Wednesday did nothing to improve Wall Street's dismal views of the holiday period.

Men's Wearhouse

(MW)

,

American Eagle Outfitters

(AEO) - Get Report

and

Hot Topic

(HOTT)

each cut their profit targets for the fourth quarter after seeing slow traffic in December.

Men's Wearhouse slashed its fourth-quarter earnings forecast to 16 cents to 18 cents a share, well below prior guidance of 43 cents to 48 cents. The earlier projection was considered weak to begin with; it fell well short of analysts' target of 53 cents when given in November.

Analysts, on average, most recently expected a profit of 46 cents a share for the quarter.

Men's Wearhouse said had substantially lower traffic levels at all of its retail stores in December. That resulted in lower-than-planned same-store sales, or sales at stores open at least a year, though the company didn't provide the exact figure.

The men's clothier said it expects traffic trends will continue to be weak in January. Shares were plunging 13.5% to $22.01 after hours.

At American Eagle, December same-store sales fell 2%, in line with analysts' expectation, according to Thomson Financial. The teen-apparel seller said it had a "difficult" traffic environment, particularly in the weeks prior to Christmas, though it saw broad-based strength in its men's business.

American Eagle now projects earnings of 64 cents to 65 cents a share for the fourth quarter, down from its earlier view of 67 cents to 70 cents. Analysts, on average, were looking for a 68-cent profit.

Hot Topic, a mall-based teen retailer, reported a 6.2% drop in December same-store sales. Analysts expected a 6.5% decline for the month.

The company lowered its fourth-quarter profit forecast to 25 cents to 29 cents a share from a previous view of 29 cents to 33 cents. Wall Street targeted earnings of 29 cents a share. Shares of Hot Topic were tumbling 10.5% to $4.19 in after-hours trading.

Most other big chains will report their December sales on Thursday morning, and the results are expected to bleak. Many analysts have predicted that 2007 will be the weakest holiday in years as strapped consumers reined in spending amid the housing slowdown.

In addition to being hit by slow sales, retailers' bottom lines are expected to show weakness as heavy discounting whacked margins.

This article was written by a staff member of TheStreet.com.