Wall Street has been worried that bitterly cold weather and heavy snow in many parts of the United States this month would hurt demand because stores had stocked spring merchandise and had little to offer customers looking for winter coats.
Consumer spending is the biggest driver of the U.S. economy and has held up well in the face of rising energy costs. Sales were better than expected in January, in part because of unusually warm weather, but analysts say there is little chance that trend will carry over into February.
The Standard & Poor's retail index was down 1.1 percent in morning trade Friday, with Nordstrom and Gap among the biggest decliners.
Gap, the largest U.S. apparel retailer, said Thursday that customer traffic was down some 13 percent in February, and it now expects sales at stores open at least a year — or same-store sales — to be down for the first half of the year.
The retailer also forecast 2006 profit that was below Wall Street expectations.
"There is no sign of a turnaround at Gap Inc. and our confidence is low that one will happen in 2006," Goldman Sachs analyst Margaret Mager wrote in a note to clients.
"We think Gap Inc. has lost its authority in the apparel marketplace and is suffering a confidence crisis that is subtly repelling the consumer," Mager said, adding that she expects Gap to endure a "long grind downward in the business."
Gap has been among the biggest laggards in the retail sector as unpopular clothing styles drove customers away. But analysts said the retailer probably won't be alone in reporting disappointing February results.
"Cold and snowy February weather typically hurts overall store traffic, and with little Winter seasonal merchandise left and consumers less inclined to think Spring due to the weather, we believe that sales suffered," Citigroup analyst Deborah Weinswig wrote in a note to clients.
Target Corp. set off alarm bells earlier this month when it lowered the top end of its February sales forecast, but a lower-than-expected profit forecast from high-end retailer Nordstrom Thursday suggested that the weakness was not limited to the discount segment.
Still, some on Wall Street said Nordstrom was aiming low and should be able to reach at least the high end of its forecast.
CIBC World Markets analyst Dorothy Lakner said Nordstrom management was "being its usual conservative self.
"Nordstrom has pulled back recently, hurt by cautious guidance from retailers for 2006 as well as more near-term concerns on February sales," she wrote. "We'd be buyers on weakness."