US retailers report profit falls

The slumping housing market has seen sales slide at Home Depot

Some of the US's best-known retailers have reported slumps in profits for the three months to the end of January, as the recession begins to bite.

Target said profits were down by 41% as customers cut back on more expensive clothes and furniture, while more fell behind on store card payments.

Macy's said profits were almost 59% down owing to costs of closing regional offices and shops, and weak sales.

And closing some of its small brands took Home Depot to a $54m (£37m) loss.

The results came as figures suggested US consumer confidence was at a new low - with the Conference Board's key index falling to 25 in February from 37.4 in January.

Retail sales figures are significant as the US economy relies on consumer spending, which accounts for two-thirds of all economic activity.

And most retailers have been warning they are feeling the pinch as consumers continue to tighten their belts during the economic slowdown.

Analysts say that some shoppers are shifting their expenditure to focus on basics such as food and toiletries and spending less on its trendy home furnishings.

Cutting costs

Target's results was its sixth consecutive fall in quarterly profits. Its net profit fell to $609m in the three months to 31 January from $1.028bn in the same period a year ago.

And its credit card division reported a pre-tax loss of $135m, compared with a profit of $189m year ago. The loss was due to a $245m addition to cover accounts that may not get paid off.

Shoppers are cutting back on more luxury items at stores such as Target

Macy's earned $310m, compared with $750m a year earlier, while sales were down 7.7% to $7.93bn.

Its results included $17m in expenses associated with cost-cutting measures announced last year, including store closures.

Earlier this month, it said it would that it would cut 7,000 jobs - almost 4% of its workforce - and cut its dividend to shareholders.

Home Depot, which is closing four small brands, suffered from the housing market slump, which has seen fewer people buying new homes and spending money on repairs.

Its $54m loss was on sales of $14.6bn in the three months to 1 February, down 17% from a year earlier.