CHICAGO (Reuters) - Wal-Mart Stores Inc and other top U.S. retailers delivered disappointing December same-store sales and profit warnings on Thursday, sparking fresh recession concerns that hit stock and currency markets.

Nearly a dozen retailers, including Macy’s and Target Corp, told investors that profits would take a further hit in the fourth quarter, which includes key holiday sales.

The results confirmed that the U.S. recession, job losses and winter storms right before Christmas produced the most dismal holiday shopping season in nearly 40 years.

The International Council of Shopping Centers said holiday sales, which include November and December, fell 2.2 percent -- the worst result since it began compiling such data in 1970.

The new year is not expected to bring relief, with the ICSC forecasting a 1 percent decline in January sales at U.S. retail chains open at least a year, or same-store sales.

Wal-Mart, the world’s largest retailer, surprised investors who have seen it outperform rivals as the store of choice in a downturn. Its U.S. December same-store sales rose 1.7 percent, excluding gasoline -- worse than Wall Street’s expectation of a 2.8 percent increase.

It also cut its profit forecast for its fourth quarter, which began on November 1.

While some retailers beat sales expectations, many of those did so only by slashing prices, which will hammer fourth-quarter margins.

“The sales numbers are not a lot worse than expected, but I think what’s really going to take a toll on these companies is when you report earnings and you see what kind of discounts you had to have to pull the numbers,” Morningstar analyst Joe Beaulieu said.

Wal-Mart shares fell 7.5 percent. The Standard & Poor’s retail index rose 0.8 percent.

The Wal-Mart news weighed most of the day on U.S. stocks, helped U.S. Treasury debt prices extend gains in a safe haven bid and prompted a tumble in the U.S. dollar.

Overall, same-store sales fell 0.9 percent, according to the Thomson Reuters index of 35 stores, slightly better than the 1 percent decline forecast.

Excluding Wal-Mart, the drop was 3.6 percent, better than an expected 4.8 percent decline.

WEAKER JANUARY EXPECTED

The report from Wal-Mart was the latest sign of how the recession has prompted consumers to cut down on any but the most essential purchases.

“The economy is in real difficult shape here, and their core consumers, lower- and middle-income consumers, that have really been flocking there cut back on discretionary spending,” said Ken Perkins, president of research firm Retail Metrics.

With the holidays over and nothing to spur recession-wracked consumers to shop until a new economic stimulus plan is approved by Congress, analysts expect the coming months to remain tough for retailers.

A customer shops at a Wal-Mart Supercenter in Rogers, Arkansas, June 5, 2008. REUTERS/Jessica Rinaldi

Wal-Mart said January same-store sales could be flat to up 2 percent. Rival Target Corp said sales could show a mid-single-digit decline. Limited Brands Inc, parent of Victoria’s Secret, forecast a mid-to-high teens drop in January.

Other retailers posting share price declines were Abercrombie & Fitch Co, down 3.5 percent after saying that fourth-quarter profit would be far below its previous forecast.

Some gainers included Sears Holdings Corp, up 23 percent after forecasting fourth-quarter profit above Wall Street estimates and Urban Outfitters Inc, which said same-store sales at its namesake stores rose 3 percent during the holiday.

REPEATED MARKDOWNS

Retailers across the board offered deep discounts to lure shoppers in the holiday season, often repeatedly marking down items like clothing as traffic to stores proved weak.

Profit warnings spanned from the lowest end of the retail spectrum to upscale store chains.

Macy’s same-store sales fell 4 percent in December, besting the average analyst estimate of a 5.3 percent drop, and said it would close 11 stores. But the company cut its fourth-quarter profit forecast on expectations for a steeper decline in November-January.

Department store operator J.C. Penney Co Inc said same-store sales fell a less-than-expected 8.1 percent, but the company had to cut prices aggressively to help sales in the later part of the month.

Clothing seller J Crew Group Inc expects a loss of 24 to 29 cents a share for the quarter instead of a previously forecast profit of 5 to 10 cents.

Gap Inc same-store sales fell 14 percent, worse than the 9.3 percent average forecast, and said fourth-quarter profit would be worse than analysts expected.

Luxury retailer Nordstrom Inc said deep markdowns meant it would not meet its fourth-quarter earnings forecast, while Saks Inc still expects a drop in fourth-quarter gross margin from a year ago.