Many retailers had to discount more than they wanted to draw customers over the holidays, cutting into profits even as December sales came in slightly better than expected overall.
Retailers such as J.C. Penney Co Inc, Gap Inc, Limited Brands, American Eagle Outfitters and Children's Place all called the holiday season highly promotional.
If shoppers turned out, they did so on condition of getting good deals, something experts said would continue into 2012.
The consumer is in the driver's seat -- they have the power, said David Bassuk, head of AlixPartners global retail practice. We'll still see aggressive promotions in the next six months.
Penney lowered its fourth-quarter profit forecast, citing higher markdown activity, and its shares fell 5 percent in early trading. Kohl's Corp also lowered its holiday-quarter profit outlook after a disappointing December and a disastrous sales decline in November.
Target Corp's sales did rise, but they missed expectations as the discounter faced a resurgent Wal-Mart Stores Inc. Target lowered its quarterly profit forecast.
Gap was one of the biggest losers, with overall same-store sales down 4 percent.
Costco Wholesale Corp's 7 percent same-store sales jump just missed the 7.6 percent increase Wall Street was eyeing.
In contrast, chains that have done well in recent months continued to do so in December, and several of those raised their profit forecast, including Macy's Inc and Limited Brands.
But even retailers like TJX Cos Inc, which runs the T.J. Maxx and Marshalls chains and had a much better-than-expected same-store sales gain of 8 percent, said it priced aggressively.
Overall, sales rose 3.4 percent at the 22 retailers tracked by the Thomson Reuters same-store sales index, compared with the 3.3 percent analyst forecast.
Better news on the job market, an upswing in the stock market and December bargains spurred consumer spending in a hopeful sign for 2012, analysts said.
But shoppers, especially those on tight budgets, could balk if they do not find bargains to their liking in the new year.
The deals were good, I guess that's why I spent more, said Joanne Marcelle, 52, at an Old Navy store in New York's Herald Square on Wednesday.
But the unemployed Bronx grandmother said she still depends on bargains. I can't say what the year will hold for us.
Store traffic rose in December, particularly in the days leading up to and following Christmas.
Retailers pulled out all the stops to lure shoppers. Macy's expanded its late-night hours to more stores in the final days before Christmas, and Wal-Mart brought back a lay-away program that challenged Target.
The National Retail Federation expects retail sales to be up 3.8 percent for the November-to-December period.
(Reporting By Phil Wahba and Dhanya Skariachan in New York, and Nivedita Bhattacharjee and Brad Dorfman in Chicago, editing by Maureen Bavdek and John Wallace)