Macy's, the flagship chain of Federated Department Stores Inc., is promoting ``amazing deals'' and free shipping on bedding and china. Williams-Sonoma Inc.'s Pottery Barn slashed rattan furniture by 60 percent. Home Depot Inc. has its own ``special values'' on appliances.

Americans' love affair with their homes has cooled, and retailers that jumped in to sell them merchandise during the housing boom are reeling, cutting prices and profit forecasts. Their shares have retreated, with Williams-Sonoma dropping 27 percent in 2006.

While today's Commerce Department report on new homes sales showed the biggest increase in December since April, the housing market may not have bottomed out yet, and that is clouding the retail outlook for 2007. Sales of previously owned homes fell 0.8 percent, capping the largest annual slump since 1989, the National Association of Realtors reported yesterday.

``You could say the bubble burst in the housing market, and it's had a dramatic impact on retailers who sell merchandise for the home,'' said Rosalind Wells, chief economist for the Washington-based National Retail Federation. ``Retailers still will feel that impact this year.''

Shrinking sales growth at U.S. stores that offer home- related goods pulled down the nationwide holiday gain to a smaller-than-expected 4.4 percent, from 6.1 percent a year earlier.

Building materials, furniture and appliance stores posted sales of $583 billion in 2006, representing a quarter of all U.S. retail sales. Their year-over-year sales growth slid to 2.7 percent in December from a jump of 16 percent last January.

Weaker Housing Market

Retailers like Sears Holdings Corp. have suffered from a weaker housing market, more stores offering home goods and fewer people increasing their spending. Thirty-two percent of U.S. consumers spent more on home furnishing in 2006, less than the 38 percent in 2005, according to a survey released Jan. 19 by Columbus, Ohio-based Retail Forward Inc., a market research and consulting firm.

A record 19 percent of consumers reported putting on hold purchases of $500 or more in December, according to a survey of 1,000 Americans by Charleston, South Carolina-based America's Research Group.

Existing home sales, representing 85 percent of total housing sales, will dip this year to 6.4 million, after an 8.2 percent retreat in 2006, the Washington-based realty group said.

After jumping 12 percent in 2005, the median price of U.S. homes increased 1.1 percent to $222,100 last year, the group said. It forecasts a 1.5 percent gain in 2007.

`Savings Banks'

``Consumers use their homes as their savings banks,'' Wells said. ``Without home equity cash-outs, consumers are not going to feel as affluent.''

Neither are retailers, nor their shareholders. Williams- Sonoma shares declined 8 cents to $34.24 at 4:28 p.m. in New York Stock Exchange trading. Home Depot fell 15 cents to $39.94.

A home-retailing index compiled by New York-based Telsey Advisory Group declined 7.5 percent to 98.58 today from a two- year peak of 106.6 in July 2005.

The measure, which uses a base of 100, is a composite of 17 home improvement, furniture and furnishings companies. Ethan Allen Interiors Inc., Home Depot and Williams-Sonoma were among those whose shares have declined.

U.S. retail sales growth will shrink to 4.8 percent in 2007, the smallest gain in five years, said the retail federation. Consumer spending accounts for 70 percent of gross domestic product.

Pottery Barn Sales

At Pottery Barn, which represents almost half of San Francisco-based Williams-Sonoma's revenue, comparable sales increased 4.3 percent a year from 2002 to 2005. They will be ``slightly negative'' in the latest fiscal year, ending Jan. 28, Patrick Connolly, Williams-Sonoma executive vice president, said at a Cowen and Co. conference Jan. 10.

The company lowered its fourth-quarter profit projection, saying it needed to discount items at Pottery Barn to clear out inventories.

``You have a competitive and highly promotional marketplace,'' Connolly said.

Hoffman Estates, Illinois-based Sears, the biggest U.S. department store operator, said third-quarter sales declines were ``more pronounced'' in home fashion and lawn and garden products at Sears stores than in other categories.

Federated, No. 2 behind Sears, blamed disappointing third- quarter revenue on weak home-merchandise sales at some stores, and said those conditions persisted in December.

Home Depot, Ethan Allen

Home Depot, the world's largest home-improvement retailer, saw third-quarter comparable sales decline 5.1 percent after a 3.6 percent gain a year earlier. The Atlanta-based company lowered its annual profit forecast as well, and earlier this month ousted Chief Executive Officer Robert Nardelli. Its share price declined 1.1 percent in the last year.

Manufacturers are feeling the pain, too. Danbury, Connecticut-based Ethan Allen, which has nine production facilities and 300 retail locations, will report a 1.6 percent sales decline for the year ending in June, according to the average estimate of nine analysts compiled by Bloomberg. A year earlier, sales gained 12 percent. The shares fell 11 percent to $37.73 in the last year.

Retailers are diversifying to better weather such slowdowns, Telsey analyst Joseph Feldman said. Home Depot is targeting contractors and builders as customers in addition to the do-it-yourself market, and expanding overseas.

Some home-related retailers see no need for a retrenchment. Bed Bath & Beyond Inc., the largest U.S. home-furnishing retailer, sees a rosy future. The Union, New Jersey-based chain said it can expand to more than 1,300 stores, up from about 800 stores now and 34 in 1992.

``Although we are obviously aware of results being reported by other operators and the current macroeconomic environment, we feel strongly that home goods is an attractive retailing sector,'' company Co-Chairman Warren Eisenberg said in December.

Source : Cotten Timberlake