Home Depot, the world's biggest DIY retailer, was the highest profile victim of mixed Christmas trading across the Atlantic.
The US retailer's share price was hammered last week when it announced that same-store sales in the fourth quarter fell by up to 10 per cent.
It had previously indicated a drop in the 3 to 5 per cent range.
Chief executive Bob Nardelli said: 'Lower customer transactions and lower-than-expected performance in traditional gift categories, like hardware and power tools, severely impacted results.'
He denied that the retailer will need to repeat the big clearance Sale it conducted in January last year. But he admitted the difficult trading environment will continue into next year.
Analysts blamed Home Depot's woes on aggressive cost-cutting, which caused customers to switch to rivals because of poor staffing levels and reduced merchandise assortments.
While Home Depot said the outlook remains bleak, Lowes - its rival and the world's number two - said same-store sales are on target and will be up by between 2 and 4 per cent.
Merrill Lynch analysts said one of the biggest challenges for Home Depot is to stop losing market share to Lowes. However, Home Depot was credited with addressing merchandising and store layout to meet the challenge.
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