Retailers like Children's Place Retail Stores Inc

and Brown Shoe Co Inc are struggling to protect their margins as they continue to discount heavily to drive sales, resulting in weak quarterly profit reports and bleak forecasts.

Apparel and footwear retailers have been trying to cut back on discounts that were used to lure bargain-hungry shoppers in the downturn, but warmer-than-expected weather forced some of them to reduce prices to move winter merchandise.

Children's Place shares were trading down 4 percent on the Nasdaq, while Brown Shoe shares plunged as much as 14 percent, making it one of the biggest losers on the New York Stock Exchange.

Brown Shoe saw boot sales fall 5.7 percent during the quarter, while Children's Place slashed prices of winter apparel like sweaters and cardigans to push sales.

Children's Place, which competes with privately held Gymboree Corp, expects gross margins to decline in the first quarter on higher souring costs for its spring and summer lines.

The kids clothing retailer, which struggled with inventory and merchandise issues in the past, has been heavily discounting at the end of each season to get rid of piled up products.

Meanwhile, footwear retailers like Brown Shoe are also facing sharp declines in sales of toning shoes, a once popular item that was supposed to exercise leg muscles by making the wearer work harder while walking. Brown Shoe said sales of toning shoes fell more than 59 percent in the fourth quarter.

On Wednesday, Brown Shoe projected full-year adjusted earnings of 78 cents to 92 cents a share, while analysts were expecting 78 cents a share.

Children's Place forecast first-quarter profit of $1.03 a share to $1.08 a share, while analysts were expecting a profit of $1.14 a share, according to Thomson Reuters I/B/E/S.

However, department store operator Bon-Ton Stores Inc bucked the trend with a strong full-year profit, despite reporting weak quarterly results on discounting of winter products, sending its shares soaring 33 percent.

(Reporting by Ranjita Ganesan, Meenakshi Iyer and Arpita Mukherjee in Bangalore; Editing by Viraj Nair)

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