Holiday Outlook Turns Grimmer After Dismal October

Shoppers leave a Williams-Sonoma store in New York in this file photo. The nation's retailers saw...

Shoppers leave a Williams-Sonoma store in New York in this file photo. The nation's retailers saw their sales plummet last month to the weakest October level since at least 1969, as the financial crisis and mounting layoffs left shoppers too scared to shop.

(AP Photo)

Retailers suffered through the weakest October in at least 39 years, despite frenzied price cutting as they desperately try to pull in consumers who are too worried about their finances to shop.

The sales tallies from major retailers on Thursday — many showing declines of 10 percent or more — suggests that shoppers will remain skittish through the holiday season, buying presents for children but not much else.

"There was every reason for consumers not to shop," said Walter Loeb, a New York-based retail consultant. "Layoffs are rising, the stock market is tumbling. Consumers are feeling poorer."

One of the few bright spots was Wal-Mart Stores Inc., whose results show how much frugal consumers are focusing on necessities. The world's largest retailer also said it will cut prices on items from toys to laptops over the next seven weeks. Department store J.C.Penney Co. is also offering extended hours and markdowns of up to 60 percent this weekend.

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The stunning and rare drop in sales last month, following an already weak September, showed the toll the financial crisis is taking on all shoppers, from teens to the affluent, and analysts expect no recovery until at least the second half of 2009.

Not even receding gas prices — their rise a cause of angst for shoppers just a few months ago — are expected to provide much relief for the holidays as consumers fixate on shriveling retirement funds and job security amid widespread layoffs. The number of people continuing to receive jobless benefits reached its highest level in more than 25 years, according to government figures released Thursday.

All of that is fueling more concern about the retail industry, which is expected to report its sixth consecutive quarter of profit declines when it reports third-quarter results this month. A growing number of merchants are facing a do-or-die holiday season, having already seen competitors like Mervyns LLC and Linens 'N Things forced to liquidate.