Retailers report weak sales for September

Discount chains and luxury stores both report slow sales.

NEW YORK (AP) — American consumers went into hiding in September, leaving retailers with dismal sales and an uncertain future well beyond the holiday season as the fallout from the financial meltdown pushes spending even lower.

As retailers reported their monthly sales figures Wednesday, even discounters weren’t immune to shoppers’ mounting worries about their financial security.

“Discretionary spending has come to a trickle,” said Ken Perkins, president of research company RetailMetrics LLC. “Consumers are the most worried I have seen since at least the 1991 recession. There are so many factors laying on their psyche.”

Wal-Mart Stores Inc., the world’s largest retailer, said sales of discretionary items were weak as it posted solid results that were nevertheless a bit below expectations. Target Corp. fared far worse, reporting a bigger-than-expected drop and said it expects problems with its credit card business to last through the rest of the year as customers have trouble making payments.

Luxury stores such as Neiman Marcus Group Inc. and Saks Inc. suffered sharp drops as well-heeled shoppers held off on buying $600 stilettos and other luxuries. Many mall-based apparel stores and department stores including J.C. Penney Co. and American Eagle Outfitters Inc. find themselves mired in a deep sales slump.

With no clear spending recovery in sight, retailers are navigating in the dark about how much to cut their spring orders and store expansions to address the dramatic changes in consumer behavior that are expected to persist at least until next year — if not longer.

“We rarely eat out, and even groceries have become a big-ticket item,” said Cincinnati resident Victoria Gentry, 41, a single mother of a 15-year-old daughter, who now worries about her job at a bank’s merchant service division. “No more payday pizzas now.”

Before the financial meltdown began in the middle of last month, customers had already been switching to lower-price brands and stores, cutting back on essentials and making other changes like mending their clothes instead of buying new ones.

“Weakness in consumer spending is a significant drag on overall economic activity,” said Scott Hoyt, senior director of consumer economics at economy.com, who now predicts declines in consumer spending, adjusted for inflation, through the first quarter of 2009. “We are on track for something longer and deeper than either of the previous recessions.”

Desperation has set in as the critical holiday season approaches. From discounters to luxury stores, merchants have begun cutting holiday orders in recent days, even as goods start to flow into stores, according to Arnold Cohen, co-founder of Mahoney Cohen and Co., an accounting firm for the apparel industry. A slew of companies, from J.C. Penney Co. to Saks Inc., cut their third-quarter outlooks Wednesday as they step up discounting to pull in shoppers. And many are delaying spring orders amid so much uncertainty, Cohen said.

Thomson Reuters estimates that its sales tally for September will be up only 1 percent, well below the 1.9 percent average pace from January through August.