Citing the weakening economy and evaporating consumer confidence, the Cincinnati, Ohio-based chain, says that in the third quarter to date, including August and September, same-store sales at Macy's have fallen 5.8%. (Macy's is one of the few leading retailers that does not report monthly sales.)

Initially, it had projected same-store sales to be flat, or slip about 1%. Now, it says those declines are more likely to be between 3% and 6% for the fall season.

As a result, it has lowered its earnings estimates to between $1.30 and $1.50 a share. Its previous estimates called for $1.70 to $1.85.

"We are continuing to manage our business well in this tough economic environment, while simultaneously offering customers exciting fashion product and great value. We expect this will result in sales performance that continues to outpace key competitors, as we have done throughout the year-to-date period," the company says in its release.

Macy's, which also owns Bloomingdale's, has plenty of company. Rivals JCPenney and Nordstrom also lowered financial forecasts, as did a number of specialty stores.

The problem is that consumers just aren't shopping.

"Recent market volatility and concerns about the health of the financial system appear to be weighing heavily on consumers," notes Deutsche Bank AG, in its recent commentary on the retail sector, pointing out that JCPenney has reported mall traffic at its lowest level of the year. And department stores like Macy's may well suffer more than other stores in the all-important fourth quarter. A new survey from the Nielsen Co., based on interviews with 21,000 households, finds that 35% of shoppers are planning to spend less this year on holiday shopping than last. Department stores and electronics stores are the places where many shoppers expect to pull back most: 28% of those surveyed say they intend to spend less in those stores this year.

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