• by Sarah Mahoney  @mahoney_sarah, December 4, 2008

Most observers predicted that November retail sales would be rough, as consumers struggled to make sense of seesawing financial markets and sweeping layoffs, and they were right. In fact, except for Wal-Mart Stores (up 3.4%) and BJ's Wholesale Club (up 4.1%), most other chains posted significant declines in same-store sales. Even discounters like Costco (down 5%) and Target (down 10.4%) suffered, turning in steeper-than-expected declines.

TNS Retail Forward, a Columbus, Ohio-based consulting firm, says that in its index of some 40 leading chains, sales fell 2.5%--down from the 4.3% composite reported in November 2007. And the International Council of Shopping Centers (ICSC), which tracks about 60 stores, says its index took a record decline of 2.7% for the month.

Clothing stores--particularly in the teen sector--turned in sharp decreases. At Abercrombie & Fitch, sales took a 28% nosedive, while sales fell 13.9% at Wet Seal, 11% at American Eagle Outfitters, 10% at Pacific Sunwear of California, and 5% at Aeropostale. (Both Buckle, up 15%, and Hot Topic, up 6.5%, bucked the trend.) But specialty chains catering to women also languished: Sales sank 15.4% at Chico's; 12% at the Limited, which owns Victoria's Secret; 12% at TJX Cos., parent of TJMaxx and Marshall's; and 10% at Gap Inc.

There's also plenty of evidence that price cuts, usually a store's most effective weapon in downturns, aren't working. At Kohl's, for example, which radically upped its value-price marketing over the month, sales dropped 17.5%. And while department stores on every end of the demographic spectrum were trumpeting amazing deals, consumers in every ZIP code just said no. At Nordstrom, same-store sales declined 15.9%; at Neiman Marcus, 11.9%; and at Saks 5%. Mid-tier Macy's saw a drop of 13.3% and Dillard's 9%, while at J.C. Penney, results dipped 11.9%.

Dismal as the results are, experts are encouraged by what appears to be a stabilizing of consumer sentiment. Although declining home prices and rising unemployment made many consumers feel worse off in November, Retail Forward says, "the good news is that shoppers are not further tightening their spending plans. The sales pace should not deteriorate much more."

Through its ongoing ShopperScape survey, Retail Forward found that the percentage of households that said they either planned to spend less (54%) on the coming holiday than they did last year, or spend about the same (40%) held steady for the month--indicating that shoppers are fairly resolute in their plans.

The weak results almost certainly mean that stores will be cutting prices even further in the next few weeks. Walmart is certainly flexing its discount muscles--announcing additional price cuts and rollbacks, including an event this weekend with Dell computers priced under $400 and a 42-inch flat screen for less than $600. The Bentonville, Ark.-based company--still struggling with the fallout from the trampling death of a store employee on Black Friday--says it is cautiously optimistic about December sales, predicting an increase of between 1% and 3%.

Otherwise, the outlook is more subdued. With this dismal start to the holiday season, ICSC says it expects industry sales will grow by 1.5% for December.