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updated 2/5/2009 1:07:37 PM ET 2009-02-05T18:07:37

Americans grappling with rising layoffs and shrinking retirement accounts dug deep into survival mode last month, leading to sharp January sales declines for many retailers. The poor results raised more concerns about the financial health of the industry.

The malaise crossed the spectrum of retailing, from department chains to teen chains. Wet Seal Inc., Stage Stores Inc. and Children's Place Retail Stores Inc. were among those posting deeper-than-expected sales declines.

Wal-Mart, the world's largest retailer, was a notable exception, reporting sales that beat Wall Street's forecast, as shoppers continued to focus on necessities like groceries.

"Sales are coming in extremely soft, and we see more of the same for at least three to six months," said Ken Perkins, president of research company RetailMetrics. "Shoppers continue to be under pressure. They are fatigued and tapped out. They are feeling pressure from all fronts. And there's absolutely no incentive to shop."

A sales tally by Thomson Reuters found that 12 U.S. retailers it tracks beat expectations, while 11 missed projections. The tally is based on same-store sales, or sales at stores opened at least a year, which are a key indicator of retailer's health.

January is the least important month of a retailer's sales calendar, but the figures only confirmed the deterioration of consumer spending. The retail industry has posted sales declines since October, according to the International Council of Shopping Centers-Goldman Sachs index, and many analysts believe that will continue through the first half of the year.

Slumping home prices
Shoppers have worries from slumping home prices to tight credit and shrinking retirement accounts. But the biggest concern is job security and income — and that may only be reinforced by data Thursday showing that new claims for unemployment benefits jumped to their highest level in more than 26 years. The unemployment rate — now at 7.2 percent — is expected to jump to 7.5 percent, a 17-year peak, in January when the government releases new figures Friday.

In this environment, stores are slashing prices to try to pull in shoppers. Already many chains, including AnnTaylor Stores and Banana Republic, are discounting spring merchandise.

And with shoppers retrenching, retailers and suppliers are looking for ways to cut costs. Macy's Inc., Bon-Ton Stores and apparel maker Liz Claiborne Inc. are among those that have announced layoffs in recent days.

"They are hunkering down," said Chris Donnelly, a partner in the retail practice at consulting group Accenture. "There is this key focus on survival."

The outlier in Thursday's parade of dismal sales was Wal-Mart, which had stumbled in December. It came back in January to post a 2.1 percent increase in same-store sales, excluding fuel. That was better than the 1.1 percent gain that analysts polled by expected. The company said same-store sales were strong in grocery and health and wellness.

Wal-Mart predicted that same-stores sales, including fuel, will rise from 1 percent to 3 percent during the Jan. 31 through May 1 period.

Macy's cutting jobs
Macy's, which announced Monday that it would cut 7,000 jobs — almost 4 percent of its work force — reported a 4.5 percent decline in same-store sales. That was better than the 6.5 percent decline analysts had expected. The company also raised its fourth-quarter and full-year estimates for the year ended in January. Earlier in the week, Macy's said that earnings for the year that ends January 2010 will be well below analysts' expectations.

Stage Stores said its January same-store sales dropped 13.1 percent, deeper than the 8.3 percent decline Wall Street anticipated. Limited Brands Inc. posted a 9 percent decline, though that was less severe than the 15.9 percent drop analysts expected.

Children's Place suffered an 11 percent decline, worse than the 2 percent drop Wall Street projected. And Wet Seal announced a 14.7 percent decline, deeper than the 11.8 percent analysts anticipated.

Costco Wholesale Corp., which had also been one of the few bright spots, on Wednesday reported a 2 percent drop in same-store sales, a little better than the 2.8 percent decline that Wall Street expected. But the warehouse operator warned that its profit for the quarter ending in February will "substantially" miss Wall Street estimates due to poor sales and margins.

More on  retail sales   |  Wal-Mart

The Associated Press and Reuters contributed to this report.

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