After October drop, stores face grimmer holidays

After enduring the weakest October in at least 39 years, retailers are set to slash prices even more to pull in consumers who went into full retreat last month. That's darkening the outlook for the holiday season, which was already grim.

Here's how October turned out and what it means for profits and the holiday season:

_SAME-STORE SALES: Sales at stores open at least a year declined 0.9 percent in October, according to the International Council of Shopping Centers-Goldman Sachs retail index of about 40 retailers. That marks the weakest October since at least 1969 when the index began. The October figure is well below the 1.8 percent average gain seen this past fiscal year. Excluding discounter Wal-Mart Stores Inc., same-store sales dropped 4.6 percent.

_DISCOUNTING: Even with inventories down, retailers, including luxury stores, are being forced to discount aggressively amid a sharp sales falloff. Salvatore Ferragamo boutiques will begin holiday sales Dec. 4, marking down men's and women's clothing and accessories from 35 percent to 50 percent. J.C. Penney is offering extended hours, markdowns of up to 60 percent and free shipping this weekend.

_PROFITS: The industry is bracing for what will likely be its sixth consecutive quarter of lower profits. Ken Perkins, president of research company RetailMetrics LLC, now expects third-quarter earnings to fall 13.6 percent, compared to the 7.7 percent decline he forecast as of Oct. 1. For the fourth quarter, he estimates at least a 3.7 percent drop in profits.

_HOLIDAY AND BEYOND: Even before the financial meltdown the outlook was grim, but some analysts are now reducing their already subdued forecasts. Furthermore, they now don't expect a spending recovery until at least the second half of next year.

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