Retail Sales Down 2.8 Percent In October

According to the report, retail sales dropped 2.8 percent from September to October, hitting a seasonally adjusted $363.7 billion, the largest decline recognized by the Commerce Department in 16 years. The drop represents a 4.1 percent decrease from October 2007.

The report noted that total sales from August through October 2008 were down 1.3 percent from the same period last year and that sales from August to September were down 1.3 percent.

Retail trade sales were down a total of 3.1 percent from September 2008 and dipped 5 percent from last year.

In addition, sales at U.S. chain stores plummeted last month to their lowest levels in 35 years.

At electronics and appliance stores in particular, sales were down 2.3 percent from September to October 2008, while year-over-year sales dropped 5.6 percent.

The report confirms what consumer electronics retailers have feared: Consumer spending has weakened in the uncertain economy.

Earlier this week Best Buy, the nation's largest consumer electronics retailer, said its global comparable store sales, which measures sales at stores open for at least a year, dropped by 7.6 percent in October, following a modest 1.3 percent drop in September.

That two-month dip prompted Best Buy to cut its full-year profit forecast, saying comparable store could drop between 5 percent and 15 percent in the remaining months of fiscal 2009, resulting in an annual comparable store sales decline of 1 percent to 8 percent.

Best Buy said it now expects earnings for the year to be between $43.7 billion and $45.5 billion, or between $2.30 and $2.90 a share. Best Buy had previously provided earnings guidance of $3.25 to $3.40 per share for fiscal 2009, based on an annual comparable store sales increase of 2 percent to 3 percent.

"In 42 years of retailing, we've never seen such difficult times for the consumer," Best Buy President and COO Brian Dunn said in a statement. "People are making dramatic changes in how much they spend, and we're not immune from those forces."

Best Buy rival Circuit City is also bracing for a downturn in holiday spending. This week, Circuit City filed for Chapter 11 bankruptcy protection, just a week after announcing it would close 155 stores nationwide and delay planned store openings. Circuit City said its bottom line has been hurt by its deteriorating liquidity position, waning consumer confidence due to the weak economy and tighter credit terms from vendors, which are requiring retailers to pay up front for product before it's shipped to stores.

Tweeter, a 94-store consumer electronics chain, also filed for Chapter 11 in November and has begun liquidating its inventory.

Big-box electronics retailers are being hurt by cost-conscious consumers who turn to discount chains for their gear, which helped Wal-Mart boost net sales by 7.5 percent to $97.63 billion for the third calendar quarter, a jump from the $90.83 billion in the same time period last year.

The positive turn prompted the discount juggernaut to estimate that U.S. same-store sales will rise between 1 percent and 3 percent for the fourth quarter, mostly due to holiday spending.

"We are very pleased with our results this quarter," Wal-Mart President and CEO Lee Scott said in a statement. "Despite economic difficulties around the world, we achieved solid sales and earnings growth, and we are optimistic about the upcoming holidays."