Dec. 28 (Bloomberg) -- Retailers counting on post-Christmas sales to spruce up the sluggish holiday season may be disappointed as tapped-out shoppers turn their noses up at discounts of 70 percent or more.

“This week isn’t going to do it,” Burt Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said in a Bloomberg Television interview. “Consumers are more cash- and credit-constrained than ever before. After a 25-year spending tsunami, they’ve shifted from spending to savings.”

Macy’s Inc. slashed prices for diamond earrings in 14-carat white gold by 64 percent, while Circuit City Stores Inc. took $500 off a 40-inch high-definition television from Samsung Electronics Co. The discounts come as the International Council of Shopping Centers has projected the worst holiday sales decline in at least four decades.

Mariel DeBernard was ready to be wowed by the sales when she turned up Dec. 26 at the Fashion Centre at Pentagon City mall in Arlington, Virginia.

“Normally I’d be loaded down with things, but there just aren’t that many deals, particularly for clothing,” said DeBernard, a 40-year-old homemaker. “For most things, the prices aren’t that different than before Christmas.”

U.S. retailers count on the holiday season for a third or more of annual sales. They’re now scrambling for business as consumers retrench to cope with shrinking home and stock values, tightening credit and the highest unemployment rate in 15 years.

Advertising post-Christmas sales before the holiday, as retailers did this year, “really smacks a little bit of desperation,” said Patricia Edwards, a retail analyst and the founder of Seattle-based Storehouse Partners LLC.

Spending Drop

The Standard & Poor’s 500 Retailing Index has fallen 34 percent this year. Wal-Mart Stores Inc., which isn’t in the retail index, has climbed 16 percent after it successfully lured customers with lower prices.

Deepened retail discounts failed to prevent a spending drop of as much as 4 percent during the last two months of 2008, according to data from SpendingPulse, owned by MasterCard Advisors. Including fuel, sales tumbled as much as 8 percent.

That’s the steepest drop since it started tracking the data in 2002, said Michael McNamara, MasterCard Advisors vice president of research and analysis. He estimates sales, excluding autos and gasoline, fell 2 percent to 4 percent from Nov. 1 to Dec. 24.

That projection follows forecasts of falling sales from industry trade groups. Sales at stores open at least a year may drop as much as 2 percent in November and December, the ICSC said Dec. 23. That would be the steepest decline since at least 1969.

‘Worst’ Situation

“It is the worst kind of picture,” Michael Niemira, chief economist for New York-based ICSC, told Bloomberg TV interview.

Meg McGuire, a county health inspector in Eden, North Carolina, spent a third of the $1,200 she and her husband had budgeted for the holiday on bicycles, toys and other discounted items at Wal-Mart on Black Friday, as the day after the U.S. Thanksgiving holiday in November is known.

The couple decided to not buy each other Christmas gifts for the first time in their 11 years of marriage.

“A lot of people are concerned about their jobs,” said McGuire, 30.

Wal-Mart, which will start selling Apple Inc.’s iPhone on Dec. 28, is one of the country’s few retailers still boosting sales. The discount retailer is one of two companies on the 30- member Dow Jones Industrial Average with shares gaining this year.

More than a dozen retailers, including electronics chain Circuit City, have sought bankruptcy protection this year as the credit squeeze and the U.S. recession drained sales. The holiday results indicate possible consolidation and further bankruptcy filings, said Gilbert Harrison, chief executive officer of retail advisory firm Financo Inc.

“It’s been difficult, much more difficult than anyone expected,” Harrison said in a Bloomberg Television interview from West Palm Beach, Florida.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

Last Updated: December 28, 2008 00:01 EST