Nov. 6 (Bloomberg) -- Macy's Inc., Target Corp. and Gap Inc. posted sales declines after the worst financial crisis since the Great Depression halted consumer spending heading into the holiday-shopping season.

Department-store chains Nordstrom Inc., Kohl's Corp. and J.C. Penney Co. also reduced their profit forecasts. Wal-Mart Stores Inc. remained a bright spot as sales at stores open at least a year climbed 2.4 percent, exceeding its forecast.

Spending declines accelerated in the first part of October after the Wall Street meltdown and increased job cuts led consumers to forgo most purchases. The results indicate that shoppers may cut back on holiday gift-buying, eroding profits during the retail industry's biggest sales period of the year.

``The Christmas season looks to be the worst in memory, you'd have to go back at least to the '81-'82 recession period,'' Ken Perkins, president of research firm Retail Metrics LLC, said today in a Bloomberg Radio interview. ``You're going to have to do above and beyond to stimulate the consumer to come into your store this year.''

October same-store sales fell 0.9 percent, the first drop in seven months, and 4.2 percent excluding Wal-Mart, the International Council of Shopping Centers said today, based on the results of 37 chains. The trade group said holiday sales may climb 1 percent, less than the 1.7 percent it had forecast.

Retail Metrics said the decrease was 0.5 percent and, excluding the effect of the shifting Easter holiday, the first decline since at least 2000.

AnnTaylor, Talbots

AnnTaylor Stores Corp. and Talbots Inc. both tumbled in New York trading after saying they will speed up reorganization plans and reduce capital spending.

Wal-Mart fell 64 cents, or 1.2 percent, to $53.49 at 4:01 p.m. in New York Stock Exchange composite trading, while Target declined 6 percent. The Standard & Poor's 500 Retailing Index decreased 5.5 percent, bringing it to a 35 percent decline this year.

A slowdown in consumer spending that started in mid- September with Lehman Brothers Holdings Inc.'s bankruptcy became even more pronounced in early October with the stock market plunge, said Richard Hastings, a consumer strategist at Global Hunter Securities LLC in Charlotte, North Carolina..

``The consumer has fundamentally changed their thought process and their shopping habits, and it's going to be with us for a long time,'' said David Bassuk, a managing director specializing in retail at consulting firm AlixPartners LLP. ``It's going to be a focus on necessities in this market and that's it.''

The ``dramatic deterioration'' is causing it to speed up cost-savings plans, AnnTaylor said. Third-quarter earnings may be unchanged, compared with its August forecast for profit of as much as 55 cents a share, the women's clothing retailer said.

Talbots Dividend

Talbots, another women's apparel retailer, said it's seeking a buyer for its J. Jill unit and is evaluating all aspects of its business, including the dividend payment. Third- quarter comparable-store sales for the Talbots brand dropped 14 percent.

Department-store same-store sales dropped 11 percent in October and 19 percent at luxury retailers, the ICSC said. The overall results were the worst October in the more than 35 years for which the ICSC has kept data.

Comparable-store sales are considered by some investors to be the best measure of retail health because they exclude the effect of location openings and closings in the past year.

Saks Inc. said its sales dropped 17 percent and that profitability would erode in the last two quarters of the year.

Sales at Neiman Marcus Group Inc. sank 27 percent. The luxury retailer said it would increase promotions and reduce capital spending.

`Weak' Demand

``We expect retail demand will remain weak for an extended period of time as our affluent customer reacts to the continuing volatility of the financial markets,'' Chief Executive Officer Burton Tansky said in a statement.

Macy's posted a 6.3 percent decline, greater than the 5.8 percent drop analysts estimated. Kohl's fell 9 percent and J.C. Penney dropped 13 percent.

``Department stores have been taking it on the chin all year here,'' said Perkins.

Thirty-seven percent of Americans plan to spend less on holiday gifts this year, according to an ICSC-Goldman Sachs Group Inc. survey released yesterday. That's up from 27 percent of consumers last year and the highest percentage since ICSC started asking the question in 2004.

U.S. gross domestic product contracted at a 0.3 percent pace in the third quarter, the biggest decline since 2001, the Commerce Department reported Oct. 30. Consumer confidence in October fell to the lowest level on record, the Conference Board said last week. Consumer spending accounts for more than two-thirds of the U.S. economy.

Payrolls Shrink

Payrolls in October shrank by 200,000 workers, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's report on Nov. 7. The unemployment rate may jump to its highest level in more than five years.

Wal-Mart's October increase was more than its 1 percent to 2 percent forecast after customer visited more and bought more on average. Analysts estimated a 1.6 percent gain, according to data compiled by Swampscott, Massachusetts-based Retail Metrics.

The retailer forecast November same-store sales to rise as much as 3 percent.

``Customers see that we are broadening the price gap against our competitors,'' Wal-Mart U.S. President Eduardo Castro-Wright said today in a statement. ``They saw it during the Halloween season and they will continue to see it during the Christmas shopping season.''

Inventory Strategy

Many retailers anticipated the economic downturn and have been able to reduce the amount of merchandise on shelves, even as sales decline, Perkins said. Cost-cutting and lower inventory helped retailers including Gap maintain their profit forecasts even as October sales plunged.

Abercrombie & Fitch Co. said October sales plunged 20 percent. Target fell 4.8 percent. Limited Brands, the owner of the Victoria's Secret lingerie chain, fell 9 percent. Costco Wholesale Corp. posted a 1 percent decline after international sales were hurt by the dollar's gains against other currencies.

Teen retailers American Eagle Outfitters Inc. and Pacific Sunwear of California reduced their third-quarter earnings forecasts.

Warehouse club BJ's Wholesale Club Inc. said third-quarter earnings would be higher than it expected because of profits from its gasoline stations. Teen retailer Aeropostale Inc. increased its forecast after October sales rose more than it projected.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net; Cotten Timberlake in Washington at ctimberlake@bloomberg.net

Last Updated: November 6, 2008 16:19 EST