Nov. 28 (Bloomberg) -- Store failures may accelerate after Woolworths Group Plc and MFI Retail Ltd. went into administration, reeling from the worst slump in European retail sales in at least five years.

“The outlook is very negative, particularly in the U.K., where consumers are more indebted,” said Suzanne Cassidy, a London-based analyst at debt research firm CreditSights Inc. “I wouldn’t be surprised to see more retailers going to the wall, particularly the smaller, more levered players in areas where spending is discretionary.”

The CHART OF THE DAY shows the rising cost of insuring debt sold by retailers against default. A five-year credit-default swap on DSG International Plc, the U.K.’s largest consumer- electronics retailer, has surged to 2.85 million euros ($3.7 million) upfront and 500,000 euros a year, according to CMA Datavision. At the end of September the contracts cost 420,000 euros a year with no advance payment.

Contracts on PPR SA, the Paris-based retailer that owns Gucci Group NV, have soared to 618 basis points from 286 in September. LVMH Moet Hennessy Louis Vuitton SA, the maker of Dior watches and Krug champagne, is also suffering, with credit- default swaps linked to the Paris-based company’s debt tripling to 190 basis points in the past two months.

Contracts on Dusseldorf, Germany-based Metro AG, the world’s fourth-largest retailer, which were at 91 basis points on Sept. 30, are now at 338. A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country or company fail to adhere to its debt agreements.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

Last Updated: November 28, 2008 03:42 EST