Fallout Begins After Dismal Holiday Season

The survival prospects for many more stores are dimming as more sales data comes in about the crucial holiday shopping season, which can account for up to 40% of a retailer's annual profit.

Holiday sales fell from 2% to 4% compared to a year ago, according to SpendingPulse, a division of MasterCard Advisors. Excluding gas and car sales, they dropped between 5.5% and 8% from Nov. 1 through Dec. 24, as key categories from luxury to electronics posted double-digit sales declines. Sales of electronics and appliances fell almost 27%, for example.

ShopperTrak RCT Corp. which tracks retail sales and customer traffic at more than 50,000 outlets, said Monday that it now expects foot traffic to be down 16% and sales to decline 2.3% for the November and December period.

The retail casualties, which were first among home furnishing stores and then many apparel stores over the past year or so, are expected to cut across all sectors as shoppers have slashed their spending on nonessentials, from TVs to jewelry.

About 160,000 stores will have closed this year and 200,000 more could shutter next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry's biggest contraction in 35 years. In March and April of next year, Flickinger expects 2,000 to 3,000 malls to shutter.

AlixPartners LLP, a turnaround consulting firm, predicts that 25.8% of 182 major retailers it tracks are either facing major financial distress or will face a significant risk of filing for bankruptcy in either next year or 2010 -- the highest level in the 10 years that the firm has been compiling the figures. That compares with the 4% to 7% that it predicted would face financial woes in the previous two years.