WASHINGTON — Retail sales plunged dramatically in October as the realities of the economic crisis took hold and drove specialty apparel sales down 1.4 percent compared with September, and fueled a 1.3 percent drop in department store sales, the U.S. Commerce Department reported Friday.

This story first appeared in the November 17, 2008 issue of WWD. Subscribe Today.

Compared with a year earlier, specialty retailers reported a 4 percent decline in sales to $18.1 billion and department stores fell 6.9 percent to $16.2 billion.

Overall sales for retail and food service providers fell 2.8 percent in October from the previous month to $363.7 billion. Total sales tumbled 4.1 percent from October 2007. Economists said October showed the worst monthly drop since 1992 when Commerce reclassified how it tracked stores. Others said the last time retail sales fell this much was January 1987. Those results were a one-month anomaly, but earlier in that decade a severe recession and high inflation lead to comparably negative sales numbers.

“There was a big retrenchment by consumers in October [2008], which caused retail sales to decline at a pace we haven’t seen since the early 1980s,” said Ben Garber, an economist with Moody’s Investor Services.

Prior to the 2.8 percent decrease in sales for October, the worst decline had been a 1.8 percent drop in September 2001 in the aftermath of the Sept. 11 terrorist attacks, said Charles McMillion, president and chief economist at MBG Information Services.

The overall decline was driven primarily by a precipitous drop in auto sales, but weakness was seen in all retail categories.

“Consumers were already fighting to keep their heads above water in the third quarter, and in October they were thrown several heavy cement blocks in the form of steep declines in employment and hours worked, further declines in house prices and a massive negative shock to household net financial assets,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

In comparison to other retail categories, clothing stores reported smaller losses. Sales at home furnishing stores dropped 2.5 percent from September and 13.5 percent year-over-year. Motor vehicle sales fell off a cliff, dropping 6.2 percent from the prior month and free-falling 25.6 percent compared with the same period in 2007.

Consumers continued to trade down from luxury and middle market retailers. General merchandise stores provided one of the few bright spots for retail last month, dropping 0.4 percent from September but increasing 2.3 percent year-over-year. General merchandise sales figures include department stores and discounters. Miscellaneous store retailers also reported positive sales, increasing 0.7 percent in October compared with the prior month. The increase was not surprising given that the category includes used merchandise stores like consignment and resale shops that have anecdotally reported elevated sales, said Richard Yamarone, director of research at Argus Research Corp.

Despite those results, there are few positives for apparel retailers.

“Judging from the downward revisions by Kohl’s, J.C. Penney, Abercrombie & Fitch, Best Buy and Nordstrom, things aren’t going to be so jolly this Christmas season,” Yamarone said. “Gone are the days of the ever-dependable consumer. They can no longer be counted upon to play Atlas and prop the global economy on their shoulders.”

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