Retail shares fell a record 7.9 percent Thursday as investors continued to trade on economic and credit fears and the industry pondered how to adapt to the financial meltdown.

The Standard & Poor’s Retail Index plunged 23.89 points to 276.88. The top five declines since the index was recalibrated in mid-2002 have all occurred over the last three weeks as the credit crunch spread overseas and unprecedented steps to add liquidity to the market failed to sooth investor psychology.

The Dow Jones Industrial Average sank 7.3 percent, or 678.91 points, to close at 8,579.19. Over the last 12 months, the Dow is down 39.4 percent and retail shares have lost 43.5 percent of their value. Some individual companies have posted even steeper declines over the past year, including: Chico’s FAS Inc., down 76 percent; Macy’s Inc., 65.6 percent; Saks Inc., 64.4 percent, and J. Crew Group Inc., 51.1 percent. Value mecca Wal-Mart Stores Inc., however, has bucked the trend, registering a 15.7 percent rise in its share price over the last 12 months.

The expected global recession and extremely limited access to credit might well spur further bankruptcies and hit the accelerator on an industry consolidation that was already reshaping the fashion landscape.

“I started in retailing at the end of the Great Depression, in 1938, and retailers were falling by the wayside one after another,” Ira Neimark, former Bergdorf Goodman chairman, said. “The small ones dropped out, but the ones who had the financial backing were able to continue.”

That process could be repeating itself and the retail veteran suggested a cautious, survival-minded approach for stores.

“When a heck of a storm is coming up, just lower your sails and ride it out rather than try to fight it,” Neimark said.

The go-go days of store growth might make waiting out the financial storm harder than it would have been otherwise, however.

“If nothing else, the stores realized they have all, without exception, overexpanded,” Neimark said.

Stores such as Neiman Marcus, Bergdorf Goodman, Saks and Macy’s will all suffer economically, but are strong enough to come back, he said, noting solo stores run by individual designers might also flourish when the consumer comes back.

In the markets on Thursday, the return of the consumer seemed to be the last thing on investors’ minds.

Department stores with double-digit losses to their market capitalizations included Macy’s, down 14.2 percent to $11.46; J.C. Penney Co. Inc., 14.1 percent to $23.42; Dillard’s Inc., 12 percent to $8.50; Sears Holdings Corp., 11.7 percent to $67.31, and Kohl’s Corp., 10.7 percent to $33.16.

Abercrombie & Fitch Co., which on Thursday posted a 14 percent drop in September comparable-store sales, saw its shares fall 14.8 percent to $27.69, while shares of Chico’s, which comped down 15.9 percent, fell 13.4 percent to $3.61. Other specialty stores with double-digit declines were Aéropostale Inc., down 11.4 percent to $24.16; The Cato Corp., 11.5 percent to $12.21, and New York & Company Inc., 10.6 percent to $6.70.

Among apparel vendors, Liz Claiborne Inc. fell 11 percent to $12.34; Jones Apparel Group Inc., 10 percent to $12.76; VF Corp., 8.8 percent to $57.76; Polo Ralph Lauren Corp., 7.5 percent to $47.55, and G-III Apparel Group Ltd., 6.9 percent to $13.69.

Also on Thursday, a fresh batch of retailers outlined just how the credit crunch and other macroeconomic woes strained consumer’s discretionary dollars and willingness to spend in September.

Though most retail firms reported comparable-store sales on Wednesday this month in observance of Yom Kippur, several stuck to the traditional Thursday release date. They did not fare any better than the early birds.

In perhaps the clearest sign of a slowdown in consumer spending, off-pricers, which had been comping up, showed they weren’t immune to the declines hurting other retailers.

Same-store sales fell 2 percent at Ross Stores Inc. and 1 percent at The TJX Cos. Inc. Executives at both companies said they expect comps to remain flat through the end of the year. In light of the prediction, TJX lowered its third-quarter earnings-per-share guidance to 55 to 58 cents from the 59 cents to 62 predicted in August.

Weather patterns, which were unseasonably warm in some parts of the country and brought three hurricanes to the southeast, further weakened sales.

For TJX, business improved with the weather.

“We were pleased to see sales trends in the U.S. dramatically improve at the end of the month as the weather turned more seasonal in key regions,” Carol Meyrowitz, president and chief executive officer, said.

Abercrombie, for one, said it would not be restrained by its 14 percent comp drop for the month.

“During this time of extraordinary macroeconomic distress, it is important for us to manage the business with a seasoned and disciplined approach that will protect our brands for the long term and better position them for an eventual turnaround in consumer spending,” Mike Jeffries, chairman and chief executive officer at Abercrombie, said. “We will continue our planned investment in international growth opportunities and avoid promotional pricing.”

The Gap Inc. umbrella staved off larger dives at two of its three brands. The group reported a 3 percent slip at Gap stores and a 4 percent falloff at Banana Republic. Old Navy, however, posted a 24 percent decline in comps.

Mark Montagna, equity analyst at CL King & Associates, said stock adjustments at Old Navy hindered the company as a whole.

“It has been known that Old Navy would struggle and that by yearend its inventory would be rebalanced with regard to fashion, fashion-basics and basics,” Montagna wrote in a research note. “The Old Navy division merchandise margins offset some of the progress in the other divisions.”

Though specialty was the scene of some of the worst comp slides, the sector also provided two bright spots. September sales at American Apparel Inc. increased 15 percent and The Buckle Inc. reported a 19.7 percent comps boost.

In the department store sector, comps fell 13.6 percent at Stage Stores Inc. and 11.8 percent at Gottschalks Inc.

Overall, comps at U.S. chain stores rose 1.0 percent, according to the International Council of Shopping Centers Inc.

“This was the weakest sales growth of any September since 2001 when the industry was in a recession and facing the aftermath of 9/11,” Michael P. Niemira, chief economist and director of research, said. “But even with all this gloom there were a few bright spots, such as wholesale clubs, which had underlying sales strength that was five times the overall industry.”

Prior to the stock sell-off that began in earnest around 3 p.m., investors appeared to take some solace from reports that Treasury Secretary Henry Paulson Jr. might use some of the $700 billion in funds authorized by Congress to invest directly in banks — a level of government involvement in markets that harkens back to the Thirties. On Wednesday, the Federal Reserve moved in concert with six other central banks and lowered interest rates in hopes of freeing the flow of capital through the financial system.

Despite these and other moves by policy makers, investor sentiment has gone from bad to worse. Some areas of the industry that are already in flux, such as the juncture between the vendors and the department stores, could be in for even more change.

“It is absolutely time for them to reinvent themselves and come up with a new model to, really survive,” Fritz Winans, former Liz Claiborne Inc. executive and president of sourcing specialist Loyaltex Apparel USA Inc., said.

Everything from lead times to development processes are going to have to change, he said.

“It’s a time to really break some glass and move into a new cycle,” Winans said. “New ideas are birthed from difficult times like this, I think that we’ll see new models, new ideas.”

The financial calamity could also be seen as the separation point between epochs.

The turmoil could be an opportunity to “sever ourselves from the 20th century and move forward into the 21st,” Edie Weiner, a principal at Weiner, Edrich, Brown Inc., a futurist consulting group, said. “It’s a serious growing pain.”

However the landscape changes, the consumer can be expected to keep her stripes, she said.

“From the beginning of time, we have been consumption animals,” Weiner said. “I don’t think we’ll ever see a time when people will want not to express themselves through their purchases somehow. This is a time to really rethink a model that will hold strong for the 21st century, to rethink it in a way that isn’t about dumping inventory.”

Going forward, Weiner said fashion should figure out how to deliver affordable luxury, basics that can be built upon and used in several ways and long-wearing classics that outlive fads. She also said retailers can revolutionize the idea of recyclables, selling second-hand goods in their stores and reconsider their own employees as customers.