US retailers are bracing themselves for further deterioration in trading conditions in the run-up to Christmas after retail sales in October fell below expectations and a raft of retailers slashed forecasts last week.

US retail sales slumped 2.8 per cent last month, the biggest drop since the US Commerce Department’s records began in 1992.

Economists had forecast a fall 2 per cent on the back of a 1.3 per cent decline in September.

Pali US research analyst managing director Robert Summers said the retail environment, which has evolved over the past 20 years, “remains at risk of unwinding”.

He said: “Almost all retailers are now struggling, eroding the myth of the bulletproof high-end consumer, with the exception of some price/value retailers. Consumer behaviour trends that emerged over the course of 2008 (moderating spending, trading-down, trip consolidation and chasing value) appear set to accelerate over the coming months.”

Electricals giant Best Buy issued a profit warning last week and now expects revenue to drop between 5 and 15 per cent in the remaining four months of its financial year. In the same week, rival Circuit City filed for bankruptcy protection.

Fashion and homewares retailer JC Penney’s third-quarter profits plummeted 53 per cent, prompting it to cut its fourth-quarter outlook. Meanwhile, luxury department store Nordstrom slashed its earnings guidance for the year as it forecast comparable store sales would decline 13 to 16 per cent in the fourth quarter. Kohl, the value department store, also reduced its full-year guidance and TJX, the US-owner of UK retailers TK Maxx and HomeSense, has cut its full-year forecasts.

Wal-Mart has also “modestly reduced” its full-year guidance, in spite of a robust sales performance in the three months to October 31. Like-for-likes climbed 3 per cent, excluding fuel, during the period.

Urban Outfitters revealed sales rocketed 26 per cent in the last quarter – its best quarter in its history – but said sales had slowed since October.

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