Eduardo Castro-Wright, who heads Wal-Mart's U.S. division, said he feared that consumers "have maxed out."
"Our customers, like a bunch of Americans, are going through some hard times," Castro-Wright said during a visit to Los Angeles last month. "Clearly the consumer is making a choice in terms of looking for better value to stretch their dollar and make ends meet."
Other retailers that fared poorly included Abercrombie & Fitch Co., down 20% from a year ago, and San Francisco-based Gap Inc., which suffered a 16% drop.
The holidays could be some retailers' last chance to turn things around, said Ken Perkins, president of research company Retail Metrics Inc. Several retailers have filed for bankruptcy protection in recent months, including Mervyn's, Linens 'n Things Inc. and Shoe Pavilion Inc., and more are expected to fold after the holidays.
"It's going to be a very difficult holiday season for the retailers -- I think a lot of them are going to be fighting for their lives," Perkins said. "Weaker players are probably going to get knocked out sometime next year."
The one bright spot for most Americans is falling fuel prices. The slowing global economy helped drive oil prices lower for a second day Thursday, with crude oil dropping $4.53, or 7%, to $60.77 a barrel. That's the lowest since March 21, 2007, and represents a 59% drop from the record high of $147.27 in July.
"Refineries around the world are reducing their runs because there is no demand for their refined products," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "If the demand for refined product is weak, the demand for oil is weak."
The economic vital signs were so poor that the International Monetary Fund predicted that the world's developed economies would probably shrink for a full year -- the first time since World War II that the global economy was likely to take such a hit.
In a new forecast released Thursday, the fund urged governments around the world to increase spending to stimulate demand.
The European Central Bank slashed interest rates in a effort to do the same.
"The financial market may or may not have seen the worst," said Harry Holzer, former chief economist for the Labor Department, who now teaches economics at Georgetown University. "But the real economy seems to be sliding downward pretty clearly."
