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Retail Stores Struggle In Tough Economy

CHICAGO (CBS) ― Recession fears are rattling Wall Street. The Dow plunged 733 points, its second biggest point drop ever. The financial crisis has shoppers afraid to spend. And for stores, that's the nightmare before Christmas. As CBS 2's Dana Kozlov reports analysts say there's really no good news in sight and that will have implications beyond State street.

This is crunch time for retailers. Analysts say the last three months of the year are the biggest money makers for the industry. But a government report released today showed retail sales dropped 1.2 percent in September - double what was expected - and that sent the markets tumbling.

"Retail sales are pretty good indicators of where the economy is going," said Homer Johnson, Loyola University, Chicago. "And these sales are going south."

Loyola University Chicago Management Professor Homer Johnson says expectations for this holiday season and beyond are grim for retailers, which may keep Wall Street and jobs in flux.

"If sales drop then its means that stores are gonna lay off people," Johnson said. "Some of the stores are gonna be closing," Johnson said.

That's already apparent in the Chicago area. There are hundreds of vacant storefronts and Thursday, national housewares giant Linens-N-Things begins its going out of business sale. That may entice shoppers at first.

"We're gonna have to go find a deal," one consumer said.

But many say they'll still spend cautiously.

"We're trying to hold on and save as much as we can and only spend what we need to spend on," another consumer said.

But Chicago shop owner Casey Rutledge says she's still optimistic. September was a down month, but she still has holiday season hope.

"I think it's going to be a really tough season for everybody, but I think that we have to hang on and we're gonna get through it, and so we might as well get through it with a smile," said Casey Rutledge, owner, Multiple Choices.

Professor Johnson says research shows people are spending money on necessities, like clothing and food. It's isn't clear if pre-Thanksgiving Christmas sales will really change.

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