Credit crisis finally hits the real economy in US

Optimists who believed the effects of the credit crunch might be confined to Wall Street were facing up to reality yesterday, with a slew of new figures from the real US economy.

As investors brace for the third-quarter earnings reporting season, a number of retailers gave an early glimpse at their performance in September, when the year-long crisis finally exploded into the public consciousness.

Fearful consumers stayed away from pricey shops, department stores saw their sales collapse and only discounters such as Wal-Mart managed to eke out any gains, it was becoming clear last night.

Mike Ullman, chief executive, of the department store chain JC Penney, blamed "unprecedented events in the financial markets" for a 12.4 per cent slide in same–store sales from last September's levels, and for an accompanying profit warning yesterday. "Our business was impacted by falling consumer confidence and spending levels, and mall traffic experienced an even greater decline than in previous months," he said.

JC Penney's results were of a piece with rival department store businesses. Nordstrom saw a 9.6 per cent fall in sales last month and upmarket chain Saks – in which the Icelandic retail investor Baugur has an 8.5 per cent stake – saw sales fall 10.9 per cent compared to September 2007.

Discount chains performed better, with the notable exception of Target, which posted a 3.0 per cent sales decline and said it had also been hit by increased losses in its store cards and credit cards division.

Eduardo Castro-Wright, head of the US division of Wal-Mart, the "always low prices" chain that is the largest retailer in America, said: "We continue to believe that the strong Wal-Mart value proposition is bringing more and more customers to our stores." The company said same-store sales rose 2.4 per cent in September in the US, although even that rate is slower than it had managed earlier in the year.

Three-quarters of the retailers who reported yesterday missed Wall Street's expectations. More are due to release September figures today, and over the next two weeks there will also be full quarterly results from the majority of the country's major public companies.

Alcoa, the aluminium producer, traditionally the first to report, launched the earnings season with a disappointing statement late on Tuesday, when it said profits had fallen by more than half because of weaker commodities prices. A day earlier, Bank of America had pre-announced its third-quarter results, which showed an unexpected deterioration in its consumer lending businesses, and rising arrears among its credit card customers in particular.

Bank of America also launched a $10bn fundraising that turned out to be a disaster. Lack of demand from investors meant it had to price its new shares at a 31 per cent discount to their previous price.