http://www.bloomberg.com/apps/news?pid=20601087&sid=ajAqMbszJmNY&refer=home Holiday Sales Drop to Force Bankruptcies, Closings (Update2) By Heather Burke Dec. 29 (Bloomberg) -- U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years. Retailers will close 12,000 stores in 2009, according to Howard Davidowitz, chairman of retail consulting and investment- banking firm Davidowitz & Associates Inc. in New York. AnnTaylor Stores Corp., Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations. More than a dozen retailers, including Circuit City Stores Inc., Linens ân Things Inc., Sharper Image Corp. and Steve & Barryâs LLC, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, said Burt Flickinger. âYouâll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out,â Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said today in a Bloomberg Radio interview. âThere are a number that are real causes for concern.â Sales at stores open at least a year probably dropped as much as 2 percent in November and December, the International Council of Shopping Centers said last week, more than the previously projected 1 percent decline. That would be the largest drop since at least 1969, when the New York-based trade group started tracking data. Gap Inc. and Macyâs Inc. are among retailers that will report December results on Jan. 8. Womenâs Clothing, Electronics Consumers spent at least 20 percent less on womenâs clothing, electronics and jewelry during November and December, according to data from SpendingPulse. Retail Metrics Inc.âs December comparable-store sales index will drop an estimated 1.2 percent, or 5 percent excluding Wal- Mart Stores Inc. Retailersâ fourth-quarter earnings may fall 19 percent on average, the seventh consecutive quarterly decline, according to Ken Perkins, president of Retail Metrics, a Swampscott, Massachusetts-based consulting firm. Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management Inc., said this month during a panel discussion held at Bloomberg LPâs New York offices. Only retailers with healthy balance sheets will survive the recession, according to Matthew Katz, a managing director at consulting firm AlixPartners LLP. Store Closings About 200,000 stores may close in 2009, compared with a record 160,000 in 2008, Flickinger said. The U.S. economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Economists surveyed by Bloomberg in the first week of December forecast the worldâs largest economy will contract through the first half of 2009. The Standard & Poorâs 500 Retailing Index shed 34 percent this year before today, with only two of its 27 companies rising. The index doesnât include Wal-Mart, the worldâs largest retailer, which fell 21 cents to $55.14 at 9:58 a.m. in New York Stock Exchange composite trading. Wal-Mart shares gained 16 percent this year through Dec. 26. âIf youâre going to be in retail right now, the discount space is where you want to be,â Patrick McKeever, a senior equity analyst at MKM Partners LLC, said today in a Bloomberg Television interview. Discount Advantage Discounts of 70 percent off or more by Macyâs, AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Consumers are trained for sales, according to Patti Freeman Evans, an analyst at Jupiter Research in New York. âThe situation is not going to right itself in January; itâs going to be a long while that discountingâs going to be around,â said Evans. âConsumers are going to get used to it and itâs going to very difficult for retailers to move forward in a full-price mode.â Retail bankruptcies may help the industry in the long run, according to Flickinger. âWeâll be going from a Dickens-esque worst of times this December to the best of times in future Decembers because weâll rationalize out all the redundant retailers and retail space in shopping centers,â Flickinger said.