Department store sales slumped badly last month, foreshadowing a morose holiday season for merchants and a further slowdown in the nation's economy.
Virtually all the major chain stores reported disappointing October sales yesterday and many of them said it was the worst month of the year.
At the same time, a national index of consumer buying plans dropped sharply for the second month in a row.
Sears, Roebuck & Co., the nation's biggest retailer, reported its smallest sales increase in 11 months, a mere 2.1 percent. Sales of rapidly growing K mart Corp., which had been running better than 20 percent ahead of last year, grew only 17 1/2 percent during October.
Two other national chains -- Levitz Furniture Corp. and Montgomery Ward -- did less business last month than during October 1980, an extraordinary decline because expansion and inflation usually make gains automatic.
Worse than the numbers were the comments of the usually cautious retail executives:
"There is no doubt that the consumer has markedly slowed the purchasing tempo," said David C. Farrell, president of the May Department Stores Co., which operates the Hecht Co. in Washington and Baltimore.
"Softening sales gains were noted during the period in most areas of the country, in most merchandise classifications, at most price levels," said an official of Federated Department Stores, owner of Bloomingdales and I. Magnin, which have stores in the Washington area.
Federated's department store sales, up 14 percent in the last nine months, increased only 8.8 percent in October; May's sales for the month were only 3 1/2 percent ahead of last year, little more than one-third of the 9.1 percent gain May has shown so far this year.
Consumer spending is the engine that has been keep ing the economy moving for months, and the October sales figures indicate consumers are running out of steam just as the perilous Christmas season approaches.
"We have been cautious about Christmas. This puts up another yellow flag," said Jeffrey Edelman, an analyst with Dean Witter Reynolds Inc.
Edelman and Monroe Greenstein of Bear, Stearns & Co. predicted a competitive Christmas season, saying there will be bargains for consumers because stores will have to cut prices to move merchandise.
Even luxury items such as women's designer sportswear which had been selling well no longer are moving, and the across-the-board weakness in sales reported by Federated was confirmed by other merchants and analysts.
Another indication of the decision of consumers to cut their consumption came from the Conference Board, the business-sponsored research group that every month makes a survey of consumer confidence in the economy and buying plans.
The confidence index--a measure of faith in the economic future--was down for the second month in a row, dropping four points after a 10-point plunge in September.
Fewer of the 5,000 families surveyed indicated they plan to make major purchases in the next six months. Only 26 1/2 percent of the families plan to buy a major appliance, down from 27.2 percent in September.
Also down for the second month in a row was the number of families planning to buy a new car in the next six months. In August, 7.9 percent of those surveyed were counting on a new car; in September the potential car buyers slipped to 7 percent.