"Overall it's real tough," said ICSC chairman Mary Lou Fiala,president and COO of Regency Centers, Jacksonville, FL. "But we'reoptimistic about the industry and our future."

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Year-to-date retail sales have risen 2.3% compared with 2007,Fiala reported, but are disproportionately uneven by category,favoring discounters.

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"October sales do not bode well for the holiday season," sheadded.

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The association has revised its original holiday salesprediction of a 1% to 2% increase to just a 1% rise in sales. Yetgiven the turmoil in the US economy, the situation could beworse.

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"Even to come close to last year's sales with this kind ofmarket is pretty strong," Fiala said. "It's not great, but it's notas bad as it seems."

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"We're still seeing around $800 of spending per family," saidJoseph Feldman, managing director and senior research analyst ofNew York City-based Telsey Advisory Group. "So it's not like theholidays won't happen."

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Other trends are troubling, Feldman. In 2001, 29 retailers andrestaurant companies filed for bankruptcy. So far this year, 34companies have filed for Chapter 11 protection, and more could comeas second-tier retailer such as Borders Group, Office Depot andTalbots face challenges.

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Privately held retailers will experience more weakness thantheir publicly held brethren, he added. And sales will continue tobe sluggish into next year. Another concern for some chains:Wal-Mart's decision to remodel all of its 3,900 stores over thenext few years."That puts tremendous pressure on other retailers,"he said. "But if you've got the right product, it will sell."

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Other trends bode well for the long term, Fiala noted. The USpopulation continues to grow, and will exceed 400 million by 2050.Having diversified their retailer base, developers no longer aredependent on a relatively small group of department stores andnational tenants to anchor and occupy centers. Overbuilding, bothby developers and retailers, has been reined in as well. Retailersthat had expanded their square footage by 7% annually have cut backto 4% to 4½% growth, Feldman noted.

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"As an industry, we will survive, and eventually thrive," Fialasaid.

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