Retailing: Shrinking the Five-and-Dime

It was a familiar story. Woolworth, once the king of downtown dime stores, was facing up to a common, if brutal, economic reality. Company officials said last week that falling sales and intense price competition have forced the 113-year-old clothing-and-variety-store chain to close, sell or restructure 900 of its 6,500 stores. The changes will jeopardize the jobs of 10,000 employees, more than 14% of its total work force.

Retailers have taken the biggest hit from a recession that is in its 19th month. In just the past four weeks, Zale, the nation's largest jewelry-store chain, and McCrory, a general merchandising store, announced that they would close several hundred stores; Seaman's, the biggest furniture shop in the Northeast, said it was going to file for Chapter 11 bankruptcy.

Behind it all, of course, is the sharp cutback in spending by consumers. Shrinking real personal income and a worsening employment picture have made shoppers wary of buying anything more than the basic necessities. Sales during the past holiday season, when stores make up more than 50% of their total yearly revenues, proved especially disappointing despite heavy price discounting.