U.S. retail sales for the 2008 winter holiday period and 2009 are expected to be weak while economic pressures continue to strain consumers' cash flow, according to Fitch Ratings in the latest edition of its "Retail Register" report.

Fitch says apparel and home retailers will be the most challenged while essentials such as food and prescriptions are expected to show relative strength. Discounters and warehouse clubs should continue to outperform other retail formats.

"As expected, the 2008 'back-to-school' period showed disappointing results for department store and specialty retailers. This is a signal that the crucial winter holiday period will experience weak sales," said Karen Ghaffari, Managing Director and head of Fitch's U.S. retail group. "Consumers are focusing on the necessities and getting more 'bang for their buck', which has benefited discounters such as Wal-Mart and Costco Wholesale."

Fitch expects many U.S. retail issuer ratings to remain at current levels however there is downside rating risk especially for high yield companies operating in the discretionary department store and specialty retail sectors. Fitch anticipates financial metrics to weaken for retailers with the continuing challenging sales environment. A retailer's ability to sustain operating performance in-line with peers as well as its willingness to maintain a strong balance sheet to ensure adequate liquidity will be crucial to future rating actions.