It was the fourth Monday in November last year. I was at a Thanksgiving party at the home of Cathie Black, the president of Hearst Magazines. Marlo Thomas was there, too. “Saks is selling shoes for 75% off. It’s incredible!” TV’s onetime Ann Marie was crowing, as a band of high-powered women—into shopping as well as business–crowded around her to hear details.

As I milled about the party—among women on Fortune‘s Most Powerful Women list, publishing executives and New York Mayor Mike Bloomberg–one magazine exec told me that her company had readjusted budgets five times in a matter of months: Down. Down. Down. Down. Down.

I didn’t realize then how seriously that evening would foreshadow this terrible downturn we’re now in. But here we are. This week, Saks reported a $98.7 million loss and a 15.3% drop in same-store sales in the fourth quarter; in January, its per-store sales fell 23.7%, the biggest decline among major retailers. Deep discounts helped Saks clean out inventory. But the outlook is troublesome. How will Saks wean its customers off these outrageous discounts–especially next year, when affluent Americans pay higher taxes under President Obama’s just-announced budget plan?

It was a grim week for retailers all around. Heavy markdowns weighed on Sears’ profits , as net income for the recent quarter declined 55% to $190 million. Investors who believed in hedge fund manager Eddie Lampert have seen Sears stock fall from $193 in 2007 to $38. (I was never a Sears investor, but I was a Lampert believer. See my 2006 profile.)

Home Depot reported poor results and lowered earnings guidance. But the world’s biggest home-improvement retailer showed impressive discipline with cost and inventory control. Better than rival Lowe’s , where management has been too optimistic about an economic turnaround. Credit Suisse analyst Gary Balter said this week that he wishes Lowe’s management “would treat the glass as half empty rather than half full.”

In light of Saks’ and Sears’ reliance on discounting, it’s worth noting that Home Depot’s “everyday low prices” pay off particularly in difficult times. This consistent pricing is more efficient than discounting items for short sales spurts. And it helps control inventories. I remember talking with Bernie Marcus and Arthur Blank, Home Depot’s founders, about this years ago. When they started the retailer, they swore by this approach and said they were following the rule of Wal-Mart founder Sam Walton. Now, of course, we see Wal-Mart beating every other retailer. (Click here to read my Fortune colleague Suzanne Kapner’s story about new Wal-Mart CEO Mike Duke.)

I can’t end this week without returning to Cathie Black’s party, where her fellow Hearst execs, as well as everyone else, were hoping for a speedy recovery. Hearst announced this week that it will shut down the San Francisco Chronicle if it doesn’t find a buyer. Amazing and sad to see all these big-city newspapers folding!

But there is hope. Check out this story about e-readers by my Fortune collegue Michael Copeland. He interviews Hearst digital boss Ken Bronfin about a new electronic reading device expected this year. Bronfin happens to be the chairman of E Ink, which provides the technology for the Amazon Kindle and Sony’s e-reading device. I went to college with Bronfin. We both worked on the daily newspaper at the University of Virginia. He was the Cavalier Daily‘s photography editor. I was co-editor of features.

That was 1981. Who could have imagined then what we’d be seeing today? Much of it bad. But some good and exciting things too. Keep the hope!