Still, "cash flow generation and a demonstrated ability to access the capital markets have resulted in strong liquidity for the three large US supermarket companies rated by Fitch," namely Kroger, Safeway and Supervalu. "Cash flow generation is anticipated to continue to be strong for the supermarket operators and increase for some large operators that are cutting capital expenditures."

The drugstore chains, meanwhile, "are expected to benefit from their mainly nondiscretionary merchandise offering despite the challenging environment," Fitch notes. Of the three largest—CVS Caremark, Rite Aid and Walgreen—Rite Aid "has been particularly challenged in improving its pharmacy comparable store sales and its share of the prescription market as it remains capital-constrained. As a result, its operating metrics significantly lag those of CVS Caremark and Walgreen, and Fitch views pharmacy same-store sales improvements as a key factor in strengthening Rite Aid's Ebitda margin."

Same-store sales for department stores are expected "to be considerably weak through 2009 and credit metrics to weaken from 2008 levels," says Fitch. It warns that while there have already been a number of bankruptcies among department store operators, "the pace could accelerate in a prolonged downturn." Fitch also notes that "department store square footage is expected to contract as retailers close underperforming stores."

And among specialty retailers—which includes electronics, home improvement, office supplies and automotive parts retailers, among others—is mixed. On the one hand, demand for consumer electronics "is expected to remain weak as much of the new product adoption has already taken place and incremental price declines will not be adequate to stimulate demand," says Fitch. On the other hand, in the auto parts subsector, "AutoZone is benefiting from the auto maintenance aspect of its business combined with the current economic climate, which has motivated consumers to fix their vehicles."

While the retail industry is hardly out of the woods, if the trend Fitch cites continues, it could be early signs of some good news for investors. In the meantime, the less discretionary a retailers' wares, the better. Although retail assets represent roughly half the net lease property market—and certainly there are net lease retail assets trading—one net lease industry veteran recently observed that on the debt side, "it's still tough to get a deal done when the tenant depends on cash registers."