Changes Are Afoot in Retailing

TALK about revolving doors. Those ornate glass panels in front of some of your favorite department stores around the United States seem to be spinning more from the comings and goings of changing corporate management than from an influx of new customers. And if anyone thinks that the management spin is about to end, guess again: A lot of doors may be moving at lightning speed during the months ahead, with a series of major restructurings occurring within the retail group.

The US retail sector is undergoing more change than at any time in the past decade: A number of prominent outlets are on the sales block, including Saks Fifth Avenue, Marshall Field & Co., Bloomingdale's, Caldor, Venture, Breuners, and Ivey's.

In the case of Saks and Field's, their parent company (BAT Industries PLC of London) is seeking to raise revenue and put BAT's financial house in order to avoid a takeover from Sir James Goldmsith and his Hoylake Invests Ltd.

In the case of Bloomingdales, its parent, the Canadian-based Campeau Corporation, needs to raise as much cash as possible to pay off its enormous debt load; in the case of Caldor's, parent May Department Store Company is seeking to revitalize its far-flung retail empire.

And if all that isn't enough to keep shoppers confused, Australia's L.J. Hooker Corporation has recently sought Chapter 11 bankruptcy protection for its Bonwit Teller and B. Altman & Co. chains.

For the retail group as a whole, the months ahead appear to be marked by new consolidations. Ironically, this occurs at a crucial period. By the end of the year, the retailers will be pulling in perhaps a third of their total yearly sales, plus the lion's share of their bottom-line profits.

``The industry appears to be in shambles,'' notes Janet Mangano, director of research for Josephthal & Co., an investment house.

Whether the degree of disorder within the retail field will trigger any reaction from the general public - such as an eagerness to hold back on purchases and wait for ``bargains'' is one of the big questions being asked in retail corporate board rooms.

``The evidence is pointing to a period of economic slowdown for the retailers,'' Ms. Mangano says. ``If consumers are reluctant to spend enough, then the retailers will turn to expensive promotion campaigns. But that will put some profits in jeopardy.''

Of course, a rush toward promotion would not necessarily be bad for consumers, Mangano says with a laugh. But lower sales (plus promotion expenses) could spell trouble for some chains.

``Sales and earnings will slow in the period ahead, in part because last year was a very, very good year for retailers,'' says Daniel Barry, senior vice president with Kidder, Peabody & Co.

But that doesn't mean that the retail group as a whole is undesirable, Mr. Barry says. Indeed, Barry is relatively positive regarding growth, although that growth, he notes, will be slower. The key, he says, is selectivity. Thus, Barry currently recommends a buy status for three retailers: Woolworth; PACE Membership, a membership retail warehouse; and Spiegel Inc., the Chicago-based catalog company.

Mangano likes Sears and Ames Department Stores.

``Sears,'' she says with a laugh, ``is probably the most downtrodden stock around. Many people are not confident about the company's restructuring program. But Sears is a tower of strength. It's got $75 billion of well-managed assets.''

Analysts note that a number of strong chains continue to make headway, including Wal-Mart Stores, Neiman-Marcus Company, Nordstrom Inc., and May, which owns upscale Lord & Taylor among other ventures.

In a recent report for Goldman Sachs, Stephen Mandel Jr. and John Heinbockel concluded that Wal-Mart should continue to ``grow at a 20 to 25 percent annual rate over the next five years despite its enormous size.'' The two analysts point out that stagnation in large companies typically stems from a combination of factors, including ``too many layers of management, lack of internal communication, and an unwillingness or inability to change.''

The Marketwatch column in Monday's Monitor was written by Guy Halverson, not David R. Francis.