Only So-So Season Seen for Retailers


INTEREST rates are falling slightly, employment is holding essentially steady, and inflation remains under control. So, given that scenario, United States retailers are planning a rousing finish - right? - to what has been a basically successful sales year. Unfortunately, not necessarily - despite long lines of shoppers in many retail stores around the US this past weekend. Retail gains for the holiday period, say most analysts, will be only modest ranging from 3 percent to 5 percent.

Experts predict a clear demarcation between durable (big ticket) goods and staples, including clothing items. Apparel and speciality clothing stores are expected to do well. Leading grocery chains will also show solid growth. So will solidly capitalized retail outlets at the upscale end of the market (such as The May Department Stores Company, with its Lord & Taylor outlets). But sellers of expensive appliances, cars, and other durables could face a very difficult holiday-season, say retail experts.

``It sure does look like a much slower retail season for the holiday period,'' says Janet Mangano, director of research for Josephthal & Company, an investment house. ``But that doesn't necessarily mean slower profits for all retailers. The retail season from February through October turned in some very strong numbers. And the fourth quarter of last year was quite good.'' Compared to those earlier periods, she says, retail sales growth will be slower during the weeks ahead, but remain ``healthy.''

Even on the toy front, consumers appear to be shopping for less expensive items this year. The Toy Manufacturers Association estimates that total sales will be around $8 billion during the holiday season, just slightly above last year.

What's happened to lead to somewhat slower intake at the cash registers? ``Wages are not keeping up with prices,'' says Cynthia Latta, an economist with DRI/McGraw Hill, a consulting firm in Lexington, Mass. Also, says Ms. Latta, there has been no appreciable increase in employment during recent weeks. Additional jobs per household usually means more family income, which can go for consumer purchases.

Whatever happens during the weeks ahead, Latta notes that consumer sales are already ``not as buoyant as earlier this year. Car sales in particular are being hit very hard.'' Nor does she see any quick relief for durable goods companies. While she anticipates no recession for the period ahead, growth, she says, will be virtually negligible, at around .05 percent for the final quarter of this year. ``It could could even turn out to be negative,'' Latta says. Looking at the year as a whole, from the 4th quarter of 1989 over the 4th quarter of 1988, US growth will only be around 2.4 percent, Latta estimates.

Still, some retailers should do well. Mangano is currently recommending May Department Stores and Sears. She also likes J.C. Penney.

Bruce Missett, a retail analyst with Oppenheimer & Company, also likes J.C. Penney Co.; as well as F.W. Woolworth Co.; The Limited, Inc.; The Gap, Inc.; Dayton Hudson Corporation; and Toys ``R'' Us, Inc.; among others.

Mass retailers such as Woolworth, which sell lower-cost items, are less vulnerable to a slowdown in consumer spending than are more expensive merchandisers, he notes.

For somewhat the same reason, Edward Comeau, also of Oppenheimer, believes that a number of grocery chains will do well. No matter what the economy does, consumers have to eat, he says with a laugh.

Thus, he likes Albertson's Inc., A & P, and Giant Food Inc., three major food chains. However, Mr. Comeau sees major problems ahead for KMart Corporation, the nation's second-largest retailer. Oppenheimer recently dropped KMart from its recommended list (although suggesting that stock already owned should be held). Comeau's concern stems from such problems as the chain's high inventory levels, as well as what he calls a lack of ``clearly defined financial objectives'' by management.

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