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Retail Sales Slow As Holidays Near

UNITED States retail companies, already reeling from major structural realignments during 1989 and early 1990, appear to be heading for a less than jolly sales outlook during the important year-end holiday period. Consumer actions are never set in concrete, of course. Still, a number of retailers, including Sears Roebuck and Company, the industry leader, have watched sales sag in past weeks, reflecting concerns about a recession, as well as the negative impact of higher gasoline and home heating oil costs stemming from the Gulf crisis. Falling consumer confidence has created a ``troubling outlook'' for fourth-quarter consumer spending, says Stephen Gallagher, an analyst with Kidder, Peabody & Co.

Last year at this time ``it was the retailers who were experiencing economic difficulties,'' says Mr. Gallagher. A number of major chains went through restructuring or refinancing last year. The most prominent example was the Campeau Corporation which filed for bankruptcy protection. Campeau owns Bloomingdale's and other retail chains. But retailers were saved at the end of last year by relatively heavy consumer outlays in the period between Christmas and New Year's Day.

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This fall ``consumers don't have the disposable income to do a lot of heavy buying,'' Gallagher says.

Although some retailers might offer special promotions, shoppers shouldn't look for too many discounts this year, says Janet Mangano, a retail analyst with Jesup, Josephthal Company Inc., an investment house. For starters, consumers don't have the extra cash. ``Consumers will focus on buying what they need this year; practicality will be more important than frivolity.'' And besides, says Ms. Mangano, retailers are ``pricing merchandise at levels where they expect to sell it.''

Nor are the catalog operations of major retailers (as opposed to mail-order catalog companies such as L.L. Bean) necessarily going to be big money makers, experts say. Sears, for example, has been slashing staff at its catalog operations.

One factor that could help retailers in the event of a recession, says Mangano, is that almost all chains have now interlinked data on inventory levels, sales, and new orders through their computer banks. Yet that was not the case during the recessions of the early 1980s, she says. Result: ``The retailers are far better prepared for economic bad news than they were a decade ago.''

Mangano still finds some good values among retail stocks. She likes May Department Stores Company and F.W. Woolworth Company. May owns such profitable chains as Lord & Taylor, Filene's, and Foley's. Woolworth is doing well, she says, because of its diversified retail outlets. These include its highly successful Footlocker stores, plus its strong operations in Germany. She notes that Woolworth has 400 stores in West Germany, having been there since 1927 (it was closed down for a time by the Hitler government). The company's German business now accounts for 12 percent of overall sales, and should post strong growth during the next decade because of German reunification, she says.

Mangano says mass market retailers such as Sears, J.C. Penney Company, and K-Mart Corporation could have some difficulty during the months ahead, given consumer skittishness.

Still, Bruce Missett and Stacy Dutton, retail analysts for Morgan Stanley & Co., say that, despite the recent slowdown in consumer spending, general merchandise sales should grow at 4 to 5 percent this year over 1989. Growth has hovered in the 5 percent range during the 1980s. Indeed, only in 1982 did growth fall below 4 percent. In 1981, sales grew at an unusually strong 10 percent.

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The two analysts currently like a number of retailers, including Circuit City Stores, Dayton Hudson, The Gap, The Limited, Toys ``R'' Us Inc., Wal-Mart Stores Inc., and Woolworth.

Some discounting or other sales promotions could still occur in selected parts of the US, says Ms. Dutton. A new round of price discounting is now taking place in California and the New York area. Dutton also says mass-market chains such as Sears and K-Mart may engage in additional discounting.

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