Retail Receipts Fall to Decade Low, Say Analysts

BEHIND all the holiday tinsel, fake cotton snow, and colored ribbons left over down at the local shopping mall, there's a lot of hand wringing under way in the front offices of major US retail stores. Despite exceptions by a few national chains - mainly upscale stores that cater to an affluent clientele - this has been less than a stellar season for retailers. Some consumers, fretting about an economic slowdown in the United States and concerned about possible military conflict in the Gulf, snapped their wallets shut weeks ago. ``About the only things we quickly sold out here were the cheaper, middle-to-bottom-of-the-line electronic items,'' says a section manager at a Sears store in northern New Jersey. ``The most expensive products just stayed on the shelf.''

Sears, Roebuck & Co. may be one of the few national retailers to have held its own this holiday season. It mounted an aggressive national sales campaign in early December, marked by extensive price-cutting measures and deferral on payment until next year on some costly durables.

Unusually cold weather in the Midwest and the Pacific Northwest also helped to keep customers at home and dampen shopping.

``This is at least the worst retail season in 10 years and maybe even farther back than that,'' says Janet Mangano, a retail analyst with Jesup, Josephthal Company Inc., an investment house. Her view is shared by others.

``This was certainly the worst retail season we've had since 1982,'' says Kurt Barnard, who publishes Barnard's Retail Marketing Report, a monthly trade publication. ``Most retailers will be fortunate if they can break even with last year.''

Sales this year have been running about 3 to 4 percent ahead of last year. But inflation, he notes, will wipe out any gain for many retailers. The consequences for the multibillion-dollar retail industry, says Barnard, ``could be very tough for some companies deep in debt. There could be some new consolidations, some [job] layoffs, and some additional bankruptcies.''

The retail industry has been hard hit by financial restructuring during the past year or so, a result of extensive overexpansion of stores, leveraged buyouts, and creation of new store chains during the boom years of the mid-to-late 1980s. That rapid growth was partly financed by high-interest junk bonds. Aggressive marketing by mail-order firms has also cut into retail sales.

Early this year the Campeau Corporation, sinking under a $7.5 billion mountain of debt, filed for federal bankruptcy protection. Through its subsidiaries, Campeau controls such prominent chains as Bloomingdale's, Abraham & Straus, and Jordan Marsh. In addition, well-known chains that were put up for sale or sold during the past few years include Marshall Field & Co., Caldor, and Saks Fifth Avenue. Such national mass-market chains as Sears and K Mart have had to engage in heavy price discounting and costly promotions to stay competitive.

Experts say the chains best positioned for the 1990s include upscale retailers such as Nordstrom's and Lord & Taylor (owned by May Department Store), and specialty stores such as The Gap and The Limited.

The clear winners this year in terms of excellent financial performance and strong sales gains are Dillard's, a retailer based in Little Rock, Ark., and The Gap, says Ms. Mangano.

Chains that might have to face restructuring due to difficulties, retail analysts say, include Macy's, primarily located in the New York region, and Carter Hawley Hale in California.

This week - that is, the sales period between Christmas and New Year's - is shaping up as especially crucial, says Stephen Gallagher, a retail analyst with Kidder, Peabody & Co. ``This particular [post-Christmas] week turned out to be very important for a number of retailers last year, and, in some cases, meant the difference between a decent year and a poor year in terms of sales. But this week will be even more important this year.''

Retail sales grew at an annual rate of around 4 to 5 percent each year during the 1980s, and inflation was running at slightly lower rates in the late 1980s than is now the case. This meant generally steady financial gains for the industry.

Stores that are expected to do well this year - or at least hold their own - tend to be those that took a very cautious approach toward inventory levels. Example: K Mart. Ed Comeau, a retail analyst with Oppehenheimer & Co., Inc., recently reduced his fiscal year 1990 earnings estimate for K Mart from $3.90 a share to $3.70 a share, based on a relatively weak year-end sales performance. (Fiscal year 1989 earnings came in at $3.67 a share.)

But, as Mr. Comeau noted in a report for Oppenheimer published in mid-December, K Mart was careful to keep inventories lean. Had the chain not done so, Comeau says, ``the earnings impact would have been more severe.'' Comeau expects earnings per share for fiscal 1991 to climb slightly, to around $4.

All told, analysts expect 1991 to be better for retailers. Both Ms. Mangano and Mr. Gallagher say they believe consumers will open up their wallets in the second half of the year.