Retailers report big gains, but analysts are cautious LTC Figures are skewed by effect of gulf war

February 07, 1992|By Michael Dresser

After a brutal post-Christmas mop-up that saw a parade of retailers, large and small, heading to bankruptcy court, U.S. merchants received a much-needed morale boost yesterday as major retail chains reported solid gains in January sales.

A composite index of 11 major retailers prepared by Dean Witter Reynolds Inc. showed that January sales were 8 percent higher than those in the same month last year, the strongest performance in two years. But it was a tainted victory.

Last month's figures were being compared with January 1991, one of the worst months in U.S. retail history, when many Americans abandoned malls and stayed glued to the Cable News Network, watching the countdown to the Persian Gulf war.

Although cheering, last month's results give no clear signal of an end to the recession, analysts said.

"It's really too early to tell if retail is in recovery," said Paul Bienstock, a retail analyst with Moran & Associates in Connecticut.

And Budd Bugatch, research director at Ferris Baker Watts in Baltimore, cautioned that "one month does not necessarily a trend make. . . . You've got to see a follow-through going into February or March."

But after the pounding retailers took during the holiday shopping season, any victory is sweet, particularly after the industry endured a barrage of Chapter 11 bankruptcy filings from R. H. Macy & Co., Zale Corp., Linda Lynn and others.

Mr. Bugatch said that he has been optimistic about an end to the recession and that he saw nothing to make him change his mind.

"I think we are coming out of it," he said, adding that he feels the economy touched bottom in December and will rebound more quickly than most economists and analysts are predicting.

"The consumer has become more comfortable with the circumstances that we are in," said Mr. Bugatch, who specializes in retail companies.

Still, individual companies' January comparisons shouldn't be taken at face value, Mr. Bienstock said. "Whatever you normally would expect, you'd have to add a couple of percentage points" to account for the war, he said.

Among the nation's largest retailers, Wal-Mart led the way. The Bentonville, Ark., discount chain, the nation's largest retailer, reported a 13 percent gain in comparable-store sales, the most widely watched measure of retail performance. By contrast, Wal-Mart's sales at stores that had been open a year earlier rose 5 percent in December, an anemic gain by Wal-Mart standards.

K mart's January comparable-store sales rose 6.2 percent, capping a year in which it pushed past Sears to become the nation's second-largest retailer. Customarily, retailersclose the books on their fiscal years at the end of January so that they can include post-holiday sales.

Department stores, which were roughed up badly in December, showed some signs of life in January. Sales at May Department Stores, parent of Hecht's, were up 8.7 in January after a 0.5 percent dip in December. Sears, where sales skidded 1.8 percent in December, rebounded with a 7.7 percent gain last month. Dayton-Hudson and J. C. Penney also posted solid gains.

One locally based company did not share in the good fortune. Merry-Go-Round Enterprises Inc., an apparel chain based in Joppa, followed a dismal December with a 5 percent drop in January sales as consumer preferences shifted from casual pants to a more basic denim look in recent months.

The Gap Inc., reflecting the flip side of that trend, posted a 14 percent gain in sales.

Merry-Go-Round's performance in recent months has been hampered by serious problems in its Cignal division, which aims for more affluent customers, Mr. Bienstock said. But he and Mr. Bugatch said the Merry-Go-Round results are not as grim as they appear.

Mr. Bugatch noted that Merry-Go-Round's customers stayed in the malls a year ago and pushed the company to a 17 percent gain -- a hard act to repeat.

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