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January Sales Weak at Big Retailers : Poor Profits Expected as Most Chains End Fiscal Year

February 07, 1986|MARTHA GROVES | Times Staff Writer

The nation's major retailers bade farewell to a generally sluggish year Thursday by reporting weak sales for January, when stores had meager Christmas leftovers to lure bargain hunters.

Sears, Roebuck, the nation's largest retailer, posted a scant increase of 0.9% in January from the same month the previous year.

K mart, which ranks second, had a 6.6% gain overall, including sales at new stores. Excluding those, the company showed a decline of 1.7%.

Department and specialty store companies fared better as they closed their fiscal year, although most showed only single-digit gains last month.

"The first two to three weeks of January were super, but in the fourth week things totally fell apart," said Kenneth M. Gassman Jr., an analyst with Wheat, First Securities in Richmond, Va. "Consumers simply did not spend."

Kenneth A. Macke, chairman and chief executive of Dayton Hudson, said that "January sales continued below our expectations." The company, parent of Mervyn's and Target, reported that sales for the four weeks ended Feb. 1 rose 12.6%. For the year, revenue was up 11.9%. At stores open at least a year, sales rose a slimmer 7.5% for the month and 6.5% for the year.

The January sales, coming on top of several ho-hum months, do not bode well for merchants' fourth-quarter and annual profits.

Boake Sells, Dayton Hudson's president, said that the company did not reach its sales goals for the final quarter but that expenses were as high as expected. As a result, the company estimates that fourth-quarter earnings per share will be only about equal to those of the year-ago period's $1.54.

Analyst Gassman said he has been "ratcheting down" his earnings estimates for many companies, especially catalogue showroom retailers such as Best Products and Service Merchandise, which he expects will show fairly dramatic profit declines from a year ago.

Edward Johnson, director of Johnson Redbook Service in New York, looks for earnings to be up 4% to 4.5% for general retailers but 20% for specialty retailers, notably women's apparel and electronic warehouse stores. He has reduced his estimates for a handful of companies, including Associated Dry Goods, Dayton Hudson, Carter Hawley Hale Stores and K mart. In most cases, he said, promotions cut into earnings more than expected despite the fact that retailers maintained much leaner inventories in 1985 than the year before.

Indeed, Sears, which unlike most other retailers operates on a calendar year, on Wednesday reported a 2% decline in profits for the fourth quarter and a 10.4% drop for the year. Chairman Edward A. Brennan noted that net income was hurt by flat sales in "the most competitive environment in retailing history." Earnings of most other retailers, which operate on a fiscal year ending Jan. 31, will be released next month.

Carter Hawley Up

At Carter Hawley Hale, the Los Angeles-based parent of the Broadway, Neiman-Marcus and Contempo Casuals, Chairman and Chief Executive Philip M. Hawley said that "January showed an improvement in the sales trend with a particularly good performance by our specialty store segment. Special size apparel, women's sportswear and cosmetics were strong sellers." The company reported sales increases of 7.4% for the month and 8.1% for the year.

Sandra Shaber, an economist with Chase Econometrics in Bala Cynwyd, Pa., noted that there has been a general slowdown in sales of hard goods such as appliances and furniture and improvements in soft goods such as apparel.

"The picture is very mixed," she said. "As bad as consumer debt and finances overall may look from the outside, there's still a reasonable amount of optimism."

Federated Falls

Federated Department Stores, which operates Bullock's and I. Magnin, said January sales showed a decline of 12.8%. Chairman and Chief Executive Howard Goldfeder noted, however, that the figures were "distorted substantially" because this year's sales period contained four weeks, compared to five last year.

Associated Dry Goods, parent of Robinson's and Lord & Taylor, was in the same boat, reporting a decline of 12.2% for the January period. After adjustment for the calendar difference, the company showed an increase of 11.9%.

David C. Farrell, chairman and chief executive of May Department Stores, said that each of the company's segments contributed strongly to sales, which rose 9% for the month and 9.5% for the year.

But analyst Monroe Greenstein of Bear, Stearns & Co. in New York said he does not expect a pickup in sales until the Easter season.

Major Retailers' Sales

(In millions of dollars)

Jan. Year % % 1986 ago change 1985 1984 change Sears 1,768 1,752 +0.9 28,577 28,522 +0.2 K mart 1,261 1,182 +6.6 22,417 20,858 +7.5 J.C. Penney 683.0 660.0 +3.5 12,648 12,359 +2.3 Wal-Mart Stores 606.0 425.0 +43.0 8,450 6,401 +32.0 Dayton Hudson 488.2 433.4 +12.6 8,580 7,670 +11.9 Montgomery Ward 237.8 251.8 -5.6 4,338 4,461 -2.7 May Dept. Stores 259.1 237.7 +9.0 5,030 4,590 +9.5 Woolworth 210.0 201.0 +4.8 3,668 3,448 +6.4 R.H. Macy 201.2 232.2 +8.3 N.A. N.A. N.A. Assoc. Dry Goods 222.9 253.7 -12.2 4,321 4,003 +7.9 Carter Hawley Hale 224.1 208.7 +7.4 3,980 3,680 +8.1 * Excludes supermarket sales. Excludes foreign sales.

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