Retailers all aglow over sales Holiday season best since 1988


December didn't disappoint merchants. It dazzled them.

The nation's largest retailers, who went into last month with high hopes and crossed fingers, exceeded their own expectations as they rang up their best holiday season sales since 1988, according to figures released yesterday.

Early projections of U.S. retail sales gains for the holiday season had been hovering around 6 percent. But yesterday's strong sales reports led some analysts to revise their estimates to 8 percent or even 9 percent.

"This will be a Christmas that will be hard to beat," said Otto Grote, a retail analyst with Derby Securities in New York.

More than a dozen large and midsize retailers reported double-digit increases in sales at stores that were open a year earlier. Chains that have been posting flat, weak or even lower same-store sales through most of 1992 rang up numbers that were more typical of Wal-Mart Stores.

"December sales were the strongest we have seen in several years, and results ran ahead of expectations in virtually all areas of our business," said Allen Questrom, chairman and chief executive of Federated Department Stores Inc. His company had a 10 percent gain in same-store sales over the prior December, when it was in bankruptcy.

The news was especially sweet for the department-store segment, which in recent years had been widely written off as a retail "dinosaur." According to the Bloomberg Composite Same Store Sales Index, the dinosaur came to life last month, as department stores posted an 8.64 percent increase, compared with a 6.9 percent gain for the discount segment and 7.4 percent overall.

Sears Merchandise Group, which struggled through most of last year, showed an 8.2 percent same-store increase -- its best monthly performance since 1988. J.C. Penney Co., going up against a strong December last year, was up 9.1 percent. May Department Stores Co., the St. Louis-based parent of Hecht's, showed an 8.7 percent gain, its best since last January.

For the first time in three years, it appeared that Americans were prepared to indulge in a few luxuries. Neiman-Marcus Group Inc., which took a beating during the recession as consumers turned their backs on high-end merchandise, was up 10.1 percent. Jewelers showed sparkling results, and consumer electronics chains also saw increases.

Discounters didn't lead the pack in December, as they had for most of the past two years, but they had their share of business. The nation's leading retailer, Wal-Mart, posted a typically sterling 10 percent gain, while Caldor Corp. continued its comeback with a 10.6 percent gain.

Ames Department Stores Co., which emerged from Chapter 11 bankruptcy Dec. 30, posted a 6.2 percent increase despite a severe snowstorm that struck its prime Northeast trading area last month.

Lagging the field was Kmart Corp., the nation's No. 2 retailer, which struggled to a 2.4 percent gain, slightly under the company's projections. Its chairman, Joseph E. Antonini, cited heavy promotional activity, but analysts suspect the company's problems run deeper.

"Kmart's problem is clearly Wal-Mart," Mr. Grote said.

The home improvement sector also posted strong results. Landover-based Hechinger Co. recorded a solid 8 percent increase. But even that could not keep up with the spectacular 26 percent increase recorded by North Carolina-based Lowe's Corp.

To Linda Morris, retail analyst with PNC Financial Corp. in Philadelphia, the message in the numbers was that "the consumer went back to the mall this Christmas."

That, she said, was a sign of a revival of fashion merchandise after a long stretch when denim seemed to be the uniform of the recession. And when women are buying fashion, Ms. Morris said, they still head for the malls. She pointed to the 9 percent same-store sales gain by the Limited, one of the largest mall-based specialty apparel chains.

One company that did not share in the good fortune of its mall-inhabiting neighbors was Joppa-based Merry-Go-Round Enterprises, which showed only a 1 percent increase in same-store sales.

Steve Ashley, an analyst who follows Merry-Go-Round for Cleary, Gull, Reiland & McDevitt in Milwaukee, said that figure fell well short of the expected gain of 3 percent to 5 percent. Although the company cited the Northeastern snowstorm as a major reason for the shortfall, Mr. Ashley said the main problem was the company's inventory level.

Last Christmas, Merry-Go-Round was caught with too much inventory, Mr. Ashley said. This year, the company apparently erred in the opposite direction. "If they had the inventory, they think their sales would have been a lot better," he said.

But even retailers whose sales numbers were not sterling expect to report tidy fourth-quarter earnings next month. "The retailer didn't have to offer huge markdowns, so I think profits are going to be good," said Kenneth M. Gassman Jr., an analyst at Davenport & Co. in Richmond, Va.

With Christmas over, most analysts expect the malls to be quiet for the next couple of months. "Credit card usage was very high this season," Ms. Morris said. "Those bills will start coming in the next few weeks."

Mr. Grote, who remains bullish on retail stocks despite a recent turndown, said he expects to see some grim-looking same-store-sales numbers for January and February, when chains will be going up against strong 1992 figures.

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