Big Retailers’ Sales Up Slightly in December : Gains Achieved Through Heavy Price Cutting; Reductions in 4th-Quarter Profits Expected

Despite a last-minute rush of holiday sales, the nation’s major retailers ended December with only modest monthly gains from a year ago, according to figures released Thursday. Those increases, however, came at the expense of heavy price cutting that is expected to hurt many retailers’ fourth-quarter profits, analysts said.

December sales results were mixed, with increases from a year ago ranging from 0.1% for Montgomery Ward, a unit of Mobil Corp., to 108% for Federated Group Inc., a chain of electronics stores headquartered in City of Commerce.

Among the large retailers, Sears, Roebuck & Co. posted a 4.7% increase in December from a year ago, K mart Corp. a 17.1% gain, Carter Hawley Hale Stores Inc. a 15% increase and Wal-Mart Stores Inc. a 33% gain.

Walter Loeb, an analyst with New York-based Morgan Stanley & Co., said that sales were not as strong as anticipated and that retailers were “almost trying to kill each other with markdowns.”

Retailers across the board resorted to unprecedented levels of price cutting, which was a boon to value-conscious, last-minute shoppers.

Trailed Year Pace

“It was a much better Christmas season for consumers than retailers,” said Monroe H. Greenstein, an analyst at Bear, Stearns & Co. in New York. “There was a strong pickup in sales in the three days prior to Christmas.”

However, December sales gains for most retailers trailed behind the pace for the preceding 11 months.

December sales began at a sluggish pace, depressed in part by unseasonably warm weather in the East and Midwest and heavy winds and rains in Southern California.

Most companies end their fiscal year at the end of this month. Christmas is crucial to retailers’ results in the fourth quarter, which can account for about one-third of a store’s annual sales and as much as 60% of profits.

The December showing among retailers is expected to yield a mixed profit picture in the fourth quarter.

Jeffrey Edelman, an analyst with Dean Witter Reynolds Inc. in New York, said: “It will not be the best Christmas as far as profits are concerned.”

Loeb added that fourth-quarter profits industrywide “will be very modest”--up 4% to 5% from a year ago.

Carter Hawley Hale, parent of the Broadway and Neiman-Marcus, is looking for a good increase in pretax fourth-quarter earnings, but Chairman Philip M. Hawley acknowledged that “consumer spending was generally sluggish during the month and led to a promotional retail environment with some pressure on profit margins.”

At Dayton-Hudson Corp., December sales were up 15.8% from a year ago, but the Minneapolis-based company said its Target and Mervyn’s units will post fourth-quarter operating profits in line with the respective 14% and 15% December sales increases from a year ago.

Kenneth A. Macke, Dayton-Hudson’s chairman, said: “Within our department store segment, however, operating profit is below last year, in spite of a 14% sales increase during the month of the December.”

He added: “As a result of the high level of promotional activity throughout the Christmas season, our fourth-quarter earnings are expected to be approximately equal to last year.

“The disappointing performance of our department store company and the lack of fourth-quarter profit contribution from the recently divested department store divisions will hurt the year-to-year comparison. For the full year, we continue to expect an improvement in earnings per share.”

Among popular holiday gift purchases were sweatsuits, sweaters and neon-colored sportswear; toys such as Transformers, GoBots and Cabbage Patch Kid dolls, and electronics equipment such as videocassette recorders, typewriters and component stereo equipment.

Slower holiday movers were telephones, video games and products licensed under the name of singer Michael Jackson.

Analysts noted that there is still a lot of leftover inventory in stores. “That’s going to mean some unusual bargains for the consumers this month, even more than we have been seeing,” said David Taylor, an analyst with Prudential-Bache Securities Inc. in New York.

Among other retailers reporting December results were: Allied Stores Corp., up 4.9% from a year ago; Best Products, up 4.6%, and R. H. Macy, up 10.6%.

Major Retailers’ Sales in December

In millions Year % of dollars 1984 ago change Sears 3,425 3,272 +4.7 K mart 3,585 3,063 +17.1 J.C. Penney 2,275 2,130 +6.8 Federated 1,723 1,563 +10.3 Dayton-Hudson 1,468 1,267 +15.8 Montgomery Ward 1,026 1,005 +0.1 Woolworth 971.1 939.2 +3.4 Wal-Mart Stores 932.0 701.0 +33.0 May Dept. Stores 861.9 777.7 +10.8 R. H. Macy 827.1 748.1 +10.6 Assoc. Dry Goods 747.4 687.3 +8.7 Carter Hawley Hale 716.5 623.2 +15.0