Retailers Report Sluggish Sales in January : Stores Expect Consumer Spending to Remain Slow in First Part of ’87

Bogged down by snowstorms and heavy debt, consumers spent only modest amounts in January at the nation’s major retailers, and many merchants said Thursday that they expect the somewhat sluggish sales performance to continue in the early part of 1987.

“It was kind of an uneventful month, just . . . more of the same,” said Philip M. Hawley, chairman and chief executive of Los Angeles-based Carter Hawley Hale Stores, parent company of the Broadway, Neiman-Marcus and Contempo Casuals. Looking ahead for 1987, he added: “Probably, the retail business is going to be reasonably good, but (it) doesn’t appear to have boom characteristics, particularly in the first half.”

Sandra Shaber, an economist with Futures Group, a Washington consulting firm, projected “a lot of weakness in any kind of store selling big-ticket items” in early 1987.

“There was a huge surge in December in anything ranging from cars to appliances to consumer electronics to furniture,” she said. “The car market is saturated, . . . so more of the consumer dollar will go to restaurants, clothing, maybe travel (in 1987).”

In January, which marks the end of the retailers’ fiscal year and is one of the least important months, merchants’ mixed sales results included K mart’s upbeat 12.8% gain over the same month last year and J. C. Penney’s disappointing 2.5% decline. Sears, Roebuck & Co., the nation’s largest retailer, reported a small 2.8% sales increase for January, a day after reporting a 7% decline in 1986 earnings for its merchandise group.

For the year, K mart reported an 8.1% gain, crediting improvements in information and merchandising systems. “We are now realizing the benefits of several long-term projects,” Chairman Bernard M. Fauber said.

Penney’s full-year sales rose 4.4%, while Sears’ increased only 2.5%.

Among department and specialty store companies, Carter Hawley Hale reported a 7.1% increase over last January and a 5.8% gain for the year. Federated Department Stores, parent of Bullock’s and I. Magnin, reported an increase of 5.4% for the four weeks ended Jan. 31 and a 6.2% gain for the year. It noted, however, that its Ralphs Grocery division in Southern California, which opened several Ralphs Giant stores in last year’s second half, accounted for much of the improvement.

Edward Johnson, an analyst with Johnson Redbook Service in New York, estimated that retailers’ sales gains, held down by bad weather, averaged 4.8% in January over the same month last year. With gains of 5.5% for all of 1986, a period of low inflation, retailers “had a pretty good year,” said Johnson, who projected smaller increases and higher inflation for 1987.

Shoppers seeking post-Christmas bargains might have noticed that merchants’ shelves were barer last month than in years past. “Christmas sales were good and cleared out winter products,” Johnson said. “January is normally a promotional month when you clean out excess inventories, but there wasn’t as much to clean out.”

Avery Hoak, corporate economist for Minneapolis-based Dayton Hudson, concurred. “If you based (shopping) expectations on prior years, you might be disappointed in what was being offered in January, 1987,” said Hoak (pronounced Hock).

By keeping tighter control over inventories in 1986 than in the previous two years, retailers may have held the level of sales down, but most expect to realize stronger profits by taking fewer forced markdowns. Analysts expect most retailers, with the exception of Dayton Hudson and Federated, to report strong 1986 profits in March.

Dayton Hudson said January sales results were hurt by heavy snow in the nation’s Eastern half. And the company’s Mervyn’s division, a promotional department store chain based in Hayward, Calif., continued to experience slow day-to-day business because of competitive pressures.

Hoak looks for growth in Dayton Hudson’s sales of 5% to 6% this year. “It’s the kind of forecast I can’t get overly excited about,” he said. “It’s not so good that I can consider it spectacular but not so bad that you need to circle the wagons.”

Hoak and other retailers expressed optimism that tax cuts resulting from tax-reform legislation will encourage consumers to loosen their purse strings this year.

“I would say the consumers should be better off,” said Thomas F. Murasky, vice president and chief financial officer of K mart. “It’s a question of when they realize it and have confidence that they are.”

Major Retailers’ Sales

In millions Jan. Jan. % Fiscal Fiscal % of dollars 1987 1986 change 1987 1986 change Sears 1,817 1,768 +2.8 29,293 28,577 +2.5 Kmart 1,418 1,258 +12.8 24,239 22,420 +8.1 J.C. Penney 666.0 683.0 -2.5 13,206 12,648 +4.4 Wal-Mart Stores 884.0 609.0 +45.0 11,912 8,451 +41.0 May Dept. Stores 530.1 476.2 +11.3 10,284 9,370 +9.7 Dayton Hudson 492.9 450.8 +9.3 9,050 8,050 +12.4 Federated* 453.1 444.8 +1.9 8,446 8,087 +4.7 Montgomery Ward 248.7 227.7 +9.2 4,286 4,196 +2.2 Carter Hawley Hale 208.2 194.3 +7.1 4,089 3,867 +5.8 Woolworth 216.0 204.0 +6.0 3,860 3,667 +5.2

*Excludes supermarket sales. Excludes foreign sales.