Retailers in State See Sales Grow Beyond U.S. Pace in December


Retail sales growth in California outpaced the nation for the first time in nine years as December business fell short of expectations, according to retailers and industry analysts.

Nationwide, December sales increased by 3.5% to 4.5%--a full percentage point below the most modest predictions--as consumers showed restraint in the face of heavy credit card debt.

Sears and Kmart were among those reporting the strongest monthly increases on Thursday. However, industry analysts said Kmart's 11.6% sales increase was partly due to heavy price-cutting.

California was one of the leading sales areas for Sears. In addition, other chains--Macy's, Mervyn's and Wal-Mart among them--had stronger sales in California than in the rest of the nation.

The sales growth in California--estimated at 5% to 5.5%--is the latest reflection of improving economic conditions as the region emerges from a prolonged recession.

"We still have a higher unemployment rate, but job growth in California is also greater, and that allows us to have faster sales growth," said Ira Kalish, a Los Angeles-based retail economist.

"Californians now have more confidence in the economy," said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County. "Retailers are eager to move into California because merchants are beginning to generate higher sales."

The renewed interest was evident late last year as a number of chains expanded or launched operations in the state. Bloomingdale's debuted in California in November, opening three stores in Southern California and one in the Bay Area.

The Bloomingdale's stores in California led all Bloomies in sales on a per store basis. Nationwide, Bloomingdale's was among the top-performing chains operated by the Cincinnati-based Federated Department Stores.

Federated's December sales nationwide were flat compared with the same period a year ago. Federated operates eight chains, including R.H. Macy & Co.

The Macy's chain had its biggest sales gains in California, Federated said. Macy's entered the Southern California market early in 1966 by moving into stores formerly operated by Bullock's and the Broadway. Macy's holiday season--its first in the Southland--was the strong period of the year, said Michael Steinberg, chairman of Macy's West, the San Francisco-based operator of the chain's Western stores.

"Overall, it was a decent Christmas," Steinberg said. "We met our expectations."

The rival May Department Stores, operator of the Robinsons-May chain, had modest success with a December sales increase of 2.7% nationwide.

Wal-Mart, with an increase of 6.8%, was among those posting strong national sales gains for the month.

"The California stores performed moderately better than our stores in the rest of the nation," said company spokesman Keith Morris. "It was a good Christmas in the West generally."

Like many other chains, Target stores--Wal-Mart's discount chain rival--struggled nationally while faring better in California. Target's sales were virtually flat nationwide but up about 2% in the state.

The disparity was even greater at Mervyn's, which posted a 10.1% drop in sales nationwide, while sales at Mervyn's California stores were down 5.6%. About 40% of Mervyn's chain is located in California.

"Mervyn's heavy presence in California was a benefit this year," said Susan Eich, spokeswoman for the Minneapolis-based Dayton Hudson Corp., operator of the Target and Mervyn's chains.

Companywide sales at Dayton Hudson declined 3%. The company said its Midwestern-based department store chains failed to meet expectations.

Sears, with a 9.5% jump in business, was the department store chain with the biggest success. The company expanded its presence in Southern California by opening five new stores last November. The company said its Southern California operators outperformed the rest of its stores.

December sales increased about 5% in the Southland, matching the state, said James Vaughn, president of the Carmichael-based California Retail Survey.

"The region is showing modest but respectable growth over last year," Vaughn said.

Sales increased 2.5% in the Southland in December 1995--virtually matching the U.S. increase of 2.6%, the poorest national holiday sales record in more than a decade. Statewide, the December 1995 sales increase was only 1.5%.

California's December sales haven't outpaced the nation's since 1988. During that year, the state increase was 10.2% and the national increase was 8.8%.

The estimated national sales increase of 3.5% to 4.5% is mildly disappointing, industry analysts said.

"The results are at best lackluster," said Kurt Barnard, a New Jersey-based retail economist.

Barnard said the results were partly due to increased savings and a concern about credit card debt, which is now $464 billion, three times the level of 10 years ago.

Other analysts said retailers were also hurt by a 1996 calendar with five fewer shopping days than usual.

Hoping to avoid the profit-weakening clearance sales of 1995, most retailers maintained lower inventories during the 1996 holiday season.

But that move may have backfired on some retailers, according to a survey by Arthur Andersen, the business services company. The survey focused on consumers who did not spend as much as they originally planned. The respondents cited "lack of selection" as one of the leading reasons for their unexpectedly low spending.

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