REPORTS OF SLUGGISH CHRISTMAS TRIGGER SLIDE IN RETAIL STOCKS

Byline: Catherine M. Curan and Mark Tosh

NEW YORK--Retailers got no gift from Wall Street Tuesday.
Following this week's string of post-holiday sales reports that ranged from gloomy readings by financial analysts to mixed reviews from national discounters, retail stocks took a beating.
Among major store groups posting share price declines Tuesday, Dayton Hudson Corp. dropped 4 to 68 3/4, Nordstrom Inc. slid 3 3/4 to 40 1/4, Wal-Mart Stores was off 3/4 to 21 1/4 and Kmart
Corp. declined 1/2 to 12 7/8.
The drop in the retail sector was particularly jarring against the general market. The Dow Jones Industrial Average rose 28 points Tuesday. The market was closed Monday, the day after Christmas. According to Thomas Tashjian, an analyst at First Manhattan, retail stocks will remain under pressure as investors see the results of December's discounting on their bottom lines.
At leading mass chains, sales were generally at or below expectations during the holiday season, and price cutting started early. Price slashing continue this week to clear out the Christmas goods.
"No question, gross margins were under pressure," said a Kmart Corp. spokesman on Tuesday. Although he declined to cite figures, he said Christmas was "one of the most promotional seasons in years."
Kmart took a more promotional stance than usual this year, making deeper price cuts and hyping them in advertising circulars. As a result, business was heavily weighted toward lower-margin items on sale, the spokesman said.
In its discount units, Kmart expects same-store sales to show a 3 percent increase for December, "give or take a little," the spokesman said. This would be "slightly under plan" if sales trends hold, he said.
Kmart's women's and children's wear businesses didn't meet expectations for the season.
"Weather was undoubtedly a part of it and, I think, there are just a lot of people selling ladies' apparel right now. Everybody is going after the same customer," said the spokesman.
At the Target division of Dayton Hudson Corp., a spokesman said, "Basically, the season turned out pretty much as expected." Target projected a same-store sales increase in the mid-single-digits for December, he said.
Wal-Mart Stores declined comment on holiday sales, although industry analysts said the chain fared a couple of points better than most retailers.
Ed Comeau, an analyst at Lehman Bros., said he believes same-store sales at Wal-Mart's discount units will be up 7 or 8 percent and on plan for December. However, he said, Sam's Club should finish the month with a same-store sales decline of 3 to 4 percent, a little below expectations.
Even though Wal-Mart stores were on plan, Comeau expected a better performance, around a 10 percent same-store increase.
Apparel sales at Wal-Mart's discount stores were driven by promotions and "margins were not terrific," Comeau said, adding that the chain is probably stuck with higher-than-desired inventories in sweaters, gloves and scarves, while Sam's has more outerwear than planned.
Meanwhile, declining retail issues on Wall Street Tuesday included Dillard Department Stores, down 1 to 26 3/8; May Department Stores, off 1 1/4 to 33 1/4; J.C. Penney Co., down 7/8 to 42 3/4; Sears Roebuck & Co., down 3/4 to 45 3/4, and Federated Department Stores, down 3/8 to 18 5/8.
Ann Taylor Stores Corp. was off 2 3/8 to 34 1/8, Limited Inc. declined 3/8 to 18 1/8 and Gap Inc. was down 3/4 to 29 1/8.
Harry A. Ikenson, an analyst at Mabon Securities Corp., downgraded Penney's, Limited, Nordstrom, Talbots and Proffitt's Inc. to "neutral" from "buy." Ikenson also cut his earnings-per-share estimates on Nordstrom to $2.40 from $2.47 for the year ending next month and to $2.78 from $2.85 for next year. Last year, after a 4-cent-per-share after-tax charge, Nordstrom earned $1.71 a share. He said apparel sales were disappointing and promotional, despite a late pickup in Christmas sales that was expected due to the extra shopping day.
Late Monday, news from another segment of the retail industry underscored the problems the apparel sector faced for Christmas. The International Council of Shopping Centers issued results from a survey of 5,000 specialty stores in 85 regional malls across the country, and apparel was the weakest category, up only 1.4 percent.
Sales in specialty stores were up 5.5 percent for the period between Nov. 25 to Dec. 24, against the same dates last year, according to the survey.
The Council also said jewelry stores outperformed other mall categories, rising 10.1 percent, while shoes rose 3.9 percent.

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