APPAREL SUFFERS THREADBARE SALES

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Retailers claim that unseasonably warm weather took a toll on apparel sales this holiday period, sending the industry into a heavy promotional frenzy even before Christmas.

But some analysts counter that the blame lies with the retailers themselves, who overestimated consumer spending when ordering inventory.

Analysts anticipate pre-holiday markdowns will cut into retailers' profits. Retailers predict an average 5% gain overall this season.

The pre-holiday discounting could spell trouble over the long term. Some analysts say retailers must take a serious look at the consequences of heavy promotions.

"Department stores are becoming more influenced by the discounters and putting less emphasis on differentiating themselves," said Frederick Marx, president of Marx Layne & Co., a Farmington Hills, Mich., consultancy.

"Pretty soon, it is going to be hard to tell a discounter from a department store," he said, "and there is going to be a big blur of gray out there."

But Kurt Barnard, president of Barnard's Retail Consulting, Scotch Plains, N.J., said retailers have learned their lesson.

"What happened this year is something that won't happen again," Mr. Barnard said. "For unexplained reasons, retailers thought the Christmas season this year would be rip-roaringly good, and they bought inventory in line with that."

Department stores like Dayton Hudson Corp. and J.C. Penney Co. had weak apparel sales this holiday and had to resort to heavy promotion before Christmas. These stores were taking as much as 40% to 50% off clothing.

"We had planned to be aggressive [with pricing] coming into the season," said a Dayton Hudson spokesman. "It's clear from the results that customers found the sale merchandise."

At Penney's, the story was much the same. Sales for the first three weeks of December were flat, then business picked up in the week before Christmas, due mostly to strong promotions and price reductions, a spokesman said.

"Some of the increased advertising and promotion was unplanned," he said, "but we were expecting to spend more overall this year."

Discounters like Kmart Corp. experienced weak sales in apparel, especially women's and infants' clothing.

A Kmart spokesman claimed that lack of differentiation in merchandise and the promotional climate had a big dampening effect on sales.

"The competitive promotional climate was a significant factor from the beginning of the holiday season," he said.

Mr. Marx believes the reason for the early discounts was purely anxiety: "Retailers pretty much panicked with their inventories being high and started the markdowns."

To make 1995 profitable, the retail industry must create new excitement in apparel, Mr. Marx said.

"There will be some type of influence that will spark a change like `L.A. Law' did [with the corporate look] in the '80s, and suddenly everything in the consumer's closet will look stale," he said. "That's what the business is all about."

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