MARTHA STEWART 'MENTALITY' INSPIRES RETAILERS FOR HOLIDAYS: HOME PRODUCTS, LIFESTYLES ARE KEY INTERESTS

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A number of the nation's leading retailers, hopeful the stock market won't play Scrooge with what portends to be the best fourth quarter of the 1990s, are looking at the holiday season with stars in their eyes.

Holiday-themed TV spots began airing over the weekend, with new creative from The Gap's Old Navy Clothing Co. and Kmart Corp.

In the Kmart effort from Campbell Mithun Esty, Minneapolis, Rosie O'Donnell and Penny Marshall return. In one commercial, Ms. O'Donnell snaps her fingers and transforms herself into a Renaissance setting featuring a Kmart dinnerware collection.

INTEREST IN COCOONING

The emphasis on products for the home underscores merchants' interest in cocooning. Retailers such as Williams-Sonoma, Pottery Barn and Crate & Barrel are thriving, while traditional clothing retailers such as The Gap's Banana Republic have transformed themselves into lifestyle brands, adding pillows, tableware and linens to their offerings.

"There is a Martha Stewart mentality in the country," said Alan Millstein, publisher of Fashion Network Report. "If a gift is for home or kitchen, it seems to have more practicality than another pair of gloves or silk blouse or scarf, which you will bring back."

'BRIGHT IDEAS' FROM MACY'S

In a series of 20 15-second spots from Macy's West, home gifts such as breadmakers are featured. Created in-house, the effort is themed "Macy's Bright Ideas"; each spot has randomly numbered ideas followed by the tag, "Macy's, making spirits bright."

In addition to dinnerware, Kmart's effort promotes a toy telephone hot line featuring Barbies, Star Wars and Lego System toys.

Old Navy's campaign from Deutsch, New York, and in-house uses actress Morgan Fairchild and actor Ben Vereen as well as the Smothers Brothers. The celebrities will appear in four spots along with the discount store's canine mascot, Magic.

The Old Navy commercials spoof holiday TV programming specials. With holiday music playing in the background, the announcer urges viewers not to miss "A*Very Magic Holiday Special" brought to you by Old Navy. "Very Magic" refers to the mascot, who sits on the couch and receives a wrapped gift box by grabbing it with its teeth.

The advertising will run in spot markets, national cable and on network TV special programming.

Although this holiday season has a full complement of days -- 27 instead of last year's 26 -- some retailers are concerned about the heightened popularity of Halloween.

"If Halloween sustains itself as a holiday, it changes the rhythm" for consumer shopping, explained Jack Sansolo, senior VP-global brand direction, Eddie Bauer unit of Spiegel. Consumers focusing on costumes aren't focused on holiday gift giving, he said.

RETAIL SALES FALL

Retail sales, in fact, fell for the second straight month in October, off 0.2%. But that was primarily due to a drop in auto sales, the U.S. Commerce Department reported. Apparel sales have been strong, and some merchants doing particularly well are discount and variety stores, according to the Goldman, Sachs & Co. retail composite index for October.

Last week strong earnings were reported at several individual retailers, such as The Gap, which registered a 22% jump in earnings -- that was attributed to increased advertising.

Such numbers have led retailers to maintain their traditional holiday optimism. An International Council of Shopping Centers survey of marketing directors at shopping malls found that 82% are expecting better sales this year than last.

"There's a lot of volatility and people are getting used to the volatility," said Barry Gilbert, vice chairman of Sharper Image, which is increasing advertising this holiday season through a print campaign done in-house.

"The consumer has great faith in the economy now," said Sheila Field, senior VP-marketing at Macy's West, possibly the result of recent rebounds in the stock

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