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Future prospects for the retail store industry are mixed, especially for department stores where women's apparel sales have been weak in 1997. The outlook for discount stores is better, however, as they continue to gain a greater share of the market. Retail stocks have outperformed the market in 1996 and 1997 after a weak 1994 and 1995. Investors must consider individual stocks, as the industry is unattractive for the next three to five years.

The retail environment has improved considerably in 1997 over 1996, in both same store results and operating profits, especially for department stores. The shift from consumer hard goods and electronics towards a wider range of goods and the development of private-label brands have been two trends in department stores, and the market share for discounters has increased. However, these are not attractive stocks through the years 2000-2002.

Economic growth and stock performance in the retail store industry seems to vary greatly among the individual members of the industry with most observers expecting department stores and discount houses that post strong returns to continue on the same track, or possibly at a slower rate, while the poor performers will have mixed results. Following poor performances in 1994 and 1995, retail store stocks outperformed the market in 1996 and the first quarter of 1997. Investors should seek companies that have and maintain the best competitive edge.

The retail environment, especially for department stores, improved in 1996 in contrast to the lackluster operating profits and same-store sales in 1994 and 1995. Prospects in 1997 are generally sound for the industry, as well. Results for discount stores in 1996 were mixed with increased store counts and sales for some, but not all, chains. A company's future, as well as current advantages, must be considered by investors before commitment.

The environment for the retail industry, especially department stores, has improved in terms of same-store sales and profits in 1996 when compared to 1994 and 1995. Department stores have been accelerating the trend to private labels, as well as changing their merchandise offerings. However, results for discount store chains have been more mixed in 1996. Timeliness for these stocks has increased in 1996, but investors must still be selective.

The environment for the retail industry in operating profits and same-store sales, especially for the department store segment, has improved in 1996 over 1994 and 1995, and stocks of the leading chains are stronger. However, results for discount store chains, such as Wal-Mart Stores Inc and Kmart Corp, have been mixed. Although timeliness for these stocks has increased in 1996, investors must consider long-term competition as well as market share.

The environment for the retail industry is strong in 1996, especially for department stores, compared to 1994 and 1995. The leading department stores are accelerating proprietary brand developments and shifting merchandise offerings, as well as automating internal functions. Results for discount chains, such as Wal-Mart, Kmart, Dollar General, and Family Dollar Stores are more mixed, however. These stocks must be selected on an individual basis.

Trends for same-store sales were weak in the retail store industry during the 4th qtr of 1995, with consumer spending only half the 5% increase of selling space expansion. Small stores with convenient locations helped some chains remain successful, and consolidation and changes in merchandising have enhanced margins for some department stores. Investors should consider stocks with long-term competitive advantages and market share.

Profits are slowing in the retail industry in 1995, due to high promotion levels and and erratic same-store sales. Large item sales and low wage growth are also affecting retail earnings. Consolidation is continuing industry-wide, especially among larger department stores, such as Federated, Macy's, and Wal-Mart. Retail stocks are volatile and investors need to watch Beta trends and other measures before investment.

Retail stores reported weaker 1st qtr earnings in 1995, mainly due to higher interest rates and layoffs. Increased debt service, interest rates, and job insecurity could also lower retail sales in the rest of 1995 and for 1996. Several retail chains, such as Wal-Mart, are opening new stores, however. Retail industry stocks are cyclical and, with exceptions such as Wal-Mart and Kohl's, will underperform the market.

The retail industry is not expected to show much strength in 1995, as interest rates continue to rise and consumer confidence dips again. Declining consumer income levels has also played on the fears consumers have and has caused them to tighten purse strings. The successful retail companies will be those who offer consumers goods with perceived value at prices that are considered reasonable.

A number of influences will affect the performance of the retail store industry. Possibilities such as a weakening of the economy and a slowdown in consumer spending would have a significant impact on the industry's growth. Retailers also have fierce competition for market share, with many of them using value retailing to improve customer traffic. Improvements in customer service and increasing the use of private label will also affect the industry. Investments in this industry will be highly volatile.

Retail store sales suffered from the California earthquake and poor weather but should recover by spring 1994. The latter half of 1993 was marked by improved durable spending, benefitting furniture and home appliance vendors but worsening margins for many broad-based merchandisers. Clothing sales should improve in 1994 and durable sales should continue. Because consumers are looking for value, stores with low operating costs should benefit.

The retail industry is improving with a stronger than expected 1993 holiday season, beginning Nov 1993, and industry stocks are reflecting optimism. Retail stocks rose 10% from Sep to Nov 1993, and two-thirds of the firms' securities experienced gains. Retailers have streamlined their operations and have kept prices down by entering agreements with suppliers. Lower prices and value-for-the-money will be key themes among retailers during the decade. However, the stock group is volatile and investors should invest with caution.

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