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Retail analysts point to department stores

NEW YORK -How department stores can fare better in an environment that favors discounters and other players was the focus of the NRF seminar, "Wall Street Review: What Ails Retail Stocks?"

Three retail analysts-Richard Baum, Credit Suisse First Boston; Teresa Donahue, Neuberger Berman; and George Strachan, Goldman Sachs-participated.

Strachan first cited the facts from GS Research. For example, a $1,000 investment made in Kohl's or Bed Bath & Beyond in 1992, when those two companies went public, he said, is now worth $31,107 and $19,176, respectively.

If one invested $1,000 in Sears, Federated, Dillards and JCPenney in 1990, however, it is now worth $3,273, $1,936, $469 and $437, respectively, though Strachan noted that these numbers exclude dividends, which may penalize department stores a bit.

Issues nagging department stores have included rising competition, a lack of square footage growth, narrowing of merchandising focus, apparel's loss of wallet share, and how consolidation has not equaled rationalization, he said.

Another problem for department stores is the "massification of trends available at each price point," said Donahue.

On a positive note, Baum cited ways to revive shoppers' and investors' interest. Stores need to embrace technology to lower costs and increase responsiveness. He also suggested that stores chase innovative product, not fickle fashion.

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