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SAN FRANCISCO, CA (May 15, l997) -- After spending a record amount in the first quarter of 1997, American consumers surprised retail analysts and numbers watchers when April's numbers came out showing that there was a slowdown in retail sales since the robust Christmas season. The U.S. Commerce Department reported that shoppers spent three tenths of one percent less last month than in March. These figures do include automotive sales, but most other retail sectors fell, as well. However, analysts would not commit to saying that there was a true slowdown in retail sales and said that factors such as a unusual winter season, income tax season, and an early Easter could have had a major impact on these numbers. Whether this perceived slowdown will influence the Fed's decision on raising rates will be apparent next week.

EVERYONE LOVES A BARGAIN

Unless one is a heir to the Getty fortune, most of us love bargains. Over the last few years, deep discounters, name brand and close-out merchandise, (referred to as "hard goods") have emerged selling housewares, toys, seasonal goods, food, stationery, health-and-beauty aids, books, party goods, hardware, and other consumer items, usually in the $1-$5 range. For about a buck, one can stock the kitchen with lots of food and necessities and best of all they will probably be name brands that you don't have to buy in packages of ten (like in the warehouses). These deep discounters get the bottom prices from their suppliers. Unlike grocers, who need to stock various brands of the same staple, these stores just sell one brand, and one size, but lots of them. When these suppliers such as Procter and Gamble close-out or discontinue an item, or make a packaging change, they sell this merchandise to these retailers.

Middle income shoppers are the demographic targets for these chains. They love saving money and many make visits to these stores a weekly shopping spree. So this week we will venture into the land of 99 cent stores and other deep discounters where fewer dollars could buy a shopping bag filled with loot.

The nations oldest existing one-price, name-brand and close-out general merchandise retailer is 99 CENTS ONLY STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NDN)") else Response.Write("(NYSE:NDN)") end if %>. The company operates a chain of 38 in southern California and also distributes merchandise through its Bargain Wholesale division. The 99 Cents Only Stores emphasize name-brand consumables in clean, attractively merchandised stores. It purchases merchandise from more than 1,000 suppliers, including Colgate-Palmolive, General Electric, Gerber Products, Gillette, Hershey Foods, Johnson & Johnson, Kraft, General Foods, and Mattel.

As a promotion and to celebrate the Grand Opening of a new store, brand new Sharp 19-inch remote-control color television sets were sold for only 99 cents to the first nine families, and Sharp microwave ovens to the next nine families. The new 21,400 square foot store, is larger than the average 99 Cents Only Stores of 14,000 sq ft. and the third location to open in 1997 and the first in the Santa Clarita Valley (outside L.A.). The company plans to continue to open new stores at an annual growth rate of at least 20%, which translates into nine new stores in 1997 and 11 in 1998.

For fiscal 1996, the revenues soared 20% and the net profits shot up 42%. Earnings per share rose 29% to $0.97 on more shares outstanding from $0.75. Net profit margins have steadily increased since 1994. All four quarters of 1996 had earning per share increase as well.

The first quarter ending March 31, 1997, saw a 47.5% increase in net income of $3.7 million for the quarter ended March 31, 1997, on net sales of $50.7 million, compared with net income of $2.5 million on net sales of $42.3 million in 1996. Earnings per share were $0.25 in the first quarter compared with earnings per share of $0.19 in the first quarter of 1996. This represents a 31.6% increase in earnings per share despite additional shares outstanding. Today this stock closed at $22 down $1/8 on thinly traded volume.

TUESDAY MORNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TUES)") else Response.Write("(Nasdaq: TUES)") end if %> operates a chain of 291 deep-discount retail stores in 31 states under the Tuesday Morning name. The company purchases close-out merchandise at prices generally ranging from 10% to 50% of normal wholesale prices and sells the merchandise at prices that are 50% to 80% lower than retail prices charged by department and specialty stores. Merchandise primarily consists of dinnerware, silver serving pieces, gourmet housewares, bathroom, bedroom, and kitchen accessories, linens and domestics, Christmas trim, luggage, toys, and stationery.

What makes these stores interesting from a marketing point of view is that they only open four times a year for six-week to twelve-week "events" during the retail industry's peak selling seasons. Their loyal customers line up to buy the goodies. Consumers know that they will have the opportunity to purchase famous-maker, first-quality merchandise which is often found in prestigious department and specialty stores. The stores which are leased throughout the year are in effect closed during the other times of the year with a big sign on the door that says "Closed for Restocking".

Recently featured in a Daily Double here at The Motley Fool, Tuesday Morning has more than tripled since its 52-week low of $11 to trading in the high $36 range. As analyzed in the Motley Fool feature, "this stock has everything going for it, growth, earnings, and improved margains." This retailer posted strong same-store sales increases up 14% over 1995. In the fourth quarter, same-store sales rose 16%. The company also reported an increase in after tax margins from 2.3% to 4.5%.

Since the publication of the Foolish article, Tuesday Morning Corporation reported a significant improvement in its operating results for the first quarter of 1997. The company recorded a net profit of $744,000 ($0.09 per share) for the quarter ended March 31, 1997, versus a net loss of $676,000 ($0.09 per share) in the prior-year period. Net sales rose 33% while comparable-store sales increased 23% during the first quarter of 1997.

This past Tuesday its board approved a three-for-two stock split. The Dallas-based discount gift retailer said the split will be in the form of a stock dividend to shareholders of record June 3. Unlike the store, the stock trades every weekday and today it closed at $28 1/2, up $7/16.

DOLLAR GENERAL CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DG)") else Response.Write("(NYSE: DG)") end if %>, is a Nashville-based deep discount retailer located in 24 Midwestern and southeastern statesrom Delaware to Nebraska, with more than 2,734 neighborhood stores. Serving primarily low, middle, and fixed-income families in small communities, its Dollar General Stores offer general merchandise at discount price points including $1, $5, $10, and multiples thereof, such as 2 for $1, and 2 for $5. The typical store has approximately 6,000 square feet of selling space. The majority of the company sales are in hard goods. For the fiscal year ending 1997, sales were $2.134 billion over sales over $1.742 billion in 1996. Net income went to $115 million from $87.8 million and earnings per share rose from $0..80 to $1.04 on approximately 20% more outstanding shares.

Fiscal first quarter 1997 saw Dollar General earnings rise 32.9% to $0.47 a share, topping by three cents the mean estimate of analysts surveyed by First Call. In the year-ago quarter, the company earned $0.35 a share. Sales rose to $675.2 million from $556.1 million a year ago. The company opened 360 new stores and closed 42 stores during fiscal 1997.

Last week, Dollar General Corporation also announced it has established an Internet web site at www.dollargeneral.com. Dollar General closed at $30 3/4, down $1/8.

MAZEL STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAZL)") else Response.Write("(Nasdaq: MAZL)") end if %> operates closeout retail and wholesale businesses in the New York metropolitan area. The company's 23 stores, up from 13 stores in 1995, which operate under the Odd Job name, offer brand-name consumer items, including housewares, stationery, books, party supplies, health and beauty aids, food, toys, hardware, electronics, and garden supplies. These brand names include Black and Decker and Mattel, among others. Odd Job stores range in size from 6,500 to 25,000 square feet. The company anticipates opening or acquiring approximately 40 new stores through the end of fiscal 1999.

In March, Mazel reported fiscal 1996 fourth quarter and year ended January 25, 1997. Pro forma as adjusted net sales for the fiscal 1996 fourth quarter increased of 27.6% for the year-ago quarter. Pro forma as adjusted net income for the fiscal 1996 fourth quarter advanced 51.1% to $2.3 million, or $0.25 per share, from $1.5 million, or $0.16 per share, for the corresponding quarter last year. Net income for the fourth quarter of fiscal 1996 rose significantly to $1.3 million from $647,000 for the fourth quarter of fiscal 1995. For the full year, pro forma as adjusted net sales were up 34.4%.

Pro forma as adjusted net income for the year was $8.5 million, or $0.93 per share, a 32% improvement over fiscal 1995's $6.4 million, or $0.70 per share. Net income for the 1996 fiscal year was $8.2 million, up from $3.1 million for the 1995 fiscal year.

However Mazel Stores Inc. said Monday it expects to earn about $0.17 a share in its fiscal 1997 first quarter -- a figure that would miss the $0.24 a share that Wall Street expects to see. The company said it expects its same-store sales to fall by about 4% to 5% from 1996 levels, while retail sales for the quarter should climb by about 25% from a year ago. In the year-ago quarter, sales dropped by about 5% -- assuming intercompany sales are added back into the mix.

The store explained that comparable store sales are based on a small platform of 13 stores. The 10 stores that opened in fiscal 1996 are not added to the comparable store base. The company attributed the softness in its retail operation to the results of lower shipments to the stores early in the latest first quarter, compared with the prior year's levels and the later timing of Passover, which affected sales in its New York and New Jersey markets.

Mazel said it made an unusually large purchase early in the first quarter of 1996, but didn't make a comparable size purchase until late in the 1997 first quarter, and therefore didn't begin recognizing the benefit of retail or wholesale sales from the purchase until late in the 1997 first quarter.

Odd Job and Odd Job Trading have nearly doubled in size from 13 stores in 1995 to 23 stores today. Through the end of fiscal 1999, they expect to add at least 40 new stores. In addition, the company said it would "seriously explore opportunities to make acquisitions that will complement our existing operations and strengthen our presence in key geographic areas, including the Northeast, Mid-Atlantic, and Midwest markets."

Toward that goal, Mazel Stores and VALUE CITY DEPARTMENT STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VCD )") else Response.Write("(NYSE: VCD )") end if %> a full-line off-price department store chain currently operating 95 stores in the Midwest and East, recently signed a letter of intent to form a joint venture that will acquire and operate the toy and sporting goods departments and the health and beauty aid departments in the Value City Department Stores. Mazel said that last year the proposed joint venture had revenues of about $110 million.

Salomon Brothers Inc. is betting that Mazel's first quarter results were a fluke, and the brokerage firm boosted its rating for the closeout merchandiser to "strong buy" from buy." In a research note, the firm said it has reasons to believe Mazel's first-quarter results will prove to be "anomalous". The firm said it expects $15-16 per share price near-term, moving to low $20's further on "if comps continue strong and the wholesale business picks up in the next couple of months." Mazel also said it feels "comfortable" with analysts' estimates for the full year at around $1.08 a share. Mazel expects to release first-quarter results in the last week of May. The stock was down $3/4, to $15 on little volume.

CONSOLIDATED STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNS)") else Response.Write("(NYSE: CNS)") end if %>, a leading value retailer specializing in toys and close-out merchandise, operates a total of 1,840 stores in all 50 states and Puerto Rico. Stores by division consist of: 1,203 toy and close-out toy stores operating as K-B Toys, K-B Toy Works and K-B Toy Outlet and 637 closeout stores operating as Odd Lots and Big Lots. Odd Lots and Big Lots sell housewares, electronics, hardware, automotive supplies, and soft goods. The stores also carry consumer items such as electrical wire and pet food. Wholesale operations are conducted through Consolidated Toy and Wisconsin Toy.

This retailer appears to have good things. Since 1992, full year fiscal revenues for this company have increased. And this year the fiscal 1997 numbers show an increase of 87%. As revenues increased so did net sales over the same period of time. Sales show up from $1,1512 million in 1996 to $2,647 million in 1997. The earnings per share have also increased from .$0.20 from 1992 to $1.28 for fiscal 1997. Retail sales for the first quarter of fiscal 1997 were $583.2 million, a 86.7% improvement compared to retail sales of $312.3 million in the same prior year period. This stock closed today at $41 1/2 up $1 1/2.

RETURNS EXCHANGES AND REFUNDS

NEW WEST EYEWORKS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NEWI and PSE: NWE)") else Response.Write("(Nasdaq: NEWI and PSE: NWE)") end if %> Monday announced record sales and earnings for the first quarter of its 1997 fiscal year. For the three-month period ended March 29, 1997, net income increased 43% in the first quarter of the prior year. Net sales for the quarter ended March 29, 1997, gained 11.2% to a record $12.8 million, compared with $11.5 million in the year-earlier quarter. The company experienced a 7.4% improvement in comparable-store sales during the first quarter of 1997. At the close the stock was $5 1/2, down $1/8 on almost no volume.

PACIFIC SUNWEAR OF CALIFORNIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSUN)") else Response.Write("(Nasdaq: PSUN)") end if %> reported yesterday record results for the first quarter of fiscal 1997 (the 13 weeks ended May 4, 1997). Net income for the first quarter was $1,124,000, or $0.13 per share compared to a net loss of ($170,000) or ($0.02) per share for the first quarter of fiscal 1996. Considering that most of the apparel for these stores focus on lightweight clothes, this shows a very strong quarter numbers. This retailer closed at $34 3/4, up $7/8.

BARNES AND NOBLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKS)") else Response.Write("(NYSE: BKS)") end if %>, the world's largest bookseller, announced that its web site was launchedthis past Tuesday to much hoopla and fanfare, www.barnesandnoble.com. BarnesandNoble.com extends the company's online presence, begun earlier this year with its site on America Online. Many of the features planned are to directly compete without missing a beat with AMAZON.COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> which went public today priced at $18 ,opened at $29 1/4 and closed at $23 1/2 (note that the company only issued 3 million shares and over 6 million were traded). Since the interest in Amazon, shares of Barnes and Noble flew to $ 40 5/8 up $1 5/8 on tremendous volume of almost eight times its 30-day average volume.

WAL-MART STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:WMT)") else Response.Write("(NYSE:WMT)") end if %> reported its earnings rose 14%, edging past Wall Street's expectations as its sales broke the $25 billion threshold. At Wal-Mart, first-quarter net income was $0.29 a share, compared to $0.25 a share, for the year-ago quarter ended April 30. Analysts surveyed by First Call had a mean earnings estimate of $0.28 a share for the latest quarter. Shares of Wal-Mart share closed up $3/8 at $30 1/2.

NORDSTROM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOBE)") else Response.Write("(Nasdaq: NOBE)") end if %> said its first-quarter earnings increased 25% from a year earlier, boosted by cost controls and improved gross margins. The results handily beat Wall Street expectations. Net income rose to $0.41 a share, from $0.32 a share, a year earlier. The year-earlier results included a charge of $1.5 million or two cents a share. Nordstrom shares closed at $45 5/8, up $7/8 on the day.

OFFICE MAX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMX)") else Response.Write("(NYSE: OMX)") end if %> Tuesday posted a 25% earnings increase for the latest quarter despite declines in prices for retail paper, computers and electronics products. The No. 3-ranked office superstore chain said its net income for the first quarter totaled $15.7 million, or $0.13 a share, up from $12.6 million, or $0.10 a share, in the year-ago quarter. Office Max's sales for the quarter, which were announced two weeks ago, increased 22% to $888.6 million from $730.6 million a year ago. Same-store sales rose 5%. Shares close at $ 13 7/8, up $1/8.

CLAIRES STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CLE)") else Response.Write("(NYSE: CLE)") end if %>, a women's accessory retail chain based in Pembroke Pines, Fla., reported Tuesday that its fiscal first-quarter earnings rose 23% and were in line with Wall Street's forecasts. Net income per share rose from $0.14 to $0.17 for this quarter. At the close the stock was $18 3/8, up $1/8.

High-end retailer TIFFANY & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIF)") else Response.Write("(NYSE: TIF)") end if %> on Thursday raised its dividend on common stock by 40%. Tiffany increased its quarterly dividend by two cents, to seven cents. The dividend will be paid July 10 to holders of record. Wednesday it reported strong first-quarter results, with sales up 10% and net earnings up 75%. Today it traded down $1/8 to $43 3/4.

Meanwhile, New York-based SAKS HOLDING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKS)") else Response.Write("(NYSE: SKS)") end if %> reported income before items of $12.6 million, or $0.20 a share, on sales of $520.4 million in the quarter ended May 3. Results matched First Call's mean estimate. A charge reduced final net income to $9.3 million, or $0.14 a share. A year ago, Saks had net income of nine cents a share, on sales of $464.5 million. Year-ago results are pro forma, its initial public offering was completed on May 22, 1996. Shares closed at $22 7/8, up $1 1/4.

San Francisco-based GAP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> earned $84.3 million, or $0.31 a share, on sales of $1.23 billion in the quarter ended May 3. That matched analysts' mean estimate, according to First Call. A year ago, Gap earned $81.6 million, or $0.28 a share, on sales of $1.11 billion. There were 5% more shares outstanding in the year-ago quarter. Gap said first-quarter earnings per share grew faster than net earnings mostly because of the company's ongoing stock-buyback program. Gap's first-quarter same-store sales fell 3%. On over 2 million shares traded the stock closed $32 3/4 , up $5/8.

ALTERATIONS

A few weeks ago I wrote about Nordstrom and how they didn't know who they were and that is one of the reasons why they were suffering so. Well I am ready to start the Confused Retailer Store Section, and my newest entry is LOEHMANN'S INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LOEH)") else Response.Write("(Nasdaq: LOEH)") end if %> I have been shopping at Loehmann's for over 25 years. When I read recently they were planning to add a men's section I went into mourning, and then ballistic. The thought of a man being anywhere but in front in their special section of the store , reading a newspaper waiting for his wife, really disturbs me.

Like an athletic club that never allowed women in, Loehmann's was our "club." On the other side of the metal railing the men sat, like good little soldiers, never daring to cross the line. Women would come out of the dressing room and parade down to show their men the newest outfit. The beauty of Loehmann's was no men, the back room, no credit cards, no returns, no shoes, one rack of skirts, one of blouses, jackets, etc. etc. And the old timers remember when the labels were ripped out and the only way to figure out the designer was to know the code. Now the stores are just like all the rest, big cluttered and filled too much merchandise. The uniqueness of Loehmann's is gone. I used to go there all the time, now I never do. One last thing, there is one big dressing room (no stalls). Where are they going to put the men? Loehmann's closed today at $6 7/16 unchanged.

Wheat First Butcher Singer lowered Loehmann's to "hold" from "buy." Wheat First cited the company's disappointing first-quarter results, the lack of a catalyst to move the stock in the short term and the unknown risk associated with introducing menswear into its stores. The brokerage firm lowered its earnings estimate for fiscal 1998 ending in January to $0.56 a share from $0.75.

Robertson Stephens & Co. lowered their investment ratings of ANN TAYLOR STORES, INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> and GUCCI GROUP NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GUC)") else Response.Write("(NYSE: GUC)") end if %> to "long-term attractive" from "buy". Also a French newspaper reported a rumor this week that MOET HENNESSY LOUIS VUITTON ADR (Nasadaq: LVMHY) maybe be interested in purchasing the Italian fashion house.

Piper Jaffray Inc. started coverage of FINISH LINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FINL)") else Response.Write("(Nasdaq: FINL)") end if %>, and FOOTSTAR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTS)") else Response.Write("(NYSE: FTS)") end if %> with a "buy" rating. McDonald & Co. upgraded its rating on OFFICE MAX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMX)") else Response.Write("(NYSE: OMX)") end if %> to "aggressive buy" from "buy".

Remember your plastic -- "We never leave Fooldom without it."