Home furnishings stores enjoy strong holiday sales.

It may have been a disappointing holiday season for most retailers, but not for the big home-furnishings chains.

Stores like Restoration Hardware, Crate & Barrel and William Sonoma Inc.'s Pottery Barn reported double-digit sales increases during the holiday period - a time when the national retail industry posted sluggish sales gains of 2 percent to 3 percent.

Thanks to an industry-wide drought in innovative home furnishings, these smaller home-decoration retailers have carved out an impressive niche. Department stores and furniture chains like Levitz Furniture Corp., which sought bankruptcy protection last September, are not faring well compared to this new generation of specialty retailers.

Same-store sales at William Sonoma were up 20.5 percent during the holiday season over the same period in 1996, according to store officials. Restoration Hardware's same-store sales jumped a reported 32 percent.

Hot items included Restoration's $45 coffee-table dictionaries, which sold out early in the season. At Crate & Barrel in Century City, shoppers have an appetite for stylish silver-and-black alarm clocks, ranging from $21.95 to $49.95. Decorative napkin rings are also strong sellers, as well as chic picture frames.

"Frames always move quickly," said Jackie Tamura, Crate & Barrel's floor manager.

The reason these stores are hot, say industry observers, is they give shoppers what they want: new and exciting products.

"Fifteen years ago, before Crate & Barrel, you would buy everything at Robinsons and The Broadway," said Scott Kohno, president and chief executive at C & J Partners Inc., a retail consulting firm in Pasadena. "Because of their slowness in responding to market trends, they basically gave away their business."

Also fueling the home-furnishings switch, say industry observers, are changing demographics and a steady economy. Affluent baby boomers are buying first and second residences and shopping at these specialty stores to decorate their new homes.

"There's a huge baby-boomer group shopping at these retailers . . . and they have more money," said Linda Frost, marketing manager at Century City Shopping Center, home to three home-furnishings specialty stores.

Specialty housewares retailers, say some industry observers, are seen as The Gap of the furniture industry. While chains like Levitz offer a vast selection of furnishings, stores like Pottery Barn and Crate & Barrel have an eclectic mix of casual, hip and stylish homewares at attractive prices.

"Every couple of weeks, Pottery Barn has a new look and new styles," said Geri Israel, 42, who shops there regularly.

Though the mix of fresh and unique inventory adds to the popularity of these retailers, another key selling point is their handsome displays.

Consumers come in for a vase and candy dish and are drawn into the rest of the store, checking out chenille throws, pillows and couches.

"Merchandising has a lot to do with it," said David Rose, a retail analyst at investment firm Jefferies & Co. "The customer can be guided into looking and discover new and different items."

Eric Silberman, manager at Restoration Hardware agrees. His store, which features everything from lamps to spigots topped with iron ducks, goes against general merchandizing principals.

"Not everything flows, you won't see a couch for $1,500 with a nice $1,000 armoire next to it," said Silberman. "What you'll find is a coffee table topped with a glass jar filled with Tim Allen hammers."

Also fueling the home decorating phenomenon is the recent rise in decorating magazines and cable TV shows on home decor. Most notably, the Martha Stewart craze has brought the casual-chic style to the masses.

"Martha Stewart is a goddess," said Betty Kahn, a spokeswoman for Northbrock, Ill.-based Crate & Barrel. "She's brought people back to their homes and is teaching people what their mothers didn't teach them."

Crate & Barrel's success has triggered some expansion plans in Southern California, said Kahn, including a multiple-story furniture store. The 35-year-old company has an extensive furniture collection, but its L.A. stores are too small to accommodate a majority of its inventory.

Meanwhile, the Pottery Barn's Century City is planning to expand its location this year, according to Frost.