L.A. retail sales projected to inch upward in 1994; new Clinton taxes may revive consumer cautiousness.

The retail industry is expected to shift into a slight recovery mode in 1994, with industry experts predicting that overall retail sales may climb, retailers may lease more space, and even department stores may do better business.

"It's not going to be a year when you're constantly reaching for the aspirin, but you have to keep that bottle close by," said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.

He predicted overall retail sales in L.A. County would increase by 1.5 percent before allowing for inflation during 1994.

Retail economist Ira Kalish, with the Los Angeles office of accounting firm Price Waterhouse, meanwhile, predicted sales would increase 3.5 percent during 1994 for general retail merchandise, which includes items found in department stores such as apparel and furniture and excludes items such as cars, food and gasoline.

This uptick actually would involve only slight real growth because Kalish predicts an inflation rate during 1994 of 1.5 percent to 2 percent, Kalish said -- leaving sales growth at 1.5 to 2 percent in real terms.

"The signs indicate the economy here shows some signs of stabilizing," said Richard Giss, partner in charge of retailing at the downtown L.A. office of Deloitte & Touche accounting firm.

"We've been through the worst," Kyser said.

But Dave Stewart, a marketing professor at USC, said retail sales probably won't pick up until late 1994, and there might be a slight dip in mid-year after consumers file their tax returns and assess the ramifications of new taxes instituted by the Clinton administration.

But Dick Carter, senior retail associate with the Sherman Oaks office of Beitler Commercial Realty Services, said he sees a strong year for retail leasing during 1994.

"We've seen a lot of tenants looking for new space" and taking advantage of cheaper rents, he said.

Furthermore, lenders and investors are expected to be more inclined to provide funds to developers for shopping center projects than they were this year, said Bernie Labowitz, vice president of real estate with Vernon-based Studio 5 Clothing Stores.

"A year ago or two years ago, they didn't even want to talk about shopping centers," he said.

Labowitz said he also expects real estate investment trusts and pension plans to become more common sources of financing for shopping centers during 1994.

As for business at the stores themselves, department store traffic is expected to pick up "a little bit," Kalish said.

Many department store chains are becoming more price-competitive and are selling a more prudent merchandise mix, thereby attracting more customers, he explained.

Also, consumers are expected to frequent department stores more because they may be more willing to shop at traditional retailers in general, Giss said.

Meanwhile, the warehouse store segment of the retail industry consolidated here during 1993, and the two biggest emerging players are expected to engage in head-to-head competition in Los Angeles during 1994, Giss said.

Bentonville, Ark.-based Wal-Mart Stores Inc. agreed to buy the eight Pace Membership stores in L.A. County from Troy, Mich.-based Kmart Corp. in November. Earlier this year, San Diego-based Price Club merged with Kirkland, Wash.-based Costco Wholesale Corp.

With Wal-Mart planning to turn the Pace stores into Sam's Clubs, the only major warehouse chains that will be left in L.A. County in 1994 are Sam's Club and Price Club and Costco stores, both owned by PriceCostco Inc.

These two major chains are going to be battling it out for membership in L.A. County, Giss said.

Their attempts to attract new members by keeping prices down will pinch profit margins, he added.

Other off-price and discount stores that are either freestanding or in strip centers should continue to fare better than small stores in malls, Kalish said.

The mass merchandisers, such as Super Crown, Blockbuster Video and Office Depot, should continue to dominate the small mom-and-pop stores, added Sy Schaffel, vice president of retail leasing in the West L.A. office of real estate brokerage Zugsmith-Thind. "I think they are taking over a great deal of space."

And stores selling household items, such as housewares, appliances and furniture, are likely to thrive as the housing market picks up in the latter part of 1994, Stewart said.

Upscale retailers, though, are expected to suffer "disproportionately," said Jon Goodman, director of the Entrepreneur Program at USC.

People will probably shop carefully and most likely will forego luxury items, she said.

The restaurant segment of the industry is expected to remain dismal, according to Laurie Lively Smith, a restaurant analyst with Seidler Co., a downtown L.A.-based brokerage firm.

"I don't see a trend that's getting better," she said, adding that the industry seems to have hit bottom but it would probably continue to move along the bottom.

But Janet Lowder, president of Restaurant Management Services, a restaurant consulting firm in Rancho Palos Verdes, expressed more optimism. "I think we'll start to see some upturn in consumer confidence and sales," she said.

In addition, restaurateurs have already done most of their restructuring to deal with the recessionary times. Thus, "I don't think we will see as many restaurants closing (during 1994) as in the past," Lowder said.

More and more steak houses are expected to pop up in L.A. County next year, she added. Florida-based Outback Steakhouse and Kansas-based Lonestar Steakhouse both plan to expand to Southern California.

More fast-food rotisserie chicken outlets are also entering the scene. Florida-based Kenny Rogers Roasters and Chicago-based Boston Chicken both plan to swoop down here soon.