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For retailers, the numbers line up, they just don't add up.

All the statistics seem to be in place for a great retailing environment. Consumer confidence is high, unemployment is low, investment portfolios are risingyada, yada, yada. Still most retailers can manage to eke out only modest gains.

The difficult state of affairs will be on display as

The National Retail Federation Convention

convenes at New York's behemoth Jacob K. Javits Center this week. (See the accompanying schedule for specific company information and presentations.

"All the fundamentals are in place" for a strong 1997, says John Torella, senior consultant at

J.C. Williams Group

in Toronto. "The economy is humming along, we have political stability and there are exciting items in fashion and home furnishings. But retail sales are lagging behind other sectors of the economy."

The electronics category is particularly hurting, Torella says. "We were all counting on the high-tech section to be a leader. The margins are so small and the business is so competitive, that it's taken a lot of steam out of that category."

He points to

Tandy Corp.

(TAN:NYSE), which shuttered its Incredible Universe chain. Also,

Circuit City

(CC:NYSE) and

Best Buy

(BBY:NYSE), which reported sluggish same store Christmas sales.

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How can retailers rev things up?

Torella says they need to make shopping more entertaining.

While there are droves of "valley" girl and boy types who like nothing better than cruising the malls, research shows that most shoppers are narrowing the number of hours they spend in stores (a trend that is helping spur growth among catalog retailers).

According to Mark Kingdon, a partner at

Coopers & Lybrand

in New York, which completed a survey of 2,500 consumers, people are shopping with more precision. "They're making more trips, but those trips are shorter," he says. "They're browsing less. The main reason they don't purchase is the store didn't have the item the consumer came to buy." So long to impulse purchases.

In order to keep people in stores longer, retailers will need to provide entertainment. Torella points to stores like Nike Town, owned by

Nike

(NKE:NYSE), and Warner Bros. Studio Stores, a division of

Time Warner

(TWX:NYSE), which play on emotional purchases. His favorite is the Virgin Records Superstore in Times Square, owned by

EMI Group PLC

. "It's a total entertainment shopping experience," he says. "It saves you time and money and it's fun."

Torella says department stores must "differentiate or die," and off-price retailers must find ways to make the experience more comfortable. "Price is just the beginning," he says. "No bare bones."

According to Kingdon's research, however, price is still the primary driver for 40% of the people he surveyed. And once consumers find stores they like, they stick with them--60% say they buy more than half of their apparel from their favorite store.

"If you're not the favorite, you'll have a challenging time getting that customer," Kingdon says. That could mean tougher roads ahead for retailers that have fallen from grace, like

Limited

(LTD:NYSE), or those trying to stage turnarounds, like

Kmart

(KM:NYSE).

Torella says Kmart will be a hot topic of discussion at the show as industry watchers try to discern how the discount retailer's fourth quarter shaped up. Kmart will report results on March 6.

One way to maximize customer stays is by offering them a place to refuel and rest their weary feet. Both Torella and Kingdon predict more retail-restaurant pairings along the lines of

Barnes & Noble

(BKS:NYSE) and

Starbucks

(SBUX:Nasdaq). Allen Questrom, chairman and CEO of

Federated Department Stores

(FD:NYSE), told

Women's Wear Daily

to watch for that trend. The same article mentioned that Federated's

Macy

's Herald Square is considering adding a theme restaurant to its already extensive eatery line up, anchored by an

Ottomanelli

's Cellar Grill.

Here are some likely, if modestly speculative, combos:

Harley Davidson CafT

and a trendy apparel retailer like

Urban Outfitters

(URBN:Nasdaq).

Sports Authority

(TSA:NYSE) and a healthy dish like

Garden Fresh

(LTUS:Nasdaq).

Bed Bath & Beyond

(BBBY:Nasdaq) and

Au Bon Pain

(ABPCA:Nasdaq).

In terms of next week's conference, here's who's saying what when:

Monday, Jan. 13

8:45 AM EST to 10:15 AM EST:

Blockbuster Entertainment Group

, a division of Viacom (VIA:AMEX). Watch for store upgrades and product expansion, such as compact discs and software, to help stem shrinking margins.

Sears Roebuck & Co.

(S:NYSE). The company will continue to drive turnaround by cutting costs and investing in women's apparel and sportswear.

11:45 AM EST to 1:30 PM EST:

May Department Stores

(MAY:NYSE). Company faces same challenges as other department store retailers--making the shopping experience fun and adding value to compete with off-pricers.

International Business Machines Corp.

(IBM:NYSE). Can Big Blue maintain its momentum?

Tuesday, Jan. 14

11:30 AM EST to 1:30 PM EST

Rainforest CafT

(RAIN:Nasdaq). Key to earnings growth will be managing expansion plan of nine new stores this year. How healthy is the executive suite?

Sudio Stores, Warner Bros.

. Well positioned to capture customers' "emotional" purchases. Does Bugs have another movie coming?

3:30 PM EST to 5:00 PM EST

Coopers & Lybrand

will present case studies of two retailers:

Starbucks Coffee

. Expansion plans on track, including bottled Frappuccino products in supermarkets nationwide, increasing whole bean sales and adding units in the Pacific Rim.

Neiman Marcus

(NMG:NYSE). High-end retailer will need to convince Wall Street that Robert Tarr Jr.'s abrupt departure as CEO last month is not a prelude to more serious problems. The seller of Jaguars and massage machines recently told analysts that second quarter earnings will be 50 cents a share, seven cents below their expectations.

Wednesday, Jan. 15

12:30 PM EST to 2:30 PM EST

Gap

(GPS:NYSE). Hip retailer could face challenges in terms of pricing. Old Navy stores will drive growth. Is there a new store concept in the works?

By Suzanne Kapner

skapner@thestreet.com