The entry of a new chain of discount stores made Christmas 1988 more competitive for local retailers than in holidays past, causing sales increases to be less than hoped for.

While some specialty stores have reported substantial improvement, most retailers will remember this year's holiday shopping spree as one when competition caused deep discounts for a noticeably conservative and careful consumer.Overall, stores expected slight sales increases of 1-2 percent over last year.

"It's not a disastrous year, but the increases probably won't be as great as we hoped for," said Ev Gray, executive director of the Downtown Retail Merchants Association.

"This is definitely not a banner year, but we will beat last year's sales by about 2-4 percent," Dell Stokes, manager of the downtown ZCMI, said.

He explained that the oldest department store in Utah salvaged an increase by taking a more aggressive stance this year in meeting the competition's prices. "We took more markdowns on slow-moving items," Stokes said.

Many retailers are pointing to ShopKo, a Wisconsin-based chain which opened seven stores along the Wasatch Front this year, for playing a big factor in the discount game.

Underscoring the national chain's competitive spirit, ShopKo declined comment on its inaugural Christmas season in Utah, saying such comments do not serve its customers.

"Since our entry into the Utah market we have been overjoyed by the quality of our employees, and our Utah customers like our products," spokeswoman Jane Kresin said.

Discounters like ShopKo and K Mart have caused sharp price cuts in toys.

Bruce Hammond, general manager of the locally-based Hammond toy and hobby store chain, said the additional competition has diluted sales and forced markdowns on most toys.

But Hammond's "made it" through the make-it-or-break-it Christmas season, with an anticipated 20 percent increase in sales over last season - balancing out an otherwise poor year, Hammond said.

Bookstores also did well over the holidays, Gray said.

"We're having a marvelous year," said bookstore owner Sam Weller. "This year people are looking for gifts they can live with and afford."

Gray explained that most consumers have been conservative in their giving this year.

"People have been shopping, but shopping very carefully. We translate into a little bit of speculation on what will happen in the economy. People are (apparently) not feeling very confident about things being too rosy" in 1989.

"Stores have concentrated on service and have had to pull out their best sales tools to capture customers," Gray said.

Noted nationally for its customer service, Nordstrom reported "a good" holiday shopping year.

Shoppers will continue to flock in after Christmas too, when they exchange gifts and take advantage of after-Christmas sales, when retailers unload surplus inventory before the end of the year.

Susan Draayer, Nordstrom's Utah advertising director, said the clothing retailer won't mark down its inventory until after Christmas, when it holds an annual men's sale and discounts other surplus goods.