Ask Nicholas Palihnich, the president of Korvettes, about the chain's new marketing strategy, and he'll tell you about flannel shirts.

Last fall, the men's plaid flannels at Korvetts' four Washington stores carried $8 price tags.

But Sears was selling flannel shirts for $5.99, K mart had them for $4.99, and even after marking them down to meet the competition, Korvettes managed to move only 100,000 shirts.

This fall, Palihnich promises, Korvettes' flannels will be priced at $5.99 -- the same as Sears -- and the initial order will be for 200,000 pieces.

Lower prices and higher volume -- the basic premise of the discount department store business -- is the marching order Palihnich has issued to reverse the chain's financial path.

The abortive attempt to lead Korvettes into department store prices is over, he said in an interview Wednesday. The name of the game now is competing head to head with Sears, J.C. Penney and Montgomery Ward for clothing and softgoods business and going up against the discounters in hard lines.

"We really moved out of our customers' range," by sliding up the price scale, he said.

Korvettes last year attempted to capture department store customers -- and department store profit margins -- with a $5 million television advertising campaign promoting "The Other Korvettes."

That was supposed to symbolize a fashion-oriented, department store-quality clothing business teamed with Korvettes' traditionally competitive hard goods business. But the customers' response was, "What other Korvettes?"

The result, Palihnich admits, will be a bleak bottom line when Korvettes reports on its earnings for the year ended Dec. 31.

But even before the red ink began to seep into view, a reversal of Korvettes' marketing strategy began to be drafted by Palihnich and Chairman Alain Mathieu.

Palihnich is a veteran Korvettes executive who was made president after Korvettes was acquired last April by Agache-Willot, a French conglomerate. k

Agache Willot is a group of 130 companies with annual European sales of $2.5 billion. Its biggest business is textile making and clothing: the output ranges from canvas awnings to clothes with the Christian Dior and Ted Lapidus labels.

To tap the American market, Agache paid $31 million to buy Korvettes from Arlen Realty and Development Corp. Arlen's real estate operations had had financial problems for several years, and the parent company was unable to provide cash to keep Korvettes running, let alone improve it.

The new direction Korvettes will take under Agache-Willot became apparent this month when the chain announced it would close 12 of its 50 stores and would concentrate on its home base -- the New York City market.

As part of the cutback, Korvettes pulled out of the Baltimore market entirely, but -- to the surprise of some retail observers -- kept open its four Washington stores.

"We view the Washington market as a greater potential for us," Palihnich said Wednesday while in Washington to check out his local stores.

While the Washington stores will remain open, Korvettes is negotiating to lease part of the buildings they occupy to other retailers, Palihnich said. t

Chain-wide, the Korvettes stores have about 12 percent more selling space than they can effectively utilize, he said. Talks are under way with several retail specialty chains to remodel the local stores and carve out a storefront for another retailer.

Palihnich said it won't be known until year-end audits are completed whether the Washington stores made money for Korvettes last year. But he predicted the stores will be operating profitably by the time Korvettes' two-year turnaround plan is completed.

Because much merchandise was ordered before the change in direction was ordered, only about 75 percent of the items in Korvettes' spring line will reflect the new marketing strategy.

By fall, the changes in merchandise should be completed, giving the new management another full year to fine-tune the system and make it work.

In addition to lowering its prices -- and backing off from its profit margin targets -- Korvettes will dramatically change both the medium and the message of its advertising.

Television, which got most of the money for "The Other Korvettes" campaign, will get only about 10 percent of the chain's advertising dollar from now on.

The new campaign will be aimed at families earning between $15,000 and $30,000 a year and the message will be strongly promotional, stressing lower prices and more current fashions than Sears, Penneys and Wards.