This is a tough economy in which to do business, Woodward & Lothrop Chairman Edwin K. Hoffman informed the company's stockholders last week as he attempted to explain why sales are weak and earnings are down.

Almost any executive of a specialty or department store chain doing business here would acknowledge as much. But unlike Hoffman, they aren't required to provide the raw numbers that, for example, show Woodies' first-quarter sales up only 4.6 percent and earnings down 78.9 percent.

Woodies, of course, is a publicly held, Washington-based department store chain. Its competitors in this market are units of larger chains based elsewhere whose sales and profits are added to consolidated results reported by the parent companies.

Thus, although Woodies' competitors may acknowledge that business is tough, they aren't obliged to say how tough.

But when Hoffman says sales "have been particularly weak in what had been perceived to be a recession-proof region," he is speaking for the industry as well as for Woodies, retail analysts point out.

Retail sales in metropolitan Washington are at their lowest level in the 17 years that the Greater Washington Board of Trade has been compiling reports from members, says Leonard Kolodny, manager of the board's retail bureau.

"To say we're in bad shape is no exaggeration," Kolodny said.

Although Hoffman won't provide figures to substantiate the claim, analysts agree that Woodies maintains its lead in local market share. Woodies actually increased market share "materially" last year, Hoffman said.

What's more, he says the company is in "very good financial condition" despite weaker sales and increased competitive pressures in a "tough" economy.

Those factors have placed management in a no-win situation.

On one hand, it finds itself having to defend against charges by a few stockholders that the company is financially weaker. At the same time, its market position and the relative strength of its assets make it an extremely attractive takeover target.

Citing Woodies' long-term debt of $84 million and deferred liabilities of $12 million, one stockholder worried aloud that the company is headed for trouble. Not only is that an absurd notion, Hoffman implied, but also Goldman Sachs, which has been retained by Woodies as a financial adviser, is "better informed than a guy with 100 shares."

Woodies also has retained the prestigious New York law firm of Skadden Arps Slate Meagher & Flom "just in case there's an attempt at an unfriendly takeover of the company," Hoffman disclosed.

"You know, that's hollering before you're hit," complained one stockholder later.

There have been recurring rumors in recent years of a takeover attempt, but a combination of factors makes Woodies a more attractive target now, say several analysts.

Besides being one of the remaining independent department store chains and a long-established and dominant merchandiser in this market, Woodies has assets that include valuable real estate property, observed Eliot Benson, vice president and research director at Ferris & Co.

Although plans have been delayed, Woodies intends to go ahead with a $200 million commercial project on property it owns across from its downtown store.

What's more, plans are being made to develop a major hotel-office complex on property the chain owns adjacent to its Chevy Chase store.

Woodies would be an "interesting" acquisition for a major retailer because of its well-established position, agrees Tim Corsini, director of research at Cecil Waller & Sterling Inc., a Richmond brokerage. "It's all a question of what you pay for a company that has a book value of about $45" a share, he added.

It also might be looked upon as a business that has potential for better profit margins, Benson noted.

One financial analyst, who asked anonymity, emphasized the importance of retaining Skadden and Arps. Management and directors control just over 20 percent of Woodies' common stock, he observed. "And I'm not sure management would be able to block a takeover if one were attempted," the analyst added.

Meanwhile, Benson and Corsini believe Woodies' management has done a relatively good job in improving the company's position in what has become a more competitive market in the past five years.

Given the state of the economy, "I don't think Woodies is in better or worse shape than other retailers," Corsini said.

And Benson predicted that, with a return of consumer confidence, Woodies will "improve 7 percent this year" and "come in with a big enough fourth quarter to earn $4.50 a share this year."