Retailers and manufacturers are counting on fashion with a hefty dose of function to drive incremental handbags sales for spring 1999.

They anticipate that new materials, microfiber looks and updated crocheted constructions will drive bag sales in the coming months. Some stores that relied heavily on basics had disappointing results this fall, but merchants are hoping that exploiting the fashion cycle will kick their businesses into high gear.

"Our handbag sales were not so great; we were very disappointed in the Back-to-School business," says Kathy Steirly, divisional merchandise manager at ShopKo. Steirly believes ShopKo's spring and fall handbag assortment may have been "too basic," adding that sales should trend upward as bags with a youthful bent enter the mix.

Even retailers at stores that this year had relatively good results believe the key to the future will be some combination of fashion and function. Ames, for example, had "good increases on handbags, in the high single digits," and this year is presently testing more junior styles for holiday and spring to cultivate customers in this bracket, according to Sandy Sansavera, senior vice president and general merchandise manager.