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Industry feels impact of retail shakedown

NEW YORK -The fact that the number of store closings announced in the past three months totals more than 500 doors only begins to outline the issue of overcrowding in the retail industry. What more fully illuminates the scope of the dilemma is this: Those 500-plus stores will be replaced this year by more than 600 others.

The question for home textiles manufacturers is how long it will take the new boxes to make up for the sales volume that had formerly been carried by the stores that will be shuttered (see chart on page 4).

The closing stores account for annual home textiles sales of about $517.3 million, according to Home Textiles Today estimates. Seven of the retailers recently announcing store closings placed in the top 20 retailers in HTT's Top 50 HomeTextiles Retailers, based on 1999 sales numbers. Two of those seven are liquidating. Even Kmart, retailer number-three on the list, announced that it was closing 72 stores six months ago.

"There's a lot of choices for the consumer," said Joan Bogucki, analyst, Wedbush Morgan Securities, Los Angeles, and if a customer doesn't like one store, she will not hesitate in going to another. "Companies that did well increased their capital expenditures and expanded," Bogucki said. However, the mood is different now. "It's survival of the fittest."

Despite the uncertain economic environment, some retailers have actually accelerated their store expansion plans. After announcing third quarter results in December, Bed Bath & Beyond said it would add about 80 units this year-11 in the first quarter, 22 in the second, 43 in the third, and four in the fourth-compared to 70 last year. Last week TJX kicked up its annual store growth plan to 12 percent for fiscal 2002 and the next several years, up from 10 percent growth in fiscal 2001.

There will be plenty of new market entries this year as well. Kohl's will soon debut in the Atlanta market with 15 locations. The Chicago and New York metro areas will see their first Expo Design Centers this year, and The Great Indoors will debut in the Los Angeles area and in Ohio.

Lowe's is also coming to the New York area, beefing up its Boston presence and breaking into Rhode Island (see related story below). Target will extend its Northeastern expansion into Maine for the first time, and will introduce the SuperTarget format to Louisiana, North Dakota and Michigan.

The industry has "always been consolidating," said Wayne Hood, analyst, Prudential Securities, New York. As the economy slows, he noted, retailers have a tendency to rid themselves of underperforming areas. During the good times, however, the mistakes are less noticeable, he said. "And we need more consolidation. We don't need more space, but [instead] to become more productive in the existing space."

David Ricci, analyst, William Blair & Company LLC, Chicago, agreed. "Some of these stores shouldn't exist but they were propped up by the economy. The downturn will shake that up."

Ricci sees the convulsions as part of the natural cycle of events. And when the economy is euphoric, he said, companies tend to lose sight of that and make unrealistic decisions. "These turns are inevitable. But it's good for the industry."

Number of stores closed or to be closed, as announced in the past three months


Store Type Ranking on HTT's Top 50 Retailers list1 Total home textile sales in millions1 No. of full-line stores closing Percent of total full line stores Estimated amount home textiles sales at stake, in millions2

JCPenney

Dept store/Chain

1

$2,325.0

44

4.0%

$46.5

Sears

Chain

6

819.0

43

0.54

2.0

Ames

Discounter

12

300.1

32

7.0

10.5

Wards

Chain

14

215.9

250

100.0

215.9

Strouds

Specialty

15

213.0

105

170.0

18.1

HomePlace

Specialty

19

201.9

38

31.0

31.0

Bradlees

Discounter

20

182.0

105

100.0

182.0

ShopKo

Discounter

25

145.0

23

6.0

4.4

Sterns6

Department store

45

65.8

5

21.0

6.9

Ann & Hope

Discounter

N/A

N/A

4

67.0

N/A

Totals:

515 stores

$517.3 million


1 According to HTT's Top 50 Home Textiles Retailers, using 1999 sales figures

2 Estimates based on full-line store closings and HTT's Top 50 Home Textile Retailers, using 1999 sales figures of home textile sales

3 Sears' full-line stores only; a total of 89 stores are being closed, most of which were specialty

4 Based on Sears' total of 860 full-line stores

5 Strouds closed four stores in December. Three more are currently undergoing liquidation to close, and three more will follow following court approval, for a final total of 50

6 Federated announced last week that it is shutting down the Stern's division, with 19 of those 24 stores to be converted into Macy's and Bloomingdale's stores

A SAMPLING OF 2001 STORE OPENINGS


Store name Announced 2001 store openings1

Lowe's

115 - 125

Wal-Mart

100 - 1102

TJX Companies3

105

Target

90

Bed Bath & Beyond

80

House2Home4

67

Kohl's

55 - 60

Expo Design Center

18

Federated

5-8

The Great Indoors

4


Total new store openings: 639 to 667

1 Retailers may open other locations this year, but have not announced them yet

2 Wal-Mart will open 40 new discount stores and 60 to 70 Supercenters, after taking the relocations and expansions into account

3 TJX Companies includes 75 T.J. Maxx and Marshalls as well as 30 HomeGoods

4 Converted HomeBase locations

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