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Retail profits plummet amid soft U.S. economy

First buffeted by a tumultuous economy, then whiplashed in the wake of terrorist attacks last year, American retailers endured a second straight year of sputtering sales and falling profits during 2001, as anxious consumers shied away from full-price department stores and sought out bargains.

In this 11th edition of the Home Textiles Today Retail Report Card, a performance gauge of 33 key retailers of home textiles products, composite profits tumbled by 15.2 percent, following an even steeper decline of almost 20 percent the prior year. Long gone are the days of the late 1990s, when composite sales of retailers routinely climbed by 15 percent to 20 percent a year.

Underlining the breadth and depth of the retail trough, more than a fourth of the retailers measured last year lost money, nine of the 33.

Putting it into perspective, the 33 retailers in the 2001 survey watched more than $1.5 billion in profits go up in smoke. Over the past two years, profits have fallen by almost 30 percent, to $8.9 billion from $12.4 billion, a drop of $3.5 billion.

At the same time, sales growth was stunted, climbing by just 7.2 percent last year, way off the 10.1 percent increase recorded in 2000 and far behind the 13.1 percent growth put up in 1999. And sales last year would have been far worse, virtually hitting the wall, were it not for the hardy double-digit gains put up by specialty retailers and the nation's mass merchants and off-pricers. As it was, a full third of the merchants in this year's Retail Report Card recorded sales declines, 11 of the 33.

But even there, the results were spotty, and rising sales for the mass merchant channel were nowhere near matched by profits. The mass merchant channel drove its profits higher by 10.3 percent last year, but profits tumbled down by almost 28 percent, weighed down by crushing losses at a handful of weakened players, notably Kmart, Ames and Value City.

Notably and predictably hard hit were the big full-price merchants like Federated, May, Dillard's, Belk, Saks and Gottschalks, where sales slid back and profits went into free fall. As consumers continued to shun the full-price channel, sales skidded down by 4.2 percent last years, and profits dropped by more than 30 percent.

The year's biggest winners, overall, were off-pricers like TJX, Stein Mart, Ross Stores, Big Lots and Factory 2-U, where profits raced ahead by 73.0 percent, and sales climbed higher by almost 10 percent.

Not far behind were the specialty players like Bed Bath & Beyond, Linens 'n Things, Williams-Sonoma and Pier 1 Imports, where sales rose at a near double-digit pace of 9.4 percent, while profits jumped up by 16.3 percent.

Composite sales and earnings
Home textiles retailers

2001 (x$000s) 2000 (x$000s) % change
Net sales $504,343,951 $470,641,541 7.2%
Net income $8,885,789 $10,484,137 -15.2%


Composite results by retail format
Ranked by percentage of sales gain
(dollar figures in 000s)

Full-price
2001 2000 % CHG
Net sales $47,045,332 $49,091,359 -4.2%
Net income $562,927 $807,778 -30.3%
Mid-price
2001 2000 % CHG
Net sales $75,335,654 $74,363,996 1.3%
Net income $1,328,676 $1,010,148 31.5%
All-the-time-low-price
2001 2000 % CHG
Net sales $311,026,046 $282,085,924 10.3%
Net income $5,204,434 $7,199,462 -27.7%
Off-price
2001 2000 % CHG
Net sales $19,029,565 $17,327,427 9.8%
Net income $639,666 $369,789 73.0%
Specialty Stores
2001 2000 % CHG
Net sales $8,386,983 $7,210,212 16.3%
Net income $424,653 $388,291 9.4%
Warehouse Clubs
2001 2000 % CHG
Net sales $39,298,185 $36,448,996 7.8%
Net income $684,437 $762,938 -10.3%
Fabric & Decorating
2001 2000 % CHG
Net sales $1,982,157 $1,868,545 6.1%
Net income ($241) ($2,733)
Direct-to-consumer
2001 2000 % CHG
Net sales $2,240,029 $2,245,082 -0.2%
Net income $41,237 ($51,536)


Sales and profit productivity

Rank by sales Rank by income Company Sales per employee ($000s) Income per employee ($000s)
1 5 Costco $396.9 $7.0
2 10 BJ's 326.7 5.2
3 30 Hanover Direct 217.1 (6.8)
4 29 Lillian Vernon 185.5 (6.5)
5 3 Lands' End 161.8 7.5
6 11 Wal-Mart 157.5 4.8
7 31 Kmart 154.5 (10.3)
8 1 Bed Bath & Beyond 154.1 11.6
9 32 Ames 147.9 (37.0)
10 18 Dillard's 142.4 1.3
11 4 Ross Stores 142.2 7.4
12 21 JCPenney 139.8 0.4
13 14 Sears, Roebuck 138.4 2.8
14 28 Federated Dept. Stores 136.1 (2.4)
15 26 Value City 134.3 (1.7)
16 20 ShopKo Stores 129.8 1.1
17 2 Kohl's 124.8 8.3
18 17 Linens 'n Things 124.1 2.0
19 27 Factory 2-U Stores 121.4 (2.3)
20 13 Belk 121.3 3.4
21 7 TJX 120.3 5.6
22 23 Saks 114.5 0.0
23 8 May Dept. Stores 111.9 5.5
24 12 Dollar General 110.9 4.3
25 9 Family Dollar 101.8 5.3
26 22 Gottschalks 98.7 0.1
27 19 Stein Mart 94.3 1.1
28 6 Pier 1 Imports 90.6 5.9
29 24 Big Lots 83.9 (0.5)
30 15 Williams-Sonoma 77.3 2.8
31 25 Jo-Ann Stores 71.1 (0.7)
32 16 Hancock Fabrics 63.4 2.3


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