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Retailers up profits as Kmart, others, rebound

Don Hogsett -- Home Textiles Today, August 9, 2004

Driven by turnaround stories and big earnings rebounds at a handful of the nation's biggest merchants — most notably at Kmart as it emerged from Chapter 11 — the 36 retailers ranked in this year's HTT Retail Report Card drove profits up more than a third, far exceeding a sales gain of 8 percent.

Accounting for most of the big swing in earnings for the group — and offsetting weakness elsewhere — was just one company, Kmart, which narrowed its loss last year more than 80 percent, to $614 million from a staggering $3.2 billion in 2002.

Other big gainers included Saks, more than tripling its profits, and Sears and The Bon Ton, both more than doubling earnings.

But underlying the volatility of the American retailing scene last year, the good cheer didn't get spread very far. Indeed, six of the 36 retailers in the ranking, more than 17 percent, lost money, if less of it, like Kmart.

Another eight, more than 22 percent of the total, recorded a drop in profits.

And sales were sometimes tough to come by. The 36 players measured this year drove their top line up 8 percent, to $637.5 billion from $590 billion last year. But not all retailers are created equal, and nine of the 36 — a full 25 percent—lost ground during 2002.

The strongest channel of distribution in terms of earnings growth was the all-the-time-low-price group, where profits soared more than 60 percent — again, the Kmart effect, as the big chain slashed its losses, improving the picture for the entire class of trade. But sales in the channel rose at a slower pace of 8.2 percent.

Second, surprisingly, were the nation's full-price retailers, where profits surged 26.8 percent, with big gains at Saks, Belk and The Bon Ton offsetting weakness at Federated, May, Dillard's and Gottschalks. But that big gain in profits certainly wasn't matched by sales, which fell 4.1 percent.

In terms of sales, the biggest gain — 15.4 percent — was recorded at the burgeoning specialty channel, fueled by a robust 32.2 percent increase at Bed Bath & Beyond.

The second biggest gain came from an unexpected source — home improvement centers in the form of Home Depot and Lowe's, which pushed their top line up 134 percent. In third place were warehouse clubs, with sales up 10.4 percent.

The weak links in terms of sales were full-price retailers, down 0.6 percent, and mid-pricers Sears, Penney and Kohl's, up just 3.2 percent.

Composite sales and earnings
Home textiles retailers, all stores
dollar figures in 000s

2003 2002 1999 %chg from '02 %chg from '99
Net sales $637,474,627 $590,029,796 $420,548,376 8.0% 51.6%
Net income 23,986,625 17,714,906 16,260,913 35.4 47.5


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

2003 2002 1999 %chg from '02 %chg from '99
All-the-time-low-price
Net sales $343,763,457 $317,643,962 $234,778,391 8.2% 46.4%
Net income 10,864,149 6,723,391 7,294,400 61.6 48.9
Full-price
Net sales 46,112,879 46,368,819 48,093,075 -0.6 -4.1
Net income 1,353,189 1,067,488 2,162,886 26.8 -37.4
Mid-price
Net sales 64,440,094 62,451,287 27,777,112 3.2 132.0
Net income 3,035,152 2,397,381 2,147,142 26.6 41.4
Off-price
Net sales 24,094,304 22,046,835 16,136,183 9.3 49.3
Net income 937,645 892,385 809,265 5.1 15.9
Specialty stores
Net sales 12,530,807 10,859,914 654,0712 15.4 91.6
Net income 756,517 628,470 330,408 20.4 129.0
Warehouse clubs
Net sales 48,277,507 43,722,048 31,030,979 10.4 55.6
Net income 823,866 830,849 508,447 -0.8 62.0
Fabric & decorating
Net sales 2,186,705 2,120,287 1,763,072 3.1 24.0
Net income 58,428 64,628 32,313 -9.6 80.8
Direct-to-consumer
Net sales 414,874 457,644 549,852 -9.3 -24.5
Net income (23,321) (24,686) (16,948)
Home improvement
Net sales 95,654,000 84,359,000 53,879,000 13.4 77.5
Net income 6,181,000 5,135,000 2,993,000 20.4 106.5


Sales and profit productivity

Rank by sales Rank by income Company Sales per employee ($000s) Income per employee ($000s)
PRODUCTIVITY
1 6 Costco $404.8 $7.0
2 15 BJ's 355.9 5.6
3 2 Home Depot 216.8 14.4
4 31 Hanover Direct 216.8 -12.2
5 4 Lowe's 209.8 12.8
6 1 Sears, Roebuck 181.0 16.9
7 14 Wal-Mart 170.9 6.0
8 3 Bed Bath & Beyond 154.4 13.8
9 5 Ross Stores 147.4 8.6
10 30 Kmart 147.2 -3.9
11 26 Dillard's 141.8 0.2
12 28 Retail Ventures 141.0 -0.2
13 18 Linens 'n Things 139.3 4.4
14 32 Factory 2-U Stores 139.0 -24.2
15 13 Federated Dept. Stores 137.5 6.2
16 11 Belk 131.7 6.5
17 10 Family Dollar 128.4 6.7
18 12 TJX 126.9 6.3
19 29 Restoration Hardware 125.3 -0.8
20 7 Kohl's 120.3 6.9
21 16 Dollar General 118.9 5.2
22 23 Saks 116.4 1.6
23 25 Gottschalks 113.9 0.3
24 21 The Bombay Company 108.4 1.8
25 9 Pier 1 Imports 106.2 6.7
26 8 Tuesday Morning 103.5 6.7
27 27 Stein Mart 96.8 0.2
28 22 Big Lots 88.3 1.7
29 20 Jo-Ann Stores 80.1 1.9
30 17 Williams-Sonoma 76.4 4.4
31 19 Hancock Fabrics 69.3 2.7
32 24 The Bon Ton 68.6 1.5


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