Big-box homers show star power
January 13, 2003,
Bumping along a rocky road as they headed into the all-important holiday season, key U.S. retailers turned in a mixed-bag performance during the third quarter. And in typically Darwinian fashion the strong kept getting stronger, mostly at the expense of weaker rivals — think Wal-Mart vs. Kmart, or Kohl's vs. department stores.
Still acting like as if it had never heard about a slowdown in consumer spending or a sputtering retail environment, king-of-the-hill Bed Bath & Beyond pushed third-quarter profits up by 38.9 percent, while sales climbed higher by 23.3 percent. And Linens 'n Things drove earnings higher by 24.3 percent, on a sales gain of 15.7 percent.
Other big retailers like Federated Department Stores and May Department Stores pushed third-quarter profits sharply higher as well — but often as they shed one-time items that had dogged the bottom line the year before; or, as in the case of Penney, made notable gains rebounding from earlier weakness.
Among the more consistent sales and earnings gainers, in addition to the home fashions big boxes, were Target, despite continued weakness at Mervyn's and its department stores, and Kohl's. Shucking one-time items that acted as a drag on profits a year ago, Target pushed earnings up by more than 50 percent. And Kohl's pushed profits up by 33 percent, as same-store sales climbed by more than 8 percent.
Wal-Mart, the world's largest retailer, continuing to capitalize on the weakness of rival Kmart, grew its sales by 11.5 percent. In contrast, Kmart's sales fell off by 16.1 percent as it shuttered 283 stores, and same-store sales fell off by 7.6 percent in the doors that remained open. What was once a contest between two more-or-less evenly matched titans has become a Godzilla vs. Bambi joke, as Wal-Mart is now almost nine times as large as Kmart in sales — $58.8 billion during the third quarter, compared with just $6.7 billion for Kmart.
It comes as no surprise that discounters easily outperformed department stores, and one way they did it was through more sophisticated inventory management. At the close of the third quarter, Wal-Mart's stockpiles added up to just 50.2 percent of its sales. At Federated Department Stores, on the other hand, inventories were more than 33 percent higher than sales.
Related Content By Author
The Countdown to the ICON Honors
Home & Textiles Today eDaily