Suppliers cautious as merchants spend
Cecile Corral -- Home Textiles Today, June 23, 2003
New York — Battered by imports and stuck with excess capacity, then hampered by weakening retail sales and a soft re-order position, American home fashions producers have cut their capital spending to the bone, with most of this year’s outlays going for routine maintenance and systems updates rather than new looms or equipment.
As recently as half a dozen years ago, it was not uncommon for a home textiles producer to spend in excess of 7 percent or 8 percent of annual sales on new equipment to boost production and cut costs. Now it’s more like low single-digits. Even such a formidable, and profitable, player as Mohawk Industries, is spending less than 3 percent of sales on capital projects for 2003.
But if suppliers are cutting back and pulling in their horns, not so their retail customers. Far from it.
Despite a weakening sales outlook and an over-stored environment as well as continued downward pressure on pricing, margins and profits, many of America’s big retailers continue to spend heavily to build new stores. And some, the most successful, are adding new stores even faster this year than they did in 2002 as they ramp up to steal market share away from weaker rivals in an increasingly survival-of-the-fittest environment for American retailers. Indeed, six out of nine key retailers sampled by Home Textiles Today, a full two-thirds, are opening new doors at a stepped-up pace this year. The major exception, no surprise there, is the department store group, where store openings are flat to down.
Who’s building fastest? Who else but the world’s largest retailer, Wal-Mart. Marching across the globe, Wal-Mart plans to open roughly 400 new stores this year, including as many as 185 new super centers; 50 new U.S. Wal-Mart stores; 25 Sam’s Clubs; 15 to 20 neighborhood markets; and 120 to 130 international stores. All told, Wal-Mart is opening about 46 percent more new stores than it did last year. And in the process it’s increasing its total store base by roughly 5 percent.
With consumers shunning full-price retailers, off-pricer TJX is coming on strong, putting up about 192 new stores this year, ranging from TJX and Marshall’s to a fledgling, and rapidly growing, home fashions chain, HomeGoods.
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