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Reticent retailers rebound

Don Hogsett -- Home Textiles Today, August 25, 2003

You might not think so — given the retail slowdown that has staggered stores and suppliers alike through most of this year — but 2002 was actually something of a turnaround year for the American retailing industry, as profits shot up by almost a third for a broad cross-section of retailers, across almost every channel, aided by an earnings recovery at full-price department stores and at the big mass merchants.

After slogging through a trough for the prior two years, American retailers in every channel but one — the sputtering direct-to-consumer merchants — launched a major earnings rebound last year, pushing overall profits for the 36 retailers in this 12th edition of the Home Textiles Today Retail Report Card up by 30.3 percent, to $17.8 billion, following a skimpy 3.4 percent increase in 2001.

Sales for the broad-based sample of American retailing advanced by 7.8 percent, to $621.0 billion from $576.2 billion in 2001, as double-digit gains at specialty retailers, off-pricers and warehouse clubs offset declines at direct-to-consumer merchants and full-price department stores.

Remarkably — given the pain that's being shared this year — almost every channel of distribution recorded a double-digit earnings gain last year. The biggest improvement was shown by the full-price department stores — ironically, the hardest hit channel this year — where profits jumped up by 88 percent, to $1.1 billion from $562.9 million in 2001, getting a big lift when Federated Department Stores rebounded with a profit of $818 million from a year-before loss of $276 million — a one-year swing of more than a billion dollars. Triggering the earnings recovery at Federated, the retailer turned its back on a $784 million loss rung up in 2001 as it wound down its failing Fingerhut business. But other full-price retailers weren't so lucky, like Dillard's, which put up a $398 million loss.

If earnings were up, sales were down for full-price retailers, dipping by 2.2 percent. Underlining just how hard that channel has been hit, over the past four years, sales for full-price department stores, savaged by specialists and mass merchants alike, have hit the wall, rising a skimpy 2.9 percent, way behind the rate of retail inflation.

The specialty channel — no surprises — pushed profits up by 60 percent in 2002, to $628 million from $393 million, while driving sales ahead by 18 percent, to $11 billion from $9 billion. By far the biggest winner when it comes to building sales was Bed Bath & Beyond with a 2002 gain of 25.2 percent. And over the course of the past four years, the home fashions big box way outpaced every other retailer in the sample, driving its sales higher by 165 percent since 1998. That was twice as fast as Wal-Mart with its 78 percent increase.

The big mass channel, the "all-the-time-low-pricers,"pushed profits up by 13.7 percent, to $7 billion from $6 billion, as cost-conscious consumers turned their back on full-price retailers in search of greater savings. Mass merchant sales grew by 8.5 percent, to a staggering $334 billion. Indeed, a channel of distribution that barely existed only 25 years ago is now seven times as large as the department store business, and last year accounted for more than half, 53.8 percent, of all the sales racked up in all of the channels of distribution combined in this year's report card — $334 billion of the combined total of $621 billion.

Sales and profit productivity

Rank by sales Rank by income Company Sales per employee ($000s) Income per employee ($000s)
1 7 Costco $413.0 $7.6
2 6 BJ's 337.0 7.7
3 34 Hanover Direct 215.8 -11.6
4 2 Home Depot 208.0 13.1
5 36 Lillian Vernon 198.3 -15.5
6 12 Wal-Mart 174.7 5.7
7 3 Lowe's 173.1 9.6
8 1 Bed Bath & Beyond 159.4 13.1
9 4 Ross Stores 156.9 8.9
10 35 Kmart 145.1 -15.2
11 33 Dillard's 143.3 -7.2
12 24 J.C.Penney 141.9 1.7
13 28 Value City 140.8 -0.2
14 14 Target 139.6 5.4
15 9 Federated Dept. Stores 136.6 7.2
16 19 Linens 'n Things 129.3 4.1
17 31 ShopKo Stores 127.6 -5.7
18 10 TJX 127.5 6.2
19 17 Belk 125.9 4.7
20 29 Restoration Hardware 125.1 -1.2
21 16 Sears, Roebuck 123.5 4.8
22 5 Kohl's 121.6 8.6
23 32 Factory 2-U Stores 116.9 -6.2
24 18 May Dept. Stores 116.3 4.7
25 15 Dollar General 114.0 5.0
26 27 Saks 113.7 0.5
27 30 Gottschalks 108.0 -1.9
28 13 Family Dollar 105.7 5.5
29 8 Pier 1 Imports 100.9 7.4
30 25 The Bombay Company 98.8 1.4
31 11 Tuesday Morning 96.8 5.9
32 26 Stein Mart 93.9 1.4
33 23 Big Lots 87.0 1.7
34 22 Jo-Ann Stores 79.3 2.1
35 20 Williams-Sonoma 73.8 3.9
36 21 Hancock Fabrics 67.4 3.1


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

2002 2001 1998 % chg from '01 % chg from '98
Net sales $620,998,103 $576,207,724 $418,850,268 7.8% 48.3%
Net income 17,770,899 13,641,246 13,195,896 30.3 34.7


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

2002 2001 1998 % chg from '01 % chg from '98
All-the-time-low-price
Net sales $333,961,962 $307,710,070 $210,808,949 8.5% 58.4%
Net income 6,807,391 5,989,512 6,190,728 13.7 10.0
Full-price
Net sales 45,681,101 46,706,235 44,413,041 -2.2 2.9
Net income 1,057,883 562,927 1,707,615 87.9 -38.0
Mid-price
Net sales 77,165,287 75,247,654 70,361,763 2.5 9.7
Net income 2,397,381 1,299,676 1,678,266 84.5 42.8
Off-price
Net sales 22,053,870 19,671,963 14,647,030 12.1 50.6
Net income 892,385 670,610 710,495 33.1 25.6
Specialty stores
Net sales 10,859,914 9,190,913 5,317,950 18.2 104.2
Net income 628,470 393,004 278,539 59.9 125.6
Warehouse clubs
Net sales 43,722,048 39,242,933 27,273,834 11.4 60.3
Net income 830,849 684,437 522,321 21.4 59.1
Fabric & decorating
Net sales 2,120,287 1,982,157 1,635,203 7.0 29.7
Net income 64,828 (241) 16,956 --- 282.3
Direct-to-consumer
Net sales 695,634 791,799 842,498 -12.1 -17.4
Net income (43,288) (25,679) (23,024) --- ---
Home improvement
Net sales 84,738,000 75,664,000 43,550,000 12.0 94.6
Net income 5,135,000 4,067,000 2,114,000 26.3 142.9


Sales per square foot

2002 2001
1. Williams-Sonoma $1,002 $1,037
2. Restoration Hardware 581 537
3. Home Depot 370 388
4. Ross Stores 316 301
5. Sears, Roebuck 303 318
6. The Bombay Company 296 288
7. Kohl's 284 283
8. Lowe's 280 274
9. Target 242 242
10. Value City 224 233
11. Kmart 212 235
12. Bed Bath & Beyond 212 199
13. Stein Mart 184 189
14. May Dept. Stores 174 185
15. Factory 2-U Stores 167 178
16. Gottschalks 148 173
17. Dollar General 148 142


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