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BILLION-DOLLAR SUCCESS STORIES; IN THE EXCLUSIVE HFN TOP 150 RETAILERS REPORT, MANY OF THE COMPANIES THAT CROSSED THE MAGICAL NUMBER IN 2002 MANAGED TO AVOID SALES DECLINES.

NEW YORK-The big are getting bigger -- and bigger.

After a dismal 2001, when the industry was dogged by weak consumer confidence and spending, the top home goods retailers still managed to aggressively grow market share.

The HFN Top 150 Retailers report reveals that companies with home goods sales above $1 billion outperformed retailers with sales below that threshold.

Of the 25 retailers composing the elite $1 billion home goods sales club, only 20 percent reported year-over-year sales declines. This compares with 35.2 percent of the retailers with sales below the $1 billion dollar mark posting declines.

HFN also found a similar trend in last year's report, which showed that 36 percent of the under-$1 billion group had year-over-year declines, compared with 19.2 percent of the $1 billion-plus retailers. These results reflect the market strength of the top players in an increasingly consolidated landscape.

This year, 12 out of the 25 members of the billion-dollar club reported double-digit gains. They include retailers such as Target, Wal-Mart, Lowe's, Bed Bath & Beyond and Linens 'n Things. These are shrewd retailers that managed to take market share at the expense of weaker players in the home goods arena. They even managed to steal share from other billion-dollar club members such as Kmart, which struggled through its Chapter 11 reorganization.

Kmart's slip from number four pushed Lowe's and Target up one spot each, to fourth and fifth place, respectively. Lowe's showed a 21.3 percent increase in home goods sales, compared with third-ranked Home Depot, with an 8.6 percent increase. Even with Home Depot's increased emphasis on home goods and its Expo Design Center chain, which is devoted to the home goods categories, home goods accounts for less than 20 percent of Home Depot's total sales. At Lowe's, home goods accounts for nearly a quarter of total sales.

While moderate department stores such as Sears, J.C. Penney and Kohl's held steady or, in the case of Kohl's, moved up two spots on the 2002 list, most of the traditional department stores continued to lose ground. Macy's East, the highest-ranking traditional department store, dropped from the 33 spot to 36, and Macy's West sank from 28 to 37. New to the "billionaires' club" is Big Lots. The retailer enjoyed a 29.3 percent increase in home goods sales, year-over-year, advancing from $782 million last year to $1.01 billion this year. Big Lots moved up five spaces on the list, from number 30 to 25. "Home is becoming a bigger part of their mix," said Jeff Stein, an analyst for McDonald Investments Inc. "They're adding furniture departments to 150 locations this year, and furniture is generating $200 per square foot while other parts of the store do $100 per square foot."

Big Lots is the nation's largest broad-line closeout retailer, with more than 1,300 stores.

Amid the declines in the under-$1 billion set, there were some stand-out winners, particularly among single-category retailers and controlled-distribution furniture franchises. Ashley Furniture Industries, for example, logged a 125 percent increase in sales, the largest increase in the top 150. Bassett Furniture racked up a 31.3 percent increase in sales while Storehouse Stores showed a 34.9 percent gain.

"One of the big themes is the importance of brand strength and its interrelationship with a vertically integrated retail strategy in which manufacturers have the brand equity to appeal to consumers directly," said Joel Harvard, an analyst for BB&T Capital Markets. More furniture manufacturers are taking this approach, including La-Z-Boy, Furniture Brands, Stickley and others. "These companies are more strongly positioned by virtue of this vertical retail structure than many of their non-vertical peers."

On the year-over-year sales decline side, the decreases were eye-popping. Ames Department Stores, which has since liquidated, had a 23.1 percent drop in home goods sales during its twilight.

Spiegel brought in home goods sales that fell 33.3 percent year over year. The catalog retailer is currently in Chapter 11 bankruptcy protection.

One of the steepest declines came in from Mattress Discounters, which had sales fall a staggering 48.5 percent. In the fall of 2002, the retailer filed for Chapter 11 as a slow economy and stiffer competition, as well as higher debt, worked against the company.

An interesting decline was from the Navy Exchange, which watched its home goods sales drop 19.1 percent year over year. Although the exchange would not comment on its results, sales for Navy exchanges tend to weaken before and during times of conflict. During 2002, the Navy was on heightened alert during the war on terrorism while ships were also deployed to the Persian Gulf in preparation for the invasion of Iraq.

Most of the year-over-year declines in this year's report were in the range of 2 to 8 percent. Economists and analysts have noted that retail sales in 2002 were negatively impacted by lousy weather during key selling seasons and sagging consumer confidence.

Patrick Jeffrey, an analyst with Standard & Poor said "North American retail same-store sales have remained soft, down 5 percent in the first half of 2003 and down 2 percent in 2002 and 2001."

"Sales trends have been negatively affected by the weakened U.S. economy, which has resulted in reduced sales in higher-ticket items," he said, adding that technology and furniture products "have been particularly affected."

THE TOP 10 CORPORATE RETAILERS

Rank, Company

home sales 2002 in millions; home sales 2001 in millions; % change

1. Wal-Mart

$18,905.68; $14,400.00; 31.3%

2. Sears

$10,294.53; $10,201.15; 0.9%

3. Home Depot

$9,791.28; $9,017.98; 8.6%

4. Target

$6,588.31; $5,997.08; 9.9%

5. Lowe's

$6,298.97; $5,235.88; 20.3%

6. Kmart

$5,021.82; $5,902.41; -14.9%

7. J.C. Penney

$4,397.70; $4,061.31; 8.3%

8. CCA Global Partners

$4,667.50; $3,754.50; 24.3%

9. Bed Bath & Beyond

$3,665.00; $2,928.00; 25.2%

10. Federated Dept. Stores

$3,086.59; $3,130.20; -1.4%

* Includes all subsidiaries and units
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Comment:BILLION-DOLLAR SUCCESS STORIES; IN THE EXCLUSIVE HFN TOP 150 RETAILERS REPORT, MANY OF THE COMPANIES THAT CROSSED THE MAGICAL NUMBER IN 2002 MANAGED TO AVOID SALES DECLINES.
Author:Zaczkiewicz, Arthur; Nicksin, Carole
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Geographic Code:1USA
Date:Aug 18, 2003
Words:1023
Previous Article:TOP 150 ALPHABETICAL LIST.
Next Article:TOP 150 HOME RETAILERS.
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