Discount heads the class in Retail Report Card

New York — Dragged down by a weakening sales environment during the second half of last year — which persists until this day — and hammered by an especially poor performance at department stores as consumers pinched their pennies and embraced discounters and off-pricers, U.S. retailers snapped a four-year winning streak in 2000, with profits tumbling down by almost 20 percent.

Unable to gain any traction from a double-digit sales increase, or widespread gains in productivity, the 30 key retailers in this 10th annual edition of the Home Textiles Today Retail Report Card watched their composite profits drop by 19.7 percent, to $9.98 billion from $12.4 billion in 1999 — a wrenching earnings shortfall of $2.5 billion. Missing from this year's ranking are Bradlees and HomePlace, out of business, and Strouds, which is no longer a public company. A fourth, Dollar General, had not yet filed its sales and earnings with the Securities and Exchange Commission as of press time.

Especially hard hit last year as consumers held on tight to their wallets were department stores, with their lingering perception of high prices, where profits were clipped by 81.4 percent, to $514.3 million from $2.8 billion last year. Department store sales were up just 4.0 percent — virtually flat, when taking into account the rate of inflation — to $90.1 billion from $86.7 billion.

Picking up the slack in sales, if not always in profits, were the nation's value retailers. Sales at mass merchants jumped up by 12.9 percent, to $287.1 billion from $254.3 billion in 1999, still stealing market share as bargain-hungry consumers flocked to the bargain bins, increasingly stocking up on the consumables that fill the front of the stores. But even there, it was tough turning a dime, and profits fell back by 0.9 percent, to $7.67 billion from $7.74 billion the previous year, weighed down by combined losses of $602.2 million at four of the eight discounters in this year's ranking — Kmart, Ames, ShopKo and Value City.

Doing even better were the lowest of the low-pricers, two big warehouse operations, Costco and BJ's, where sales advanced by 17.2 percent, to $36.4 billion from $31.1 billion. And profits in this no-frills channel were through the roof, zooming up 50.1 percent, to $762.9 million from $508.4 million in 1999. Profits at Costco shot up by 58.9 percent, and BJ's earnings rose by 18.3 percent.

Still cruising in the passing lane and riding on the fast track was the smaller, but rapidly growing, specialty channel. Driven by sales gains of 25 percent or more at three of the four players in the ranking, sales at specialty stores shot up by 23.3 percent, to $7.2 billion from $5.8 billion. More importantly, profits climbed higher by 19.1 percent, to $388.3 million from $326.1 million. Leading the pack, as it routinely does, was Bed Bath & Beyond, with earnings up by almost a third, and sales climbing higher by 29 percent. The only earnings disappointment came from Williams-Sonoma, where profits were off by 16.6 percent.

Lending some support to the composite bottom line — and it needed all the help it could get — was stepped-up productivity at a broad cross-section of retailers. In a sample of 27 retailers for whom figures were available, somewhat more than two-thirds, 20 of the 27, recorded gains in sales per employee. Leading the list — not surprising, given its no-frills, low-overhead format, was warehouse operator Costco, with sales per employee of $405,400, up from $385,400 last year.

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