Reticent retailers rebound

NEW YORK — 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.