Ready for Round 3?

This is the third go-round in my scan of the top 10 retailers of home textiles. It started in November 2007. I compared my predictions in July; now we are nearly a year along and it’s not too early for another reality-check.

Below I sum up my previous predictions and give my current projections. Each chain is shown with its home textiles retail volume for the last two full years.

1. Wal-Mart - $3.810 billion in 2007, $3.640 billion in 2006

First I said Wal-Mart could open up a significant business in mid-priced goods, then I backed off. I’m still backing: The demise of LNT coupled with newly aggressive value merchants means there are several billion dollars worth of cut-price goods at large – much of it at higher quality and style levels, much of it branded. I think many consumers will grab those value deals, some at the expense of Wal-Mart’s remade but less than sizzling soft home department.

2. Bed Bath & Beyond - $3.100 billion in 2007, 3.040 billion in 2006 (No. 3)

BB&B will have big box home retailing all to itself – but the next six months will be no picnic. The waves of liquidation and branded promotions will cut into margin. The discipline of this market leader, however will help BB&B position itself for expansion and dominance in the “better” segment of home textiles merchandising.

3. JCPenney - $3.058 billion in 2007, $3.065 billion in 2006 (No. 2)

It will take another year for JCP to start to work itself out of its soft home conundrum. American Living is not different enough. Linden Street is not unique enough. Hoped-for margin dollars from direct sourcing will not materialize with top line volume in decline. This is a good time for JCP to take meetings with as many outside resources as possible – and test more of the fresh fashion-endowed offerings.

4. Target - $2.710 billion in 2007, $2.615 billion in 2006

By lifting itself out of the mold of me-too discounting, Target has landed exactly in the middle of the market – a tough place to win. Still, it’s hard to bet against this crew. If anyone can ward off the commodity-kings and off-pricers on one side, while stealing some fashion thunder from the upstairs chains, it would be Team Target. Of course, it was less than encouraging at the recent financial summit to hear so much talk about the focus on food categories – but the next 18 months will be no bonanza for discretionary-dollar divas. Target will work overtime – from product developers and marketing geniuses to store managers and their disciplined army of clerks – to surprise and win over shoppers.

5. Kohl’s - $1.163 billion in 2007, $1.100 billion in 2006

Now with 1,000 stores, Kohl’s is a test case for brand exclusives, crisp in-store presentation, and high-speed promotional cycles. It seems to be working – Kohl’s 5.7% growth in soft home sales led the top 10 in 2007. The chain manages to offer department store-quality goods in an assortment as tightly edited as Target’s, but with breadth enough to keep shoppers satisfied. The next hurdle is to get more shoppers into the department: Home is the least-shopped of the six merchandise areas at Kohl’s.

6. Linens ’n Things - $980 million in 2007, $993 million in 2006 (No. 7)

Case closed. Except as a case study in business and retailing classes of the future: “How to Collapse a Specialty Retailer: Dive into Debt and Dispose of the Merchants.” R.i.P. LnT.

7. Kmart - $949 million in 2007, $1.025 billion in 2006 (No. 6)

Kmart – and Sears along with it – are starting to look something like Woolworth’s in the 1980s: Universal brand recognition, plenty of locations, loaded with tons of stuff…but nobody knew quite what to do with the business. Will Kmart post-Martha morph into a bigger-footprint Family Dollar? Will Sears slump into a Montgomery Ward-like coma, and take Cannon with it? There is still a long way to go in this decline – and an outside chance chairman Lampert could turn it around!

8. Macy’s Home Store - $835 million in 2007, $865 million in 2006

What do you sell when you own the market? Floor space, I suppose. With 850 uniformly branded stores, with the Thanksgiving Day Parade, with more star power in its merchandise matrix than Entertainment Tonight, this department store chain is a marketing machine. So, how’s that working for Martha’s Collection on the soft home pad? The best thing Macy’s might do at the 810 stores that are not Bloomingdale’s is try to make them more like Bloomie’s.

9. TJMaxx/Marshalls - $620 million in 2007, $615 million in 2006

TJX has a formula and a routine, and it has excellent merchants – but they took their eye off the ball in soft home and it has sagged – while Ross Stores, half the size of TJX in home textiles, has grown the business by more than 10%. With the onrush of value chains like Big Lots and Anna’s Linens, TJX needs to prove its authority in both fashion flair and irresistible value.

10. Williams-Sonoma - $580 million in 2007, $595 million in 2006

The big Pottery Barn division seems to be trapped between Macy’s and a hard place. It’s not for lack of trying – but the trying has erred on the side of caution, even while some promising new formats (West Elm, Williams-Sonoma Home, even PB Teen) have not rolled out aggressively. Look for W-S to drop off the top 10 in 2009, if not this year.

Soon to join as the new No. 10: Big Lots, $425 million in 2007.

And the dark horse: Family Dollar, $402 million in 2007. Welcome to the new face of home textiles retailing!