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10 Retailers Gaining Strength From the Recession
A trip through the mall tells the story: The recession of the past two years has devastated the retail industry, as overspent consumers have put away their credit cards, started paying off years of debt, and put the kibosh on shopping.
[Slide Show: 10 Retailers Gaining Strength From the Recession.]
So far, the victims include bankrupt chains like Dial a Mattress, Filene's Basement, KB Toys, Circuit City, Mervyn's, Steve Barry's, and Linens 'n Things, plus hundreds of smaller retail outlets. Vacancy rates at shopping malls have been shooting up, and 10 percent of malls might even close, by some estimates. The pain could continue for another year or longer, as unemployment keeps rising and shoppers scrimp.
The hammer has come down hardest on the most vulnerable retailers: those that expanded too rapidly during flush times, took on too much debt, or derived too much business from a single, troubled segment of shoppers. The demise of the weakest players, however, has produced a classic consolidation in which stronger companies or those that are simply the last left standing benefit from their rivals' pain. In many retail sectors, better run firms are getting bigger while competitors downsize or go out converse womens uk of business.
[See America's most endangered and most profitable converse womens uk malls.]
To identify some of these recession winners, I analyzed data provided by financial research firm Capital IQ, a unit of Standard Poor's, to see which firms have made gains since the recession began near the end of 2007. Capital IQ crunched the numbers on about 140 retailers with annual revenue of $250 million or more, in a dozen categories including apparel, electronics, Internet sales, and specialty stores. The research firm calculated revenue and market share in 2007 and 2009 and noted which companies had the biggest increases over that time. To arrive at a final list, we eliminated firms with market share too small to be meaningful and other anomalies, then cheap converse womens high uk selected the top one or two firms in a variety of sectors.
These retailers haven't necessarily escaped the recession. Many are simply toughing it out better than competitors, thanks to low debt or conservative management. Most of these firms offer products or services that appeal to consumers trying to save money, and many have two or three lines of business, so the whole company isn't captive to a single market. And most have been rewarded with stock price performance far better than the S 500, which has fallen by 30 percent since the beginning of 2008. Once the economy recovers, these retailers will enjoy a competitive position that has become significantly stronger over the past two years:
Aaron's. (Revenue increase since 2007: 21 percent.) This rent to own furniture chain has been aggressively expanding and buying up competitors, aided by an economy that favors its business model. Its inexpensive products are recession friendly, and for consumers or small businesses unable to get loans to help finance big ticket purchases, renting is an attractive option. Aaron's stock price has risen about 50 percent since the recession began, and analysts think the company will continue to thrive in an economy that will be tough for a while.
[See 5 myths about the economic recovery.]
Aeropostale. (Revenue increase: 28 percent.) Here's something uncommon in the clothing industry: double digit sales gains and an optimistic outlook. While pricier competitors like Abercrombie Fitch and American Eagle have struggled, Aeropostale's unpretentious gear has found new cachet with teenagers trying to look cool on a budget (as well as their parents). A new sub brand aimed at grade schoolers, PS From Aero, has also caught on. With strong back to school sales, Aeropostale recently raised its earnings projections. And the company's stock has soared 68 percent through the recession.
Amazon. (Revenue increase: 38 percent.) This premier online retailer is gaining from the pain at the mall. While overall retail spending has fallen, online sales have kept growing, as thrifty consumers search all black converse for the lowest price on the Web and even try to save gas money by shopping from home. In its quest to become an online megastore, Amazon has expanded way beyond books and music and acquired other online retailers.
[See 10 gaffes by doomed CEOs.]
Buckle. (Revenue increase: 38 percent.) This clothing company has a strong portfolio of 75 brands, including hot names like Guess, Lucky, Billabong, Hurley, and Converse, which help pull in premium prices even in a subprime economy. For bargain hunters, Buckle also sells cheaper private label clothing under brands like BKE and Buckle. And most of the company's items are casual denim, popular in good times and bad. Sales at 370 retail outlets have held up well over the past year, and online sales have been even stronger.
Dollar Tree. (Revenue increase: 16 percent.) A share of stock in this discount chain might make a much better present than a gift certificate to the store: The share price has risen an astounding 108 percent since the recession began. A poor economy is obviously a boon for stores that sell really cheap stuff, and most "dollar" stores have been thriving. Dollar Tree, with more than 3,400 stores, isn't the biggest discount variety chain, but it has tried to offset its bargain basement image with an upbeat ambience and frozen foods in some locations. Even if the economy recovers, analysts figure that the coming surge in baby boomer retirements, with many living on fixed incomes, will mean a rich future for Dollar Tree. The company has been buying other chains and opening new outlets in a push to reach 5,000 stores within a few years.
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GameStop. (Revenue increase: 26 percent.) Sales have drifted down, but that's partly because of a dearth of hit games or breakthrough consoles. GameStop executives expect better results in coming months, and the video game business overall is expected to be robust over the next few years. With more than 6,200 stores, two successful websites, and a gaming magazine with 3.6 million subscribers, GameStop is the biggest video game retailer in North America; even with lower sales, its profit margin and market share have been improving. In this economy, most companies would kill to have a growing share of a growing market.
O'Reilly Automotive. (Revenue increase: 84 percent.) Despite the summer rush to trade in clunkers, car sales are still down about 40 percent from peak levels of two years ago. And all those owners holding on to aging cars need more parts and service than ever. O'Reilly sells fan belts, alternators, headlights, and other components to two sets of customers: professional installers and at home tinkerers who work on their own cars. The balance positions O'Reilly to benefit from a turbulent market in which thousands of Chrysler and General Motors dealers are shutting down and dispersing their maintenance business. The purchase of CSK Auto last year greatly expanded O'Reilly's presence, to nearly 3,300 stores in 38 states.
Priceline. (Revenue increase: 46 percent.) Travel is down, but with consumers more determined than ever to save money on flights and hotels, this discount travel website has enjoyed sharp increases in business and profitability. Priceline has two main businesses, and both cater to travelers on a tight budget. Traditional travel packages highlight discounts and deals, while Priceline's "Name Your Own Price" program lets suppliers peddle unsold flights and hotel rooms at unpublished low ball prices offered by customers. There's no shortage of online travel competitors, but all black converse aggressive plans to expand in Europe and Asia could keep Priceline's numbers growing, whether the economy's good or bad. Priceline's stock has been rising like the old days of the dot com boom, up 54 percent since the recession began.
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Staples. (Revenue increase: 26 percent.) Just about every company can get by with fewer paper clips, which makes it tough to sell office supplies when companies are slashing costs. Profits are down, but the world's biggest office products company has been growing by adding new stores and expanding popular services like printing and copying. The 2008 acquisition of Corporate Express helps expand Staples' presence in Europe and Canada. Staples also has one of the busiest websites in the world, which helps offset weak retail sales.
Ulta Salon, Cosmetics Fragrance. (Revenue increase: 25 percent.) Each of this beauty chain's 333 superstores contains a boutiquelike salon, so customers can justify a bit of pampering after bargain hunting (or vice versa). A huge product line includes bargain brands, designer offerings, and Ulta's own lineup, giving Ulta outlets far more selection than a drugstore and discount prices lower than department stores. Sales and profits are both up from last year, thanks to stable business at existing stores and several new locations. Even in a recession, it turns out, it's important to look and smell good.