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Choosing a record player, especially if this is your first record player, is not easy. The technical specifications are numerous and there are various items which are not always easy to choose. This guide is intended to help you choose a first record player by presenting the various elements to consider when buying, whatever the […]
The smaller chains, however–Bon-Ton, Broadway, Gottschalks, Jacobson’s, and Crowley, Milner–all recorded negative earnings, during what is usually one of the more profitable quarters for department stores. And Proffitt’s and Younkers’ profit margins declined to 1.8 percent, from significantly higher levels a year ago and well below this quarter’s department store sector composite of 3.4 percent. A warmer-than-usual autumn, which depressed seasonal apparel sales, was the main cause cited for the declines.
Weather was also a factor for Sears, in the only exception to the big-good/small-bad trend this quarter, in spite of the chain’s relatively good comp store sales performance. Sears’ earnings declined by $18 million in the third quarter compared to last year. Its profit margin of 2.5 percent fell below even its second quarter results.
Furniture and Home Decor
Retailers in the furniture and home decor sector generally had a good quarter. Bed Bath & Beyond turned in a strong summer (quarter ended Aug. 30, 1994), with sales and profits growing 41 percent and 39 percent respectively over last year. Its 7.8 percent profit margin was the highest of the 67 companies reported here.
Heilig-Meyers and Williams-Sonoma also recorded significant sales and profit increases. After mediocre profit performances over the last couple of years, Williams-Sonoma finally appears to be on track. Its stock now trades at over $30 per share (Nov. 29 close), a P/E ratio of 48, versus a 12-month low of $12.38. Read more about Furniture and Home Decor …
Home furnishings retailers reported profit and sales that surpassed the general retail industry during the third qtr 1994, with consumer electronics retailers leading in sales and home improvement centers leading in profit. Lowe’s and Home Depot recorded 36% and 40% sales growth respectively. Larger department stores, such as Nordstrom’s, J.C. Penney and Dillard’s, reported better results than smaller chain retailers, such as Milner, Bon-Ton and Crowley.
Based on third quarter sales and earnings results, home furnishings retailers continue to outperform the retail industry as a whole. The public companies comprising the consumer electronics and home improvement sectors increased sales over 30 percent.
Department stores, furniture and home decor retailers, and home improvement centers delivered both high profit growth and solid profit margins. The only weak performers for the third quarter were discount stores (excluding Wal-Mart) and non-store retailers, whose profit margins were well below retail medians.
Super CE Stores
The fastest growing sector continues to be consumer electronics. All 11 reporting companies registered double-digit sales growth. The usual suspects, Best Buy and Circuit City, grew by 66 percent and 43 percent, respectively. But smaller, regional companies also did well. Ultimate Electronics, Campo, and computer retailer and cataloger ELEK-TEK recorded 85 percent, 43 percent and 43 percent sales growth, respectively.
These retailers are expanding the fastest with their superstore formats–with the smaller retailers’ growth funded primarily by recent initial public offerings. The CE superstore format is today estimated to have an 18 percent share of total U.S. consumer electronics store purchases and 10 percent of all consumer electronics product purchases. And in highly competitive markets such as Dallas, the superstore share is estimated to be in excess of 50 percent of the consumer electronics market. Read more about Home Improvement Centers …
Additional economic uncertainty comes from the credit markets. More than other lines of retail trade, the outlook for home goods retailers is very closely tied to the direction of interest rates and the availability of credit.
Having raised interest rates six times in the past year, the Fed seems far from done. Despite the absence of inflation, the Fed is focused on keeping interest rates high and the pace of growth low. Their purpose is to reduce the outflow of capital, protect the value of the U.S. dollar and preempt any possible inflationary pickup.
Over the past 25 years, the Fed has continued to raise interest rates until it precipitated a financial crisis. Whether it was the Mexican debt crisis in 1982, Continental Bank in 1984 or the Savings and Loan crisis in 1990, the only thing the Fed fears more than rising inflation is failing banks.
The likely source of a financial meltdown this time is the derivative craze. Some large financial institution will get in trouble with them. The problem will spread like the plague to other financial institutions and the Fed will be forced to ease credit and bail them all out.
Still more uncertainty can be found in the changing capabilities of competition. More than in any other segment of retailing, home goods retailing has witnessed an explosion in competitive activity. New concepts abound. New players are entering the business. The net result has been the emergence of a new economic model for the home goods business. Read more about Home Furnishings Industry perspectives …
The home furnishings industry during the 1990s has to deal with a multitude of uncertainties that will grow during the decade. Retailers must remain open to change and learn not to depend on what was done in the past. Areas of uncertainty include the new Republican Congress and its affect on political changes, competitive uncertainty and credit uncertainty. There’s is also much uncertainty about consumer buying.
In 1954, when asked his opinion about all the change taking place in the world, Dwight Eisenhower responded:
Things are more like they are today than they have ever been before
The pundits of his day ridiculed Ike for obfuscating even the simplest questions. But Eisenhower was right. He is even more right today.
What Ike was trying to say in his own roundabout way was that we live in unprecedented times. There are no historical comparisons, no previous trailblazers to point the way. In an age without precedents, past experience is no longer a virtue. In fact it may be a detriment.
The lesson home goods retailers need to embrace is that we are all trailblazers now. From politics to economics, from new competition to changes in consumer trends, home goods retailers face a complex and at times confusing array of change agents that make managing a business today more difficult than it has ever been before.
Take politics. It has been nearly 50 years since the United States last had a Republican Congress and a Democratic President. In 1946, the Republicans swept the mid-term elections on a platform of change, a grass roots dislike of President Truman and a general weariness with the New Deal Democrats.
The new alignment of power may result in political bickering as it did back in 1946. Two years of gridlock would not be all bad economically. Just imagine: no change in taxation, no new regulations, no health care reform, no reform of welfare. It’s not the best possible outcome, but it’s not all that bad, and the economy would continue to grow. Read more about The Home Furnishings Industry …
Attendees at the National Retail Federation’s Retail Information Systems Conference, Riscon ’94, pondered the effects of the information superhighway on the retail industry. Some retailers viewed the growing computer network as a means to direct advertising more efficiently to the target customer, while other retailers believed that such as system could ultimately replace retailers altogether.
Does the new information superhighway favor the elite?
Should retailers focus on its business-to-business applications or on creating new shopping techniques to reach out to consumers?
Will the superhighway drive out mass market retailers altogether as manufacturers gain the ability to reach consumers directly?
Is the superhighway being hyped?
These were just a few of the questions put forth at the National Retail Federation’s Retail Information Systems Conference, Riscon ’94, earlier this year.
More questions were asked than answered about the implications of the superhighway. One of the most lively sessions, moderated by Arthur R. Miller, Bruce Bromley professor of law at Harvard Law School, featured retailers and information technology experts discussing “a strategic and philosophic journey down the information super highway”. Read more about Information Superhighway’s Implications …
Another option, which implies more risk, is to stock up on merchandise in the warehouse. “We try to plan around late shipments by keeping our warehouse distribution center full,” Altmeyer explained. “When we know reorders are running late, we can often work with what we have.”
Stockpiling does not always work, however. ever. Altmeyer’s is maintaining more stock in its warehouse, but even this does not help when a vendor discontinues a particular product. “One firm that we buy woven bedspreads from has converted their production to throws and is not producing the bedspreads,” Altmeyer said. “So what are we supposed to do?” One change the chain made to better adapt to vendor shifts was to stockpile four months worth of merchandise, rather than keeping only a two-month supply, as it had done previously.
Small stores are also looking to alternative sources of supply to replace companies that chronically deliver late or incomplete orders. This does not mean, however, that stores stop buying from key vendors completely. “We need diversification in our product mix,” said The Linen Loft’s Horesh. “We cannot stop buying from a company because deliveries are slow, but if there is a choice of leaning toward the one that has a better shipping record, we will.”
Some retailers seek out smaller vendors simply because they want to cut back on the red tape. “We enjoy doing business with smaller manufacturers because there are less layers of management to go through,” Altmeyer said. Nevertheless, like most retailers, he said maintaining a well-balanced merchandise mix requires working with large and small vendors.
Small retailers of home textiles believe that they suffer the most from late merchandise deliveries. Small retailers say that their orders are left to be filled last after the large chains have been supplied. Some small retailers develop personal relationships with vendors in order to help alleviate the problem. Laytner’s Linens co-owner Alan Laytner says that being small is a definite disadvantage regarding deliveries, because the larger chains are able to send their orders electronically. Generally, the best recourse is to complain loudly about late or short orders.
Late delivery is a classic headache in the home textiles business. For just about everybody. But small retailers, those operating just a handful of stories. say, they’re in the worst shape of all. they believe their orders get pushed aside by vendors who give larger chains first dibs on what’s available.
So what’s a little guy to do? Some go out of their way to cultivate personal relationships with vendors. Others turn to alternative, often smaller manufacturers. Still, others tie up more of their cash in inventory.
Several retailers have told HFD that their stores get late or incomplete deliveries because many vendors give priority to larger orders from national retailers – retailers who are able to send their orders electronically.
The recent increase in popularity of cooking shows has generated great interest in the latest tools to become master chef. The latest trend in Europe is ceramic cookware, which has the potential to replace Teflon as the dominant material in cookware. Today kitchenware serve not only for cooking. Most pots and pans have a very […]