Home Improvement Centers

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.

While rapid development of new stores drove much of the growth, comparable store sales growth(1) for these retailers was also impressive: Ultimate Electronics, 26 percent; Campo, 23 percent; Best Buy, 22 percent; and Circuit City, 19 percent.

Home Improvement Centers

Home improvement center behemoths Home Depot and Lowe’s continue to be the sector leaders in sales and profit growth, recording sales growth of 40 percent and 36 percent compared to last year’s third quarter, and profit increases of 36 percent and 71 percent. Lowe’s expansion builds upon an impressive 15.2 percent comp store sales growth. (Home Depot does not publish its monthly comp store sales results.)

Wolohan Lumber, D.I.Y. Home Warehouse, and Strober also experienced good quarters and strong profit results. The profit margins for these five companies averaged a healthy 3.8 percent. In contrast, the other companies in the home improvement sector squeaked by on a mere average 0.4 percent net profit margin.

Department Stores

The third quarter was kind to the big department store chains, cruel to the smaller ones. JC Penney, May Co., Nordstrom’s, Mercantile, Dillard’s and Neiman Marcus all improved upon last year’s third quarter profits, recording above-average margins this quarter.

Post Author: John Snow

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