Home industry sales a mixed bag for retailers

DSN Retailing Today, July 11, 2005 by Mike Duff

With the cocooning trend abating, 2004 saw a slow-down in home furnishings sales that had been a welcome relief for many retailers following economic softness earlier in the decade. The effect wasn't felt equally through home furnishings retailing, though, and top performers continued to thrive while others suffered to varying degrees.

Bed Bath & Beyond and JCPenney, for example, seemed to take things in their pace, and Anna's Linens entered new territories. Meanwhile Pier 1 and Bombay suffered declining sales.

Results were mixed for other retailers. A strong fourth quarter helped resuscitate Linens 'N Things' 2004, although it has slipped through the first two quarters of fiscal 2005. Growing pains seem to be responsible for at least some softness in the results at Cost Plus which after several years of strong results had to lower its fourth-quarter guidance.

Target, for its part, retained its strategy developing new proprietary and private labels, such as Fieldcrest, the retailer's successful domestics brand.

Kmart continued to rely on Martha Stewart to buoy its home program in 2004, and what a year it was for Martha. Despite going to jail, her Martha Stewart Everyday brand continued to thrive despite the troubles Kmart suffered.

Now, Martha is striding firmly along the comeback trail, but not all her troubles are necessarily behind her. Even as it negotiates with Martha Stewart Living Omnimedia, Kmart's new parent, Sears Holdings, is rolling out the Ty Pennington brand to its traditional stores and its Kmart conversions, renamed Essentials. Sears is well acquainted with Martha, carrying her paint brand in the United States, and the full line of MSE products at Sears Canada. No new Martha goods have rolled into Sears, though, a development that retailers and Stewart watchers have awaited.

But it was Wal-Mart, among the broadliners, that reached a decisive point in the development of its home furnishings program. Clearly, the retailer realizes that its product quality--particularly given the price points--has reached a level that should provide broader appeal, but it has issues with presentation. Lacking major vendors who are in a position to help it significantly remerchandise home goods, Wal-Mart now finds itself situated such that it must commit resources for new fixtures and additional labor if it wants to update a display strategy that has clearly fallen behind the times. The retailer continues to struggle with that dilemma even.

Among major housewares categories, 2004 was a mixed bag. Major appliances were up significantly, driven in part by the expansion of supply from mass-market retailers including Best Buy, Lowe's and others. Personal care appliances, from electric razors to hair dryers to massagers to showerheads, also gained as vendors and retailers began taking tentative steps to better respond to the growing wellness trend as well as a consumer increasingly interested in appearance and grooming.

Home environment appliances, including air purifiers and humidifiers, full-size and hand/stick vacuums, heaters and water filtration devices and filters, gained a modest 1.3%. Sales of kitchen appliances and housewares, including kitchenware and tabletop, slipped by 4% and 3.9%, respectively.

On the textiles side, most segments grew, although most of the growth was in the low single digits.

Of course, the home textiles industry was rocked by change in 2004, mostly due to the shift of so much business overseas. Bankruptcies were rife. As a result of the shift, mostly to Asia, WestPoint Stevens and Dan River now find themselves under Chapter 11 bankruptcy protection, and Pillowtex folded, resulting in the transfer of key brands, such as Cannon, to Li & Fung.

Overall, home textiles sales in 2004 gained about 1.6% to $19.68 billion. Each of the major categories in home textiles showed a percentage sales gain, even if slight. The overall bedding category gained 2.2% to $5.19 billion. Basic bedding gained by 3% to $2.59 billion.

The "other" category, including area rugs and decorative pillows, advanced sales by 2.5% to $3.1 billion.

Kitchen sales increased by 1.3% to $1.58 billion, bath textiles and accessories was up by 0.5% to $4.37 billion and window treatments rose 0.4% to $2.86 billion.

Among the segments, down comforters, up 7.3% to $590 million, led the basic bedding category. Decorative pillows also made a strong showing, advancing 6.7% to $400 million, and leading the "other' category. Rounding out the top three segments, sheets gained 4.2% to $2.5 billion. Elsewhere, kitchen textiles led segments in the kitchen category with a 1.5% gain to $685 million while towels led segments in the bath category with a 1.2% gain to $2.58 billion.

HOME & HOUSEWARES

2004 RETAIL SALES BY SUB-SEGMENT

% change over previous year, figures in billions

PERSONAL CARE     $4.54    +2.50%
FURNITURE         $9.28    +7.50%
APPLIANCES       $10.03    (0.65%)
HOUSEWARES        $2.25    (3.90%)
MISCELLANEOUS    $38.89    +4.80%
TEXTILES         $19.68    +1.65%

$84.68 bil.
+3.30% from 2003

Note: Table made from pie chart.

TEXTILES
           $19.68   +1.65%

BEDDING     $7.78   +2.37%
   BATH      4.37   +0.69
  OTHER      3.10   +2.31
 WINDOW      2.86   +0.35
KITCHEN      1.58   +1.20

Source: Based on The NPD Group, private industry research and
International Housewares Association

() Indicates decline or loss

TOP VOLUME LEADERS

(SALES IN MILLIONS)

CHAIN                       2004       2003    % CHG.

Wal-Mart                 $28,618    $26,130     9.52%
Target                     9,136      8,654     5.57
Sears/Kmart (1)            7,876      9,115      N/A
Bed Bath & Beyond (2)      5,148      4,478    14.96
JCPenney                   3,040      2,935     3.58

TOP SPECIALISTS

(SALES IN MILLIONS)

Bed Bath & Beyond         $5,148     $4,478    14.96%
Willams-Sonoma (3)         3,137      2,754    13.91
Linens 'N Things           2,661      2,395    11.11
Pier 1 Imports             1,898      1,868     1.61
Ikea U.S.                  1,280      1,130    13.27

FOOTNOTES:

ALL FIGURES FOR U.S. OPERATIONS
ONLY, UNLESS OTHERWISE NOTED

Source: Top Volume and Specialists data compiled from
company reports, analysts' estimates and DSN Retailing
Today research.

(): Decline or loss

N/A: Not applicable/available

(1) Combined figure derived from corporate filings
and industry sources.

(2) Includes results from CTS and Harmon.

(3) Includes results from Pottery Barn, Pottery Barn
Kids, West Elm and Hold Everything.