Top chains, membership clubs, specialty retailers to propel discounters' sales to $132.5 billion

Discount Store News, July 20, 1987

Top Chains, Membership Clubs, Specialty Retailers to Propel Discounters' Sales to $132.5 Billion

DISCOUNT INDUSTRY ANNUAL REPORT

Top 20 Discounters' Sales Grow 13%

Nationwide DSN Report

The nation's top 20 full-line discount department shores outpaced total industry growth last year as sales for these giant discounters surpassed $56 billion, a gain of some 13 percent over 1985. Total discount industry sales increased about 9 percent in 1986 and are projected to climb another 5 percent this year to $132.5 billion, according to DSN's annual report on the discount industry.

Overall, full-line discount department stores are expected to post a more modest gain of about 2 percent to sales of $84.9 billion, reflecting continued consolidation among the top chains and rough sledding for many of the industry's second-tier chains, such as ALCO Stores (sales down 5 percent), Gee Bee (down 12 percent), Danners (down 6 percent and subsequently acquired by Maxway this year), and Cook United (down 22 percent and in Chapter 11 for the second time in two years).

But whatever sales were lost by these mid-sized discount store chains were more than made up by the industry's giants:

K mart's 2,086 U.S. and 118 Canadian units led the discount store industry in sales last year with $22.1 billion, up 6.3 percent from $20.8 billion in volume in 1985. This gain was paced by the 5.5 percent increase in same store volume last year as compared to a 0.4 percent drop in 1985.

Widely admired as one of the strongest companies in any category of retailing, Wal-Mart was the pacesetter in growth among the industry's elite. Last year, sales at Wal-Mart's 7,674 discount stores climbed 33 percent to $10.2 billion. Its Sam's Wholesale Club division joined the billion dollar club and is poised to pass the long-time membership club leader Price Club this year. And Wal-Mart cemented its reputation as one of the most innovative retailers with the planned rollout of two new hypermarket formats this year.

Target's sales rose 11 percent last year, as its parent, Dayton Hudson Corp., acquired over 78 Gemcos from Lucky Stores for about $440 million in late 1986. In addition to beefing up Target's presence in the Southern California market, the Gemco-converted stores also give Target a chance to enter the San Francisco Bay Area and the state's Central Valley region.

The upscale retailer is also scheduled to open three stores in Las Vegas and six stores in metropolitan Detroit. Target also announced plans to enter the Pacific Northwest, where it hopes to be operating up to 35 units by 1993.

Zayre Stores, which last month lost its chairman when Malcolm Sherman resigned, topped $3 billion in sales last year despite reduced pretax earnings of $129.9 million, down from $141.9 million the previous year. Over the past three years, same store sales increases have declined, from a 10.4 percent gain in 1984 to 4.3 percent in 1986.

Zayre Stores, with 362 locations at year-end 1986, plans to add 25 stores this year. The spin-off of the company's apparel divisions, T.J. Maxx, a newcomer to the billion dollar club last year, Hit or Miss, and Chadwick's of Boston, will facilitate plans to add 35 units to T.J. Maxx's 226-store total and 50 units to Hit or Miss' 461 store base.

Bradlees' sales rose 19 percent to $1.9 billion, as the upscale discounter took steps to reduce overhead and improve profitability. Parent Stop & Shop's confidence in the resurgence of its discount store arm is illustrated by plans to open 10 new Bradlees stores in 1987 and to increase the pace of existing store renovations.

An $18 million inventory shortage marred Ames' record sales of nearly $1.9 billion last year as the company assimilated its Murphy's Mart acquisition of 1985. First quarter 1987 sales are up 19 percent from last year's period and net profits showed a 20 percent gain.

The combination of May Department Stores' Caldor and Venture divisions gives the company the fifth highest sales total of all the full-liners. Caldor, acquired by May from Associated Dry Goods in 1986, posted sales of $1.4 billion, a 5 percent rise. The more profitable Venture division experienced a 10 percent sales gain to $1.1 billion last year. While the company has no plans to merge the two divisions, it appears that with an influx of several Venture executives to positions with Caldor, many operating formulas of the successful Venture Stores will be incorporated into the East Coast chain.

Other full-line discounters that experienced double-digit sales gains last year included Hills, Rose's, ShopKo, Fedco, Jamesway and Pamida.

Discounter Apparel Sales to Total $24.9B

Nationwide DSN Report

Apparel will continue to be the leading volume category for full-line discount department stores this year. Taken together, ladies', men's and children's wear will generate $24.9 billion in sales by year-end, according to DSN research.

On average, full-line discounters will devote some 17,800 square feet of selling space to these apparel categories, which will generate roughly 20 percent of total full-line discount store sales.