Major American retailers Sears Holding Corp., Target Corp. and Gap Inc. reported losses as high as 40% in the fourth quarter as they attempted to attract price-conscious shoppers.
Sears lost $2.4 billion, marking its largest quarterly loss in nine years. Heavily dependent on malls stores, Sears announced in December it was closing up to 120 under-performing locations.
Target reported a 5.2% loss in earnings, and its profit margin fell to 28.4%. The retailer made a name for itself by offering trendy decor and clothing under the same roof as food and toiletries, but recently has had its formula copied by rivals. It also was unable to attract holiday shoppers who are now looking to competitors for lower prices.
Gap Inc., which operates Gap stores, Old Navy, Banana Republic and Athleta, has been struggling for years. The company recently reported a 40% drop, with all stores averaging a 4% drop in revenue.
Each division saw losses, with the exception of Banana Republic, which was unchanged from 2010. In October 2011, the retailer announced it will be closing 189 stores by 2014.
Will Retailers Bounce Back?
Sears Executive Edward Lampert is working to end the chain’s reliance on mall stores by investing in its Kenmore, Diehard and Craftsman brands and by spinning off its Outlet and Hometown stores. These efforts are expected to raise up to $500 million.
Sears also plans to sell 11 of its stores to real estate company General Growth Properties within the next two months for $270 million.
As for Target, it announced last month that it will partner with specialty shops to offer limited-edition merchandise. The first temporary shops will open in May. In addition, Target will continue offering 5% discounts to Target credit and debit card holders and plans to expand its food offerings. The retailer also recently entered the Canadian market.
Gap Inc’s Board of Directors approved a plan to increase the annual dividend per share by 11% for 2012. It also approved a plan to repurchase $1 billion in shares, and plans to open 30 stores in China by the end of the year. Nearly 30 of Gap’s sales come from abroad and online.
Key Statistics – US Apparel Retail Industry (source: MarketLine)
- In 2009, the apparel retail industry in the United States had revenue totaling $305 billion. For the period spanning 2005-2009 this represents a compound annual growth rate (CAGR) of just over 3%.
- For the five-year period 2009-2014, the industry is predicted to decelerate and have a CAGR of nearly 2%. By the end of 2014, the industry is expected to be valued at more than $335 billion.
- The most lucrative segment of the US apparel retail industry is women’s wear with 53% of the market share. Revenue from women’s wear totals $162 billion.