It’s no secret that U.S. retail sales collapsed in 2008 and 2009 because of the recession. But several of the largest retailers consistently performed poorly between 2005 and 2010 for reasons that go beyond the recession. 24/7 Wall St. looked at which retailers lost most in total sales during that period and found that their troubles have a few common elements.
First, some of these retailers compete with even larger retailers. This is true of a company like Foot Locker. Most high-end athletic gear is available at big box retailers and department stores.
Another reason for the poor performance of some of these companies is the presence of a number of direct competitors of relatively similar size. The office products retail sector is occupied by Office Depot, Office Max, and Staples. And, Wal-Mart’s Sam’s Club has created lines of merchandise that also compete in the sector.
The third reason that some of the retailers have done badly is poor management. Robert Nardelli was a former Jack Welch lieutenant at GE. Nardelli was passed over tor Welch’s job. He was hired by Home Depot to run the company after he failed to get the promotion. Between 2000 and 2007, Nardelli managed to alienate both employees and shareholders with poor results and extravagant pay packages. When Nardelli left, he became CEO of Chrysler, which also faltered under his management. JC Penney has had similar management problems. Poor merchandising decisions by CEO Mike Ullman, who has run the company since 2004, hurt revenue. He was recently replaced by the head of Apple’s retail store operation, Ron Johnson
The retail industry has fared relatively well in the last five years, despite the recession. Most big operators have been able to increase revenue since the middle of the last decade. U.S. GDP grew by 16% over that period. Sales at industry giants such as Wal-Mart, Target, and Costco have risen by 21%, 13%, and 28%, respectively. Although smaller retailers than these would protest if their results were compared to the giants, with over $600 billion a year in combined sales, the trio are a reasonable proxy for the entire industry.
To identify the largest retailers in America with the worst sales, 24/7 Wall St. looked at the National Retail Federation’s Stores Magazine. Using the 2006 and 2001 “Top 100 Retailers” lists we then identified companies that had lost the most in annual retail sales from 2005 to 2010. We only ranked public companies in order to demonstrate how declining sales affect the overall health of the company. We also excluded companies with significant M&A activity because it can distort sales.