America’s Eight Worst-Performing Retail Chains

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8. JCPenney
> Drop in sales: 5.9%
> 2005 sales: $18.8 billion
> 2010 sales: $17.7 billion
> 5 yr. change in stock price: -59%

JCPenney is an iconic U.S. brand. It was started by James Cash Penney in 1902. At one point, it employed Sam Walton, the founder of Walmart. JCPenney suffers from two problems. The first is that it is in the highly competitive middle-market department store business, which includes Kohl’s, Macy’s and Dillard’s. Poor management has allowed competitors to flank the company in store locations and merchandise selection. Mike Ullman, who joined the company as CEO in 2004, was the head of JCPenney during its decline. Problems at the retailer have been severe enough that the board has replaced Ullman with former Apple Store chief Ron Johnson. Looking to the future, Penney’s typical middle class customer may have little discretionary income for spending this year. JCPenney same-store sales dropped 2.6% in October.

7. The Gap
> Drop in sales: 9.4%
> 2005 sales: $16 billion
> 2010 sales: $14.5 billion
> 5 yr. change in stock price: -3%

The situation at Gap has become more desperate recently. It announced it would close 21% of its flagship store locations by 2013. The Gap, which was founded in 1969, was the cool location for casual dress during the 1990s, capturing the nation with its slogan, “Fall into the Gap.” Until recently, the company had 3,100 stores, including Gap, Old Navy and Banana Republic locations. The Gap’s competition has grown both because of merchandise decisions at large department stores and the rise of retailers like Abercrombie & Fitch. Gap has been through several CEOs since it fired its famed chief Mickey Drexler.

6. Foot Locker
> Drop in sales: 12.3%
> 2005 sales: $5.7 billion
> 2010 sales: $5.0 billion
> 5 yr. change in stock price: -3%

In 1974, Woolworth, another famous American retailer, founded Foot Locker to take advantage of the growing interest in athletic shoes. Nike was started ten years earlier, and a surge in interest in athletic shoes had begun. Unfortunately for Foot Locker, Nike shoes are now sold by almost every department store and big-box retailer in the United States. Also, the parent company of Nike as well as Adidas and Under Armour have taken a larger part in building their brands, in some cases by having their own stores. Foot Locker’s sales did rebound in the second quarter of the year.

5. The Home Depot
> Drop in sales: 16.6%
> 2005 sales: $81.5 billion (restated to $77.1 billion due to HD Supply, August 2007)
> 2010 sales: $68.0 billion
> 5 yr. change in stock price: flat

The Home Depot is the world’s largest retailer of building materials and home improvement products. The company has over 2,200 stores worldwide. The chain has been badly damaged by the housing crisis, which began in earnest in 2007. Home Depot’s prospects were also hurt by the presence of Robert Nardelli, who operated the chain in the first half of the decade. One of Home Depot’s greatest challenges is that it has a large direct competitor in Lowe’s. The other is that the housing market has shown no sign of a recovery.