11. Sears Holdings Corp. (NASDAQ: SHLD)
> Revenue per employee: $139,000
> No. employees: 293,000
> Revenue: $40.6 billion
> 1-year revenue change: -2.9%
Sears, which owns Kmart, Sears and several smaller retail brands, has 3,900 locations. Sales at the company have fallen so rapidly that management has decided, in the hope of getting better shareholder returns, to spin off of its Orchard Supply Hardware Stores and create a new public company to hold its Sears Hometown and Outlet Stores assets. None of these actions have done anything to reverse the long and seemingly endless slide of Sears store sales and corporate revenue. In the quarter that ended on July 28, revenue fell from $10.1 billion in the previous year to $9.5 billion. Sears lost $132 million in the period.
Most of the trouble can be blamed on sales at the company’s two largest units. The parent company reported that for the most recent quarter Sears Domestic’s comparable store sales (sales at stores open at least 12 months) declined 2.9%, Kmart’s comparable store sales declined 4.7%, and Sears Canada’s comparable store sales declined 7.1%. The situation at Sears is not likely to get better. Rivals Target Corp. (NYSE: TGT) and Wal-Mart Stores Inc. (NYSE: WMT) are larger and have had relatively good revenue growth in the last year.
10. Royal Caribbean Cruises Ltd. (NYSE: RCL)
> Revenue per employee: $128,000
> No. employees: 60,670
> Revenue: $7.8 billion
> 1-year revenue change: 9.1%
Royal Caribbean operates 40 cruise ships under several brands, including Celebrity Cruises, Pullmantur and Azamara Cruises. The cruise line’s ships sail to Alaska, Asia, Australia, New Zealand, Canada, Europe and South America. Royal Caribbean has one of the longest-serving CEOs of a major public company. Richard D. Fain has been chairman and chief executive officer since 1988. There is good reason for the length of his tenure. Revenue and net income have risen steadily for a decade. The company made $607 million last year. Although Royal Caribbean has a large employee base in relationship to its revenue, personnel costs are hardly its only major expense. The company spent $206 million on payroll and related expenses in the second quarter of 2012. It also spent $109 million on food and $238 million on fuel.
9. Caesars Entertainment Corp. (NASDAQ: CZR)
> Revenue per employee: $128,000
> No. employees: 70,000
> Revenue: $8.9 billion
> 1-year revenue change: 2.8%
Caesars is a parent casino and resort company that manages a number of brands, including Harrah’s, Caesars, Horseshoe and the London Clubs. The primary locations for most of its casinos are Reno, Las Vegas and Atlantic City. Caesars also owns and operates the World Series of Poker. Caesars is not the only casino company with the low revenue per employee issue. Revenue per employee at rival MGM Resorts International (NYSE: MGM) is $150,000. The effects of the recession drove down Caesars’ revenue. In 2008, total sales were $10.1 billion. That number fell by more than $1 billion last year. Caesars continued to struggle financially in the first half of 2012. While revenue was up 2% to $4.4 billion, its loss of $522 million compared to a loss of $303 million in the same period of 2011.
Caesars has been undergoing some restructuring recently, which probably will result in a smaller headcount eventually. In May, Caesars signed a definitive agreement to sell Harrah’s St. Louis to Penn National Gaming for $610 million in cash.
8. The Gap Inc. (NYSE: GPS)
> Revenue per employee: $113,000
> No. employees: 132,000
> Revenue: $14.9 billion
> 1-year revenue change: 1.6%
Gap was once among America’s most successful clothing brands and retailers. Its position in the market has slipped substantially over the past several years. Its revenue has dropped fairly consistently since 2005 when it was $16.3 billion. To partially remedy the decline in activity, Gap announced a plan about a year ago to cut its retail capacity. It is currently in the process of closing 189 Gap stores in the United States, which is 21% of its locations there, which in turn probably will lower the firm’s total employee count. Gap is also the parent company of several other brands, including Banana Republic, Old Navy, Piperlime and Athleta.
Gap’s fortunes have improved somewhat recently. In its most recently reported quarter, for the period that ended on April 28, revenue rose 6% to $3.5 billion. Earnings per share were up 18% to $0.47. More important than either of those figures, same-store sales, or sales at stores open at least a year, rose 4% year-over-year and were up for all three of the company’s major retail brands — Gap North America, Old Navy and Banana Republic. International sales were down. Gap joins a number of retailers with very low revenue per employee, among them Macy’s Inc. (NYSE: M) and Nordstrom Inc. (NYSE: JWN).
7. JCPenney Co. Inc. (NYSE: JCP)
> Revenue per employee: $98,000
> No. employees: 159,000
> Revenue: $15.6 billion
> 1-year revenue change: -12.2%
JCPenney has consistently posted some of the poorest revenue performance among large retailers for years. The situation has worsened after the arrival of new CEO Ron Johnson, the former head of Apple’s retail division. In the second quarter of this year, same-store sales dropped 21.7%. Total revenue fell 22.6% to $3 billion. JCPenney lost $147 million in the quarter. At first, management indicated that results in the second half would be better. But then, on Sept. 20, Johnson dropped a bomb. He said investors should not expect improvements for the balance of the year.
Johnson tried to almost totally revamp the way that JCPenney attracts consumers, and the effort failed dismally. The retailer released a new pricing strategy in January called Fair and Square. It included three types of prices: everyday regular prices, month-long values and best prices, which occur on the first and third Fridays of every month. Shoppers were confused for obvious reasons. JCPenney currently has 1,100 stores, but it would not be surprising if the company had to cut that number.
6. Starbucks Corp. (NASDAQ: SBUX)
> Revenue per employee: $87,000
> No. employees: 149,000
> Revenue: $13.0 billion
> 1-year revenue change: 12.7%
Starbucks has been considered one of the breakout successes in the fast-food and coffee business. Because of the number of stores it manages and the large number of people needed to operate them, its revenue per employee is barely better than a lower tier fast-food company like McDonald’s. Starbucks is a relatively new company by the standards of major public companies. It was started in 1971. After current CEO Howard Schultz joined Starbucks in 1982, the company grew rapidly, save for a brief interruption during the recession. As of July 1, Starbucks had 17,651 stores. Schultz has drawn in a large customer base by turning what was a coffee store into a cool location. The food, a multitude of noncoffee beverages, CD sales and free wireless access helped encourage people to remain more than a few minutes.
Starbucks also has created an aura as one of the most responsible, large “green” companies in the world. One such green program, “ethical sourcing,” focuses on “responsible purchasing practices, farmer loans and forest conservation programs.” Another program, “environmental sustainability,” looks at, among other things, the use of renewable energy in its stores. No matter what Starbucks does for its suppliers and the environment, revenue and profits have surged. In its third fiscal quarter, revenue increased 13% to $3.3 billion, and earnings increased 19% to 43 cents per share. Starbucks also forecasts strong growth for the next several quarters.