10 Retail Power Players

by Jeanine Poggi
Saturday, July 3, 2010

http://finance.yahoo.com/family-home/article/109977/10-retail-power-players

Despite a difficult year, a number of retail powerhouses continued to solidify their dominance.

Best Buy is one of two electronic retailers to appear on NRF's top 100 chart. (Associated Press)

Here are the retailers that ranked in the top 10 according to NRF's measurement…

10. Best Buy
Best Buy (BBY - News), coming in at No. 10, is one of only two traditional electronic retailers to appear on NRF's top 100 chart. In 2009, the company generated $37.3 billion in sales at its 1,192 U.S. stores.

High-definition televisions, netbook computers and smartphones were big drivers of sales, helping to push Best Buy's sales up 1.7%. This offset a 3% decline from entertainment software like video games, CDs and DVDs. Best Buy is looking to ramp up this business with the recent launch of a video download service to compete with similar programs from Amazon (AMZN - News), Blockbuster (BBI - News), Apple (AAPL - News) and Netflix (NFLX - News).

Domestically, 39% of Best Buy's sales came from consumer electronics, with home office products accounting for another 34%.

Even as other retailers looked to cut costs, Best Buy still opened 100 new stores during the year. The electronic retailer is currently focused on expanding its Best Buy Mobile business, with plans to operate up to 1,000 of these stores.

9. Sears

Sears (SHLD - News) retains its No. 9 ranking, even as its sales continue to remain sluggish. In 2009, Sears sales dropped nearly 6% to $44 billion, as the company shuttered some underperforming stores.

This trend has continued into 2010, as one of the few retailers that still saw a decline in profit in its first quarter. Sears reported a 39% drop for the period, earning $16 million, or 14 cents a share, on revenue of $10.05 billion. Sears said its profit margin was squeezed due to deep discounts on major appliances.

Still, some of Sears' new initiatives should give investors some encouragement. The department store recently launched a marketplace on its Web site, an appliance layaway program, and streaming movie and TV downloads partnership.

8. Lowe's

The housing slump pushed Lowe's (LOW - News) 2009 sales down 2.1% to $47.2 billion, but improving trends in bellwether markets like Florida and California are promising.

Already in the first three months of 2010, Lowe's posted a 2.4% increase in same-store sales, its first positive quarterly comparable sales figure in nearly four years. While some of this gain can be attributed to government stimulus programs, the home improvement retailer did raise its sales and earnings forecast for 2010.

Still, analysts are cautious on the sector, as several cut their estimates for both Lowe's and rival Home Depot (HD - News). "Management commentary on recent webcasts reflected a slight downshift in tone, in our view, and this is what recent investor sentiment has been concerned about," FBR analyst Stephen Chick wrote in a note last week.

7. CVS Caremark

CVS Caremark (CVS - News) ranks at No. 7, with $55.4 billion in sales in 2009, a 13% increase from the year prior. NRF's total does not include non-retail sales. CVS' purchase of Long's Drug Stores back in 2008, is one of the primary factors of the double-digit sales growth.

CVS made headlines along with rival Walgreen due to a dispute over its pharmacy benefits management business. The disagreement ended in a resolution where Walgreen will continue to participate in CVS' PBM for existing, new and renewed plans.

In June, CVS approved a new plan to repurchase up to $2 billion in shares before the end of 2011. It recently completed a $2 billion share buyback in November.

6. Costco

Costco Wholesale (COST - News) fell three places to No. 6, generating $56.5 billion in sales at its 406 stores in the United States and Puerto Rico.

The biggest reason for Costco's drop on NRF's chart is due to the exclusion of fuel, as it derives a significant portion of its overall revenue from the gas pump.

Regardless, Costco credits its food products with boosting its volume even as consumers tightened their purse strings. The wholesaler has said that last year's trends have continued into the first half of the year, as traffic within its stores pichas picked up, but spending remains below normal. The bulk of purchases continue to come from food and other necessities, rather than non-essentials.

5. Home Depot

As with Lowe's, the success of Home Depot (HD - News) is closely tied to the performance of the housing market.

While there is skepticism in the market after last week's disappointing new homes data, Janney Capital Markets analyst David Strasser said he is confident in the company's turnaround. He cited Home Depot's increased visibility in its supply chain, which could mean robust margin opportunities, as well as its investment in information technology.

"The ability to accurately forecast inventory, manage pricing and control labor hours, all result in better sales and margins," Strasser wrote in a note.

Home Depot also plans to continue to increase its dividend payout and buy back shares.

4. Walgreen

Walgreen (WAG - News) moved up two places to the No. 4 slot, as it continued to open stores and make acquisitions.

In 2009, Walgreen opened its 7,000 location and its first store in Alaska, giving the drugstore a presence in all 50 states. It also purchased 25 Snyder's Drug Stores in Minnesota, a dozen Eaton's Apothecary locations in Boston and 257 Duane Reade units in New York. These acquisitions helped boost Walgreen's sales 7.3%

The $618 million acquisition of Duane Reade will help Walgreen in its move to provide a bigger fresh- and prepared-food selection in stores. Prior to the buyout, Duane Reade was well on its way to launching its DR Delish -- a broader selection of food offerings that includes fresh salads and frozen desserts.

Walgreen is also making strides in its pharmacy business, going directly to companies and government agencies to provide prescription medications for employees.

3. Target

Target (TGT - News) moved up two notches in NRF's ranking to claim the No. 3 spot.

The discounter has been making headway with its PFresh grocery segment, which generated 16% of its $63.4 billion in sales in 2009. The company plans to have more than 450 of its stores with the PFresh assortment and presentation by the end of the third quarter.

Target has also seen strength in sales of discretionary merchandise like apparel and home goods.

2. Kroger

Kroger (KR - News) holds on to its No. 2 ranking, and is expected to hold up better against pressure from discounters than other traditional grocers.

The grocery sector has been facing increasing competition from discounters like Target and Wal-Mart, which have been steadily growing their food selection. At its shareholder meeting last week, Kroger's CEO Dave Dillon said the company is strengthening its customer loyalty.

Looking ahead, Kroger expects full-year earnings in the range of $1.60 to $1.80 per share, and foresees same-store sales growing between 2% and 3%.

The board of directors also approved the repurchase of $500 million of common stock, replacing the $225 million remaining under a $1 billion authorization announced in January 2008. It also declared a quarterly dividend of 9.5 cents to be paid on Sept. 1 to shareholders of record on Aug. 6.

1. Wal-Mart

Wal-Mart (WMT - News), unsurprisingly, once again ranks as the No. 1 retailer in terms of sales, according to NRF.

While Wal-Mart's biggest growth opportunities have been overseas, the discount giant still says it can generate another $100 billion annually in domestic sales. One way it may do this is through the roll-out of smaller-sized stores. By reducing its footprints, Wal-Mart hopes to win approval from zoning officials in cities like New York, Chicago and Los Angeles.

Wal-Mart's grocery business is also dominating, accounting for more than half of its $304.9 billion in sales in 2009.

But the retail behemoth isn't without its worries. U.S. comparable sales have declined in the last four consecutive quarters, and management is forecasting another dip for the second quarter. Wal-Mart has seen weakness in its discretionary categories, most prominently in apparel.

-- Reported by Jeanine Poggi in New York.