Specialty stores lead in growth, margins
May 22, 2013,
Sales growth, store growth, gross margin. The specialists own these and other performance categories, and it's thanks mostly to one very active subset - the bedding specialty retailers (more on that on page 57).
The specialists even manage to keep adding retailers to their ranks - a net two new names last time and one more on this year's Top 100.
Furniture, bedding and accessories sales for the now 26 specialty stores on the Top 100 increased 15.7% to $13.8 billion. That creams the combined 5.7% sales increase to $17.6 billion for the 74 conventional stores on the list.
Just like last year, the specialty stores bested the 9.9% sales increase for the combined Top 100, the 12.2% gain for the Top 10 and 9.7% increase for the single source networks on the list. The specialists' 15.7% gain was also better than the 11.1% increase for the 25 specialty stores on last year's Top 100.
Specialty stores left the conventional players in the dust in terms of expansion, too, adding a net 586 stores for a 10.4% increase in store count to 6,237 stores in 2012. The conventional furniture stores, meanwhile, eked out a 1.2% increase in store count, adding just 35 units for a total of 2,900 stores.
The store growth rate for the specialty stores wasn't as great as the 11.8% store count expansion for the Top 10 on the list, but specialists account for six of those Top 10 names, including No. 6 Mattress Firm and No. 9 Sleepy's. These two combined to add a net 446 stores - the vast majority of the Top 10's total gain of 495 stores.
All of this aside, the conventional stores still boosted their sales and store growth numbers over the conventional stores on last year's list. Last year's group increased sales and store count by 3.4% and 1.1%, respectively.
While the specialty retailers gained a net one new member, two specialists actually joined the ranks, No. 68 Mattress Warehouse and No. 100 LoveSac. The latter is a Stamford, Conn.- based modular and alternative upholstery maker and retailer. Although it just made the list, the 49-store LoveSac posted some big numbers, including the best percentage sales gain in the Top 100 - up 48.1% to $40 million.
The specialty stores lost one player this year, Mattress Giant, which was acquired in pieces by Mattress Firm and Sleepy's.
Among the conventional stores and the entire Top 100, the Ashley Furniture Home- Stores network was No. 1 in sales volume, growing 9.6% to $2.9 billion in 2012. The dedicated network of company owned and licensed stores also posted respectable store growth last year, adding a net 28 U.S. stores for a total of 462 stores at year's end.
Conventional retailers also got a nice bump out of several separately ranked Home- Stores licensees, including No. 67 Broad River Furniture (up 28.5%); No. 47 Regency Furniture, which also operates multi line stores (up 39.2%); and No. 30 Hill Country Holdings (up 19.5%).
No. 57 Big Sandy Superstore gave the conventional stores a shot in the arm, too, with its 33.3% sales gain. The subgroup, however, was hurt by No. 69 Famsa, the credit-oriented retailer owned by Mexico's Grupo Famsa. Famsa closed nearly half of its U.S. stores last year - exiting California, Arizona and Nevada - and suffered a 23.9% decrease in estimated furniture, bedding and accessories sales compared with the year before.
On the specialty store side, the bedding specialists again were the top-performing subset of all the specialty stores, growing sales last year by 22.9% to nearly $4.2 billion and increasing their store count by 18.5% or 568 stores, to 3,638 units.
Next best were the 11 retailers in the lifestyle specialty category, which combined for a 13.1% sales increase to nearly $8.6 billion, though they added only 11 stores for a 0.5% increase in store count to 2,170 units.
The largest of the lifestyle specialists remains No. 2 Ikea, with $2.5 billion in furniture, bedding and accessories sales, but No. 3 Williams-Sonoma is gaining ground. The publicly held, multi-channel retailer - owner of Pottery Barn, Williams- Sonoma, West Elm and other brands - saw an 11.3% increase in furniture, bedding and accessories sales this past year to nearly $2.0 billion.
However, the biggest percentage sales increase among the lifestyle stores came from No. 33 Arhaus, up 30.3% to $215 million. The Walton Hills, Ohio based chain closed one store and opened five last year in King of Prussia, Pa., Hackensack, N.J., Indianapolis, Raleigh, N.C., and Edina, Minn. Four more are opening this year.
The four retailers in the living room specialty subcategory combined for a 10.4% sales increase to $993.8 million, with LoveSac the standout performer. And No. 65 Chair King/Fortunoff Backyard Store was again the only retailer in the casual specialty subcategory with a 7.4% sales increase to $87 million.
The specialists again dominated the conventional stores in three key performance measures - sales per square foot, stock turns and gross margins - although only a handful of specialists offered estimates.
The median sales per square foot for specialty retailers was $343 for eight companies reporting, compared with $223 for 33 conventional stores reporting and $232 for the combined Top 100.
The specialists also turned inventory more quickly - 8 times for five stores reporting, vs. 6.5 times for 19 conventional stores reporting. Median gross margin was markedly better for specialty stores, too - 56% for five stores reporting compared to 47% for 14 conventional stores.
Will specialty stores continue their market-share grab this year and beyond? Industry analyst Jerry Epperson isn't so sure.
"We think these specialty shops are peaking to a degree," he said. "There's a certain level of saturation we must be nearing with as many of these as we have and with multiples of these in every major market now, we think there's probably going to be a peak sometime soon."
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