By comparison, Wal-Mart Stores, the undisputed retail heavyweight champion, saw its stock fall 12.2 percent in 2002 while shares of fast-growing Kohl’s Corp. were off 20.6 percent.
Even against results severely depressed by the terrorist attacks of 2001, top-line growth was scarce for most retailers in late 2002, but severe restraints on spending insulated many stores against major profit declines. Should sales pick up in late 2003, it’s hoped that leaner, meaner cost structures will result in hefty bottom-line gains.
"Provided consumer spending remains robust, 2003 could be a comeback year for apparel if the economy were to stabilize," declared Moody’s Investors Service in a recent industry outlook. "However, improvements in the economic climate may not translate into higher sales, earnings and cash flow for all apparel retailers."
Same-store sales have generally slid over the past two years, noted the report, as consumers, "sated from binge shopping in the late Nineties and nervous about their futures," cut back on apparel and other noncritical purchases. "Sales could show a noticeable rise in 2003 simply because closets are finally getting some room as apparel wears out. The question is where consumers will go to fulfill their needs when they become apparel-hungry."
Angela Selden, North American managing partner for Accenture’s retail industry group, stated that compelling products could translate into a turnaround, as they did in home improvement in 2002: "People are willing to spend when they have something interesting to buy. The apparel manufacturers have a unique opportunity to capture. If the product is not interesting and the price points don’t have a value orientation attached to them, it’s going to be an opportunity missed."
She worries that, in trying to preserve their capital, they’ll cut muscle instead of fat. "The first place they start to conserve is in the most interesting offerings to the customers," noted Selden, adding that an "investment in excitement" would allow retailers to move more quickly into a growth mode once the economy again turns upward.