Retail leaders and laggardsSeptember's sales figures were strong enough to give many hope that retailing may start climbing out of its two-year funk this holiday season. But some companies will have a tougher climb than others.

Many merchants adjusted quickly to the "new normal" of penny-pinching shoppers and were rewarded with rising sales in the middle of the downturn -- or at least a quicker return to growth. But many others are still losing out in the competition for shrinking consumer budgets or by headwinds they were already fighting before the bottom fell out in 2008. Here's a look at the two groups that are going in two different directions.


Aeropostale (ARO): This teen apparel retailer stole Abercrombie & Fitch's (ANF) lunch because it reacted faster to the recession. It cut prices and stocked up on low-ticket items like graphic T-shirts. As a result, it kept posting rising sales, even as the rest of retail lingered. Abercrombie finally reacted and began playing the markdown game late last year. It's starting to get its groove back and trying to lure back those customers. This holiday season will be a test to see if Aeropostale can hang on to those fickle teens as Abercrombie and other competitors such as American Eagle Outfitters (AEO) go after them with promotions.

Best Buy (BBY): Nothing beats a monopoly, and since the demise of rival Circuit City two years ago, Best Buy has owned the electronics big-box store market. Its only real brick-and-mortar competition is from the other big box, Wal-Mart Stores (WMT). On a smaller scale are regional appliance chains and specialized retailers like Apple Stores. Online, of course, there's Amazon (AMZN) and eBay (EBAY). Credit Suisse First Boston analyst Gary Balter recently recommended Best Buy as a market share gainer in what he called "the underloved consumer electronic segment."

Kohl's (KSS): In a good example of not letting a crisis go to waste, retail experts seem to agree that Kohl's has been doing all the right things lately. It has taken opportunities, such as the demise of the Mervyn's chain in West, to expand its footprint, and it hasn't taken its eye off the ball. It's giving its closest rival, J.C. Penney (JCP), a run for its money in the midprice department store segment at a time when that low- to middle-income shopper they both target is under pressure. But while Penney's has been stumbling (more on that later), Kohl's has been cruising: Comparable sales are up 5.3% year-to-date.

Macy's (M): The holiday season will be decisive, but the parent of Bloomingdale's seems to be climbing out of a fallow period. After several years of struggling to absorb acquisitions following the merger of Macy's and Federated Department Stores, it hit upon the My Macy's strategy that put stores under more local control, so the merchandise and marketing are a better fit with local shoppers. So far, it seems to be working. CEO Terry Lundgren says Macy's had its best back-to-school season in years, thanks to exclusive brands like Madonna's Material Girl clothing line. "Macy's arguably is on an upswing. The next month or two will confirm if that is the case," says Kenneth Stumphauzer, analyst at Sterne Agee.

Nordstrom (JWN): Department stores took a beating early in the recession, but Nordstrom reacted faster and better than most to adjust its prices and products for the newly thrifty shopper. The move paid off, and the chain is emerging from the downturn with an even more loyal customer base than before. It just reported that sales are up 9.3% year-to-date. And unlike other department stores, which are banking on private brands and exclusives, Nordstrom is doing it by focusing on customer service and stocking just the right things for shoppers. "One thing Nordstrom has always done well is the customer experience," says Joel Alden, a principal at consultant A.T. Kearney.


Borders (BGP): The ugly proxy fight at rival Barnes & Noble (BKS) took some of the focus from this bookstore chain's troubles. First it shed DVD and CD aisles to focus on areas such as children's books, where it figured it could make its mark. Then it stumbled as it tried to get into e-books by hooking up with the wrong e-reader technology. This summer, while everyone watched the brawl at Barnes & Noble, it laid off employees and sold its Paperchase stationery unit to a private equity firm to reduce its debt. It makes one almost nostalgic for the days when B&N was considered a category-killer that put neighborhood bookstores out of business, like in You've Got Mail with Tom Hanks.

Dillard's (DDS): The recession hasn't been a good time for traditional department stores, but especially for the mushy middle that's neither aspirational luxury (i.e. Nordstrom) nor low-price (Kohl's). Retail experts keep looking for signs of impending bankruptcy in this regional department store based in Little Rock, Ark. Its sales had been dragging even before the recession. While it has managed to boost its fortunes during the downturn with cost-cutting and closing a number of stores in 2009, it's still getting squeezed by competition from the likes of Macy's and from falling mall traffic.

Gap (GPS): While its Old Navy sibling is doing relatively well, the mothership Gap brand keeps lurching along, trying to find a fashionable sweet spot. It did well briefly with its 1969 jeans line, but sales aren't budging. It's hard to get customers to pay mid-level prices for basics like T-shirts during an economic slump. Many customers are simply trading down to the cheaper Old Navy basics as an alternative.

J.C. Penney (JCP): Like Macy's, Penney's has looked to exclusive brands and a corporate restructuring to come out of a downturn. It's banking on technology (it recently dropped its catalog business to focus on online sales), and new exclusives with Liz Claiborne and Spain's Mango fast-fashion chain. But it's facing fierce competition from Macy's and Kohl's, and a drop in traffic at mall, where most of its stores are located. Penney's has been expanding its off-mall stores and improving the in-store environment with everything from Sephora cosmetics shops to kiosks that let shoppers order online any item they can't find in the store. But the heavy competition is forcing it to play the promotions game, which keeps hurting the bottom line.

Kmart/Sears: As many retail analysts like to point out, it's no fun being third in a retail segment. Kmart is up against Target (TGT) and Wal-Mart among discounters, but it doesn't have Wal-Mart's mass or Target's class. It can't match the pricing power of the world's largest retailer, and with Martha Stewart's departure late last year, it lost the one brand where it competed with Target in style props. Parent Sears Holdings (SHLD) can't catch a break, because just like Kmart is getting squeezed among discounters, Sears has sunk to third-wheel status behind Penney's and Kohl's among mid-price department stores. Sears Holdings has been making up for the merchandise shortcomings by adding lay-away (in-store and online) and Christmas Clubs for cash-strapped customers, improving online shopping and adding a rewards program to build customer loyalty. But it's an uphill climb. Says Stumphauzer: "Sears and Kmart both have been bleeding market share for the last couple of years."

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I've noticed one thing, and it's about more than just a few stores that have now gone under...It's was a certain clientele that started moving into adjacent areas, and after this these stores were closing up one after the other. These same people would buy stuff as cheap as possible, then arguing and haggle over sale items or coupon discounts making waiting in their line unbearable. Then a few days ;ater you'd be seeing these some folk walking in returning for refunds clothing items that were obviously worn. When I started talling my husband about this he thought I was making this stuff up, that was until he saw it himself. He was shocked after returning from a local hardware store where he just saw a fellow that was making a big scene over trying to return a toilet plunger they knew he'd used and took it back for a $2.99 refund. He said, he thought he'd seen evrything! My daughter worked in retail and told us, No, what I was saying was 100% correct, she'd been dealing with this day afte day in the malls as well. Women would buy a nice dress, shove the price tag inside the thing, wear the dress or clothing item for whatever occasion, and then return it for a full refund. Since the clothing items were clearly worn by someone not wearing deodorant and reaked of smells making items unfit for resale the store refused to take these items back from them. What businesses can survive given large amounts of returns like this? "Not Many" There's a new face on the consumer today, and these are those being imported into this country in mass quantity by all these cheap sleazy corporations. Our American businesses have to wise up to what is happening. I've noticed some stores are already wising up and put into place "VERY STRICT RETURN POLICIES" So, Don't be mad at these stores, they are protecting themselves and us. "Welcome to the NEW Silicon Valley"

October 20 2010 at 2:41 AM Report abuse rate up rate down Reply
1 reply to bunnyfunny47's comment

So very true. Sometimes we get short with the loyal customers after dealing with these people. Our customers service reps get really beat up sometimes but we stand beside them. Thanks for the observation.

October 20 2010 at 9:20 AM Report abuse rate up rate down Reply

Comments are coming from the same called " experts " blind enough not to see the Banking and Automobile crises, Where were they hiding now like gypsies they announce fortune for retailers their credibility is minus zero

October 19 2010 at 11:08 PM Report abuse rate up rate down Reply

Stein Mart is the way to go right now,they have fashion,name brand,less price and great customer service.all you need is to sign up to be a preferred customer"its free not a cc" and you get whatever coupon they have and no hassle returns.take it from me ladies and gents,once you go there you get it!

October 19 2010 at 7:05 PM Report abuse -1 rate up rate down Reply

i love kohls!

October 19 2010 at 5:17 PM Report abuse rate up rate down Reply

I think of all the stores to shop at for quality Kohls is the best. It has the best prices of any of the retail stores as far as name brands. I think Kohl's will be around when all the other stores are closed up. Just check out the great selection that they have and compare it to the other stores such as Macy's. Yeah Macy's is top dollar for every-thing. Kohls is great quality and has awesome prices. I will shop Kohls over any-other store. You get great savings with the discounts when using your Kohls charge. Do you get that at any-other store?? Didn't think so!

October 19 2010 at 3:58 PM Report abuse +1 rate up rate down Reply

First off, I'm not surprised that Aeropastale is doing well because they have drastically cut their prices over time. Secondly, I'm definetely not surprised that Sears/K-mart and Gap are not doing so hot because their prices are overly rediculous!! I'm 38 now, but when I was a kid, K-mart was the money-saving place to go. They had brand name everything (except their clothes) and were competitively priced. Now, FORGET IT!!! Sorry, but Martha Stewarts products and name are not enough for me to pay those prices. Along with them and the Gap, I also think that Hollister, American Eagle, and Justice could use some huge price cuts. I walked in those stores to only walk out 2 minutes later after looking at about 4 price tags.....thats CRAZY!!! Excuse me, but not everyone has that kind of cash to

October 19 2010 at 11:55 AM Report abuse rate up rate down Reply

I would hate to see any of the stores close as it would more than negatively impact too many people who are presently employed. If push came to shove and I had to make the choice of who went under I guess it would be Sears/K-Mart as Sears, in the past, had the unspoken attitude, screw the customer in any way you can. What you send around comes around. I do like the idea that Kohls has started handling big and tall sizes. I only wish that the dept. stores would also stoack shoes in widths up to "3E". Sure wish that economy would really pick up so that the retail shakeout would not hurt so many people.

October 19 2010 at 11:25 AM Report abuse rate up rate down Reply

I surely hope K-mart and Sears do not go out of business. That would be a disaster for the already down employment market. There are rude employees in all stores, especially Walmart. Even at Best Buy the other day, an associate almost knocked me over and didn't even bother to say excuse me or anything. I will keep shopping at K-mart because I actually find better deals there than Walmart and it is less crowded. A lot of people think they are getting great deals at Walmart and that is why it is so crowded and hectic there. The truth is they are not always the lowest price and sometimes they don't even offer the most popular brands because they are offering only china junk. I only go to Walmart if I have to go late since they are open 24 hours but other than thanks. I will stick with KMART OR TARGET.

October 19 2010 at 10:58 AM Report abuse +1 rate up rate down Reply

My sister and I spent all day shopping in department and smaller clothing stores and came home with only 2 blouses and some underwear. The clothing does not fit a real person right just holding up some of the jeans and looking at the crooked seams lets you know they won't do a thing for your figure. Also please get rid of the large print dark, depressing old lady stuff. It's sad when you have the money to buy but can't even find anything you want. Help!

October 19 2010 at 10:57 AM Report abuse -1 rate up rate down Reply

I'm watching sister Hallmark stores close everywhere. I know money is tight. I hate to see people cheapen a special gift to that special someone. I also hate seeing this brand is discount and outlet businesses.

October 19 2010 at 10:48 AM Report abuse rate up rate down Reply