Minnesota’s Fastest Growing Retailer? Select Comfort
Retailers everywhere are under intense pressure today amid the rise of online retail and changing shopping habits. There has already been a spate of retailer bankruptcies and store closings this year. But one Minnesota-based retailer opened 72 new stores in 2016 and plans to open approximately 60 more this year. Its identity might be a surprise to some retail watchers.
While most Minnesota retailers are facing sales declines or nominal gains in revenue, Plymouth-based Select Comfort Corp. is in a category by itself. The company’s fourth quarter revenue for 2016 was up 46 percent compared to 2015.
Comparable store sales were up 34 percent in the quarter, which included the holiday shopping season. That figure is a key retail barometer generally comparing results for retailer’s stores that have been open for at least a year. For the full year, sales were up 8 percent to $1.31 billion. The steadily profitable company had net income of $51.4 million last year.
Select Comfort is a unique case because it is both a manufacturer and retailer for its signature product: the Sleep Number bed. Although the beds are expensive, the company is the exclusive source for the proprietary product—customers can’t find it in other stores. Select Comfort’s success highlights the growth of niche, specialty retail concepts.
At the end of 2016, Select Comfort had 540 stores. Spokeswoman Susan Eich says 10 new locations have opened since the start of 2017. That continues a trend for the company with about 80 percent of its retail stores having opened in the last five years. Select Comfort will sell you a bed online or over the phone, but 91 percent of its sales come from its brick-and-mortar locations where customers can stretch out and test the products.
But for many other retailers, it’s already been a brutal year. The sagging fortunes of many national retailers have included store closings in Minnesota.
On Tuesday, Kansas-based Payless ShoeSource Inc. filed for Chapter 11 bankruptcy and will close 400 of its 4,400 stores, including four locations in Minnesota. Omaha-based Gordmans Stores Inc. filed for bankruptcy in mid-March; this week the discount retailer disclosed that it would shutter five of its six Minnesota locations.
St. Paul-based Gander Mountain Co. also filed for bankruptcy in March. The outdoor apparel and gear retailer is shutting down three locations in Minnesota among the 32 “underperforming” stores that the company is closing.
Cincinnati-based Macy’s Inc. closed its downtown Minneapolis department store in March. Other retailers closing Minnesota locations include J.C. Penney (8 stores), Radio Shack (7 stores) and The Limited (5 stores). Radio Shack is in bankruptcy; the owners of The Limited pulled the plug on the entire chain in January, announcing plans to close all of its 250 stores.
Minnesota retailers are facing the same tough market.
Challenges continue for Plymouth-based Christopher & Banks Corp., which sells women’s apparel. CEO LuAnn Via was terminated in mid-January and replaced by interim CEO Joel Waller. The company has not named a permanent CEO. Weak holiday sales were a factor in Via’s departure.
For its fiscal 2016 fourth quarter (ending January 28, 2017), Christopher & Banks’ revenue was down 10.1 percent and its comparable store sales were down 7.8 percent. Waller acknowledged that the fourth quarter results were “disappointing.” (Coincidentally, Via had been CEO of Payless before joining Christopher & Banks).
Duluth-based Maurices is owned by New Jersey-based Ascena Retail Group Inc., which owns other brands including Ann Taylor, LOFT and Lane Bryant. For the second quarter of Ascena’s fiscal 2017 (ending on January 28, 2017), all of the company’s brands saw sales declines.
Maurices’ second quarter revenue of $274.5 million marked an 8 percent drop compared to a year ago. That was the second worst percentage drop among Ascena’s seven chains; the only group with a bigger slide was Ann Taylor, which saw a 9 percent drop.
In his comments about the numbers, Ascena CEO David Jaffe pointed to larger industry trends, citing “ongoing store traffic headwinds and overall customer price sensitivity” and the “disruptive trend toward ecommerce transactions.” At the end of the January, Maurices had 1,012 stores. For fiscal 2016, Maurices’ had revenue of $1.1 billion.
Minnesota’s biggest retailers, Minneapolis-based Target Corp. and Richfield-based Best Buy Co. Inc., are both seeing solid growth in online sales. But neither is posting big gains in overall total sales.
For its holiday quarter, Target reported a 4.3 percent drop in sales and a 1.5 percent decline in comparable sales. The company also lowered its guidance to Wall Street for 2017, forecasting a “low single-digit decline in comparable sales.” Digital sales were up 34 percent for the company in the quarter, but only represented 4.4 percent of Target’s total sales for 2016. In 2016, the company opened 15 new stores—primarily smaller format stores—and closed five to end the year with 1,802 stores.
Richfield-based Best Buy Co. Inc. saw a 1.4 percent decrease in revenue and a 0.9 percent drop in comparable store sales in the holiday quarter for its domestic division, which accounts for more than 90 percent of the company’s total revenue. Domestic online revenue for the quarter increased 17.5 percent to $2.3 billion. Looking ahead, the company is projecting a 1.5 percent increase in total revenue for the year ahead, including its international division.
America’s largest retailer, Arkansas-based Wal-Mart Stores Inc., saw a 1.8 percent uptick in comparable sales for its holiday quarter.