At discount chains: better lines, face lifts, and results
Framingham, Mass. — The recession may be bullying some industries, but many discount retailing firms aren't being pushed around.
Industrywide, sales are expected to be up 9 percent this year over 1981, according to Discount Store News, an industry publication. And some discount department store chains are forging ahead with new stores.
''The recession has been very difficult,'' says Malcolm Sherman, executive vice-president and general manager of Zayre Stores, a division of the Zayre Corporation. ''On the other hand, we have been able to generally achieve our plans this year.''
Zayre's earnings got hit in last year's fourth quarter, but the company is up again. Corporate third quarter sales were up 60.3 percent from the same time last year.
The ''plans'' Zayre has achieved are part of a five-year program to remodel and remerchandise its discount stores. By the end of this year, about 80 percent of the Zayre stores will be upgraded.
Remerchandising includes emphasis on soft goods, especially apparel and women's accessories. One shopper interviewed at a nearby remodeled Zayre said: ''I have definitely noticed the clothes. They're better quality.''
This east-of-the-Mississippi discounter has also nearly finished fitting its stores with special kitchen, bath, and furniture shops. ''Our merchandising thrust here is to change the look of the stores, the look of the advertising, and the look of the merchandise, to keep pace with the tastes of our customers, '' Mr. Sherman said in an interview at the Zayre corporate offices here.
And consumer tastes are changing, says Mona Forman Doyle, president of Consumer Network, a Philadelphia-based research group. ''There is an overwhelming amount of quality consciousness now - from blue-collar and white-collar workers.''
In the eyes of discounters, and the securities analysts who follow them, an image of quality is the best protection from recession the industry can get. ''If a discounter is still in business, he's remodeling,'' states Fred Wintzer, first vice-president for Lehman Brothers Kuhn Loeb Inc.
At G. C. Murphy Company, a 430-store retail chain with stores in Ohio and the mid-Atlantic states, profits took a dive last year. But the brightest star for the company, its 111-store Murphy Mart discount chain, saw sales sparkle through Oct. 31 at $370 million - up 10.7 percent from the first three quarters of last year.
Like Zayre stores, Murphy Marts are getting a face lift. Divider walls and smaller racks and displays give the stores ''a shop-type atmosphere,'' says company spokesman Edwin Davis. By the end of this year, about 40 stores will have been remodeled and refitted with more brand names.
G. C. Murphy's main line of business is variety stores. But ''we are closing variety stores and opening more Marts,'' says Murphy treasurer Gerald Prado.
At K mart, the quality image is helping the company stay just a fraction ahead this year, according to spokeswoman Susan McKelvey. Through the third quarter, sales were up a modest 1.6 percent over last year.
''No longer is price the only issue,'' Ms. McKelvey says. The issues, apparently, are designer and brand name apparel, new fixtures and floor layout.
By the end of last year, K mart had remodeled 460 stores and opened 171 others. ''But we are slowing down and concentrating on existing stores and their apparel departments,'' Ms. McKelvey explained. Because the profit margin is so much higher in apparel and the line is a big earnings contributor, it is getting more attention.
But apparel is a problem area for K mart, according to a recent Bear, Stearns & Co. report on the company. ''Manufacturers prefer not to sell to K mart, knowing the company is a price-cutter.''
A step above the K mart-type stores are ''upscale'' discounters such as Target Stores, Venture Stores, and Caldor Inc. These are branches of department store chains, and carry mostly name and designer brands, but are still priced competitively.
Upscale discounters benefit during a recession because ''their products have enough quality and are priced low enough to win department store shoppers,'' says Wintzer.
At Target, based in Minneapolis, it's as if the word ''recession'' were never heard. Sixteen new stores were added to the list of 149 this year. Next year there will be 40 more - most of them in California, where Target recently secured the real estate of the now out-of-business FedMart chain.
Brand names, computerized inventory control, and aggressive cost control have helped Target sales surge 18 percent for the first three quarters of this year, says George Hite, company spokesman.
There is one discounter, however, that isn't extensively remodeling and doesn't quite fit the upscale category, but is still ''the hottest discount retailer around,'' in the words of Ray Cowen, an analyst with the Value Line Investment Survey.
''Quarter after quarter, Wal-Mart Stores increase their sales in each store, '' Mr. Cowen says. For the first 10 months of this year, same-store sales (not including new stores) are up 11 percent, says David Glass, chief financial officer of Wal-Mart Stores Inc., based in Bentonville, Ark.Sixty-six new Wal-Marts popped up this year; 80 more are on the way.
According to analysts, it's management that makes the difference. The company sets up stores within a 455-mile radius from distribution centers. ''This lets them restock quickly,'' Cowen said. It also ''sticks to towns with 25,000 people or less.'' And it prices competitively, even below K mart.
These reasons aside, David Glass says Wal-Mart's success comes from ''constant attention to improving the store's appearance, merchandise mix, and management. It requires low resistance to change.'' Discount retailers ring up more sales in more stores Sales: Stores: 1982... $72.6 billion* 1982... 8,282 1981... $66.6 billion 1981... 8,164 1980... $60.5 billion 1980... 7,736 Source: Discount Store News * Discount Store News estimate