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Majap Chains Post Sizable Gains For ’98

Despite a stepped-up competitive pace in 1998 that drove two veteran appliance/electronics retailers out of business and forced a large regional utility company to drop the major appliance category, the nation’s top appliance merchants finished last year with a sizable hike in aggregate white-goods sales.

Together, the 100 chains that make up the TWICE 1999 Major Appliance Retail Registry had a 12.8% increase in sales last year, compared to the top 100 chains’ combined sales in the revised 1998 Appliance Registry. That double-digit increase pushed the total Registry sales volume above the $12 billion mark for the first time – to $12.322 billion, to be exact, up from the $10.927 billion in sales achieved by the retailers on last year’s Appliance Registry.

Overall, the appliance industry’s top 100 retailers generated total 1998 sales of roughly $1.4 billion more than their combined 1997 volume. These 100 chains produced those sales through 6,658 retail locations last year – 11.5% more storefronts than the 5,973 units they operated in 1997.

A look at the performance of the retailers heading the Registry listing – the top 10 appliance chains – shows that much of last year’s increased volume came from sales gains by the largest players. Another contributing factor in the double-digit increase was strong growth in ’98 in the home-improvement segment of the white-goods market, spurred by Home Depot’s broadening of its major appliance test program.

Because of significant gains by the Lowe’s home-center chain, which jumped from fifth to third place on the 1999 Appliance Registry, and the first-time appearance of Home Depot (in sixth position) on TWICE’s Registry, this year’s listing shows some significant changes in ranking among the top 10 chains.

Perennial Appliance Registry leader Sears once again retains the lead position, with 1998 white-goods sales of $5.1 billion, up 7.4% from its $4.75-billion appliance volume in 1997; Sears slowed its store-expansion pace last year, adding just 10 locations that sell appliances for a total of 850 at year-end ‘98. While mega-retailer Sears continued to dominate the appliance category last year, its share of the top 100 chains’ aggregate sales slipped slightly to 41.4% of the 1999 Appliance Registry’s total volume, down from the 43.8% share published in last year’s Registry.

Circuit City remains in second place on TWICE’s Appliance Registry for the third consecutive year; its nearly $1.4-billion 1998 appliance volume – up 15.9% over the previous year’s white-goods sales – edged its share up to 11.3% of the 1999 Registry’s total.

With a 1998 appliance volume of $860 million – up a whopping 40.8% – through 484 locations, Lowe’s leapfrogged over Best Buy to seize the number-three spot on the 1999 Appliance Registry. That came despite Best Buy’s 13.1% increase in white-goods sales to $855 million, through 311 retail locations.

And Montgomery Ward continued to lose ground, dropping one more notch to fifth position on this year’s Registry after its 1998 appliance sales skidded 11.2% to $572 million _ the only drop in volume among the top 10 appliance retailers. Montgomery Ward closed another nine stores last year after shuttering more than 100 units in 1997; its total store count at year-end ’98 was 291.

Home-improvement giant Home Depot makes its first appearance on the TWICE Appliance Registry in sixth place this year, after broadening its white-goods offering during 1998 from a few units sold through its kitchen remodeling operation to a full appliance offering in 715 of its home centers. Home Depot did an estimated $429 million in major appliance sales last year.

Because of Home Depot’s entry onto the 1999 Appliance Registry, veteran appliance/electronics specialists P.C. Richard & Son and ABC Warehouse each dropped down a notch, to seventh and eighth places, respectively. P.C. Richard did $265 million in appliance sales last year, an 8.2% increase over its 1997 sales in the category, while ABC Warehouse’s white-goods volume climbed 8% to $216 million.

Wal-Mart’s Sam’s Club operation is another addition to the 1999 Appliance Registry, arriving in ninth position with $147.4 million in white-goods sales through 450 warehouse clubs. Heilig-Meyers – down two places from last year – rounds out the top 10 with 1998 appliance sales of $141.1 million, having achieved a 6.6% increase in volume despite having 15 fewer locations last year than in 1997.

Heightened competition in both appliances and electronics claimed two major retail victims during 1998, although both show up on the 1999 Appliance Registry by virtue of their partial-year sales. After operating under Chapter 11 bankruptcy protection since July 1997, Campo Electronics, Appliances & Computers – which did about $43 million in white-goods sales in 1997 – finally gave up the ghost and closed its remaining stores in October 1998; up to that point last year it had sold $36 million in appliances, earning it 31st position on the 1999 Appliance Registry.

Appliance veteran Sun TV and Appliance’s demise was much quicker; that chain, whose appliance volume was about $65 million in 1997, filed Chapter 11 in September 1998 and shut down its 55 stores shortly thereafter. The $54.6 million in white-goods Sun sold until it closed last year earned it the number 22 spot on the 1999 Registry.

Another long-time fixture in appliance sales also called it quits – in that category, at least – late last year. North Carolina utility Duke Power had sold white goods for 93 years through a store network that at its peak topped 60 units. The company finally bowed to competitive pressures and pulled out of the retail appliance business at the end of 1998, however, after doing just $6 million in appliance sales for the year; in 1997, by comparison, Duke Power had generated white-goods volume of $19 million through 54 locations statewide.

Other major chains expanded their major appliance activity during 1998. In addition to the growth in the category shown by Lowe’s, Home Depot and Sam’s Club, last year Circuit City stuck its toe into the builder appliance market via a new Builder Appliance Sales division, created following its June 1998 acquisition of Richmond, Va.-based Goldbert Co.

Kmart also began testing appliance sales late last year, offering Whirlpool-made Estate appliances in stores in the Detroit area as well as through its interactive Kmart Solutions format. Although its test volume did not qualify Kmart for a spot on the 1999 TWICE Appliance Registry, the discount giant is a candidate for next year’s listing if the trial program proves successful and is expanded.

And how did the various types of retail outlets that make up TWICE’s Appliance Registry shape up last year when measured against each other’s aggregate performance? The home improvement center segment showed the strongest increase in white-goods volume for the third consecutive year, with a huge 111% surge in appliance sales in 1998 over 1997. That market segment also had an enormous increase in the number of locations selling major appliances, with 1,199 stores offering white goods last year, up 185.5%.

In large part because of the inclusion of Sam’s Club onto the TWICE Appliance Registry, the second-strongest white-goods sales gain came from the warehouse club segment, which showed a 19.9% increase in appliance sales last year despite only a 2.9% growth in the number of stores in that segment selling appliances, to 667 locations.

Electronics/appliance operations, the traditional backbone of the white-goods business, saw their combined sales rise a healthy 10.4% last year, although the number of storefronts in this market segment actually dropped by 1.4%, to 1,695 locations. Department stores also saw a significant gain in appliance sales last year for the second year in a row: their aggregate white-goods volume rose 11.1% for the year.

The number of department stores carrying appliances rose by the same amount, to 30 locations.

The only two retail segments that did not produce double-digit sales gains in appliances last year were home furnishings stores, whose combined volume in the category went up just 1.3%, and mass merchants, whose appliance sales rose 5.1% in 1998. And if Kmart’s current appliance experiment proves to be a winner for the discount giant, the mass merchant segment could get a shot in the arm this year for the TWICE Appliance Registry in the year 2000.

The affect of Internet sales of appliances by Sears and other merchants in 1999 could also change the face of next year’s Appliance Registry – but how and how much are too early to tell.