Hot 100 Retailers

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Click on chart to see a sortable list of the Hot 100 Retailers.
 
Hot retailers come in three general varieties: those that grow via acquisitions, those that open a lot of new stores and those that boost sales by increasing productivity in existing units.

Seven of the first 10 companies in STORES’ annual Hot 100 Retailers chart fall into the growth-by-acquisition category, including chart-topper DineEquity. It ranked third on last year’s Hot 100 Retailers chart when it was still known as IHOP, benefiting from a few months of combined sales after acquiring the much larger Applebee’s. As planned, company-owned Applebee’s locations are being sold off to franchisees to raise cash to pay down debt and to make the Applebee’s chain similar in operation to IHOP. With a full year as a merged entity, sales have more than tripled even as restaurants have been one of the more depressed segments of the economy.

A similar story applies to Wendy’s/Arby’s. Wendy’s was wobbling and looking to be sold last fall when financier Norman Peltz cobbled together a deal in which Arby’s parent Triarc spent about $2 billion to take over Wendy’s. By the time the fiscal year was over, it was the Arby’s chain that was a drag on earnings, as Wendy’s showed surprising strength with its value menu.

Susser Holdings benefited from its 2007 purchase of 168 Town & Country Food Stores and Village Market grocery stores in west Texas and eastern New Mexico, for which it paid $356 million. Susser’s 348 other c-stores carry the Stripes brand and its fuel centers fly a number of different banners, though about two-thirds use Valero.

Supermarket operators have rarely ranked very high in the four years of the Hot 100, but A&P is there this year by virtue of its purchase of Pathmark Stores, another New Jersey-based grocer. The combined company closed some redundant and underperforming locations and posted a $140 million loss for the year. Core A&P units performed well, but the Pathmark locations and price-impact Food Basics units were a drag on earnings.

O’Reilly Automotive took a major step toward becoming a national player with its acquisition of CSK stores. Springfield, Mo.-based O’Reilly recently announced it would build a new distribution center in Colorado to supplement support for stores in 11 western states where it previously had no presence. Of the 1,342 stores it acquired, O’Reilly has either consolidated or closed 41 of the former CSK units and is hanging the O’Reilly nameplate on the rest, a transformation scheduled to be completed by 2011.

Ordinarily, a retailer posting same-store sales declines of 11 percent in a year when gross margin decreased 6.2 percent would not be anywhere near the top of the Hot 100 Retailers chart, but then Finlay Enterprises is not a conventional operator. Total company sales were $754.8 million in 2008, up 5.2 percent from the previous year. The majority of those sales were in leased departments at stores operated by Macy’s, The Bon-Ton Stores, Gottschalks and Lord & Taylor.

Licensed jewelry department sales are not included in Hot 100 Retailer compilations, but Finlay also operates 108 freestanding specialty jewelry stores under the Bailey Banks & Biddle, Carlyle and Congress flags. So with its retail sales in department stores removed from the equation, Finlay’s specialty stores showed a sales increase of 38.4 percent, earning it the No. 8 position on the Hot 100 Retailers list.

The Pantry, which describes itself as “the leading independently operated convenience store chain” in the Southeast, continues to grow in bits and pieces, usually by buying out smaller companies with a few dozen locations. Typical of The Pantry’s modus operandi, the company recently closed a deal to buy 38 c-stores from Herndon Oil. The locations, which generate annual revenues of about $152 million, are clustered in the Mobile, Ala., area but extend along the Gulf Coast to Louisiana, Mississippi and Florida.

Ongoing changes to the qualifications for Hot 100 consideration have impacted the rankings – and in some cases, led to the exclusion – of a number of companies. In addition to being publicly traded, Hot 100 Retailers:

• Must generate at least $300 million a year in total revenues, up from $100 million the past three years.

• Can be subsidiaries or divisions of publicly-held companies engaged in telecommunications, consumer electronics, paint or apparel. Vitamin and dietary supplement manufacturers with retail outlets appear on the chart as integrated operations represented by total revenues.

• Can be U.S. subsidiaries of a publicly-held overseas company, like Ahold USA (Stop & Shop, Giant Food), Delhaize America (Food Lion, Bloom, Sweetbay) or Delek US Holdings, which sells fuel and operates c-stores.