No surprise: Top 500 sales decline

For most retailers appearing on the 2010 Annual Top 500 Retailer Scoreboard, it was a year to put in the rearview mirror. Combined total sales for the home channel were $226.0 billion in 2009, off 4.8% from last year’s tally of $237.4 billion. This year’s scoreboard is remarkable for posting only the third decline in the history of the HCN Top 500—and it’s the third decline in a row.

Optimists will be quick to point out that there have been years of lower sales—2004, for example. But 2004 was, though only a few years removed, a different world for home improvement retailers, distributors and manufacturers.

For instance, 404 companies on the 2004 list showed year-over-year increases in sales. On the current list that begins on page 26, there are only 57. ( See chart .)

At the top of the list, home center giants Home Depot and Lowe’s showed sales declines of 7.2% and 2.0%, respectively. But the companies see better days ahead. Both described 2010 as a “transitional” year—and both are seeing returns in comparable-store sales. But in the most recent conference call, Home Depot CEO Frank Blake stressed that heavy lifting remains to be done.

“So there were a number of positives for us in the quarter, but there are also signs of caution,” ative. And fixed residential investment as a percent of GDP turned south in its most recent quarter, which could be troubling, he said.

Also in the Top 10, privately held Menards based in Eau Claire, Wis., showed store growth and sales growth, relying on super-sized formats to compete with both home centers and mass merchants in the Midwest.

Menards was one of 57 companies to show a sales increase. Peek’s Carpet & Tile jumped from four to nine stores, boosting sales 61%. No. 257 Ritter at Home of Nederland, Texas, increased sales more than 50%. C-A-L Stores of Idaho Falls, Idaho, No. 108 on the list, reported that it “just had a good year,” growing sales from $56 million to $84 million.

More telling perhaps is the number of companies with negative growth. The stats from this group of 368 companies range from No. 127 Buchheit of Perryville, Mo., down 0.4%, to the 68.9% decline from Stock Building Supply.

There are 88 companies on the list that show 20% declines or higher.

Of course, Stock is a very different company than what it was in 2008. The company is several times smaller than it once was, thanks to a bankruptcy and restructuring. But it has given every indication that it is re-arming itself. In quick succession, Stock this year has acquired National Home Centers and Bison Building Holdings. And it unloaded its commercial door and hardware division to better focus on residential construction.

“As market conditions improve, we remain committed to redeploying our resources to our residential business, and this transaction furthers that goal” said Stock CEO Joe Appelmann. “Stock will continue to expand this year organically and, where smart opportunities arise, through acquisitions.”

Appelmann was one of many home channel executives who eagerly bid goodbye to 2009. (The company actually held a party to bid good riddance to the year.) The reason is clear. Housing starts smashed through the floor. In the half-century of keeping track, annual starts never fell below 1 million until 2008 skidded to 905,500 total starts. The 2009 figure was—pause for effect—554,000.

Against that backdrop, the year was an exercise in cost cutting and rethinking the retail experience. Even the good ones struggled. Consider the case of 2010 Golden Hammer Retailer of the Year Marvin’s Building Materials and Home Centers, No. 103 on the list.

“The overall slowdown has impacted our sales, just like it has for all of retail, but mostly in our LBM and new construction categories,” said Craig Cowart, president of Marvin’s. “Our merchants were challenged back in 2007 to help find ways to fill the gap in sales as demand for LBM weakened. Promotional focus and new categories have moved the dial for us in a big way, without taking focus away from our ‘core’ business.”

More than 400 companies on the Top 500 have less than 20 stores—and 345 have less than 10.

The best story coming out of the 2010 Scoreboard is that 2009 is behind us, and the race to the recovery is on.