By Tom Van Riper
These hot companies are thriving in the face of a weak economy.
A user-friendly site; new products like the Kindle reader and the Roku video stream player; customer service ratings that rank with the best anywhere: For Amazon.com, it all adds up to a loyal customer base that kept sales humming through the worst economic downturn since the Great Depression.
Amazon's sales rose 219% to $34.2 billion between 2006 and 2010, the most of any major retailer over that span. Consumers may still not be parting with cash that easily, but fresh products, a wide array of choices at different prices and reliable service is a pretty good formula for taking a big share of what's out there.
As the economy recovers at a maddeningly slow pace, March retail sales numbers show a pretty tight dichotomy: discounters like Costco and high-end chains like Saks are doing well; middle-ground chains like Macy's and J. C. Penney and Gap are mostly flat.
Analysts point to this year's late Easter as a catalyst for shifting more March sales into April. But with unemployment still high at 8.8% and gas prices climbing, this spring's moderate rebound from the disasters of 2009 and 2010 isn't looking very broad based. Currently, about 50% of all retail purchases are made by 10% of all shoppers, notes Howard Davidowitz, president of Davidowitz & Associates, a New York-based retail consultant and investment bank. The historical norm is closer to 30% of purchases coming from the upper 10%.
"Those invested in the capital markets are doing great right now. That's what's driving retail," says Davidowitz. But while a Dow that's up 28% since last summer is helping investors, the mass consumer market is still licking its wounds from its housing-driven loss of wealth. So expect a sluggish retail landscape for a while longer.
But there are always exceptions, like Rue21, which places second on our list of the fastest-growing retailers. Since coming out of bankruptcy in 2003, the apparel chain has found success selling denim and hoodies at its outlet locations, undercutting Gap and other chains on price. After opening about 200 stores in the past two years, Rue21 now operates more than 600 locations in 44 states. Sales rose 181% from 2006 to 2010.
In third place: Chipotle Mexican Grill, which grew sales 123% over the same four-year span by catering to time-conscious and cost-conscious consumers with consistently fresh food and a restaurant atmosphere that's a cut above the usual fast food joint.
Right behind Chipotle is appliance and electronics chain HH Gregg, which grew its sales revenue 121% thanks in part to taking over a number of former Circuit City stores. However, Davidowitz has his doubts about whether HH Gregg can maintain such strong growth in the face of stiff competition from the likes of Best Buy and Wal-Mart.
One smaller chain on our list that he does like: ninth-place Ulta Salon, Cosmetics and Fragrance, a Bolingbrook, Ill.-based chain that's grown sales 92.7% since 2006 by selling its beauty products at appealing prices in low-cost strip centers. In a way, Ulta's growth is the mirror image of the performance of struggling department stores, which typically showcase the cosmetics counter out front. Moving the counter out of the big store, in effect, and setting it up as a standalone on cheaper real estate has been a winning formula for Ulta, at least during the rough economy of the past four years. "It's a good business, really a good concept right now," says Davidowitz.
In Pictures: The 10 Fastest-Growing Retailers
While the retail world continues to battle the effects of a lackluster economy, some have found ways to grow sales enormously over the past few years. These 10 led all major chains in revenue growth between 2006 and 2010.
2010 Revenue: $34.2 billion
Four-year growth: 219%
Compared to Amazon, traditional brick and mortar retailers are still in catch-up mode online.
2010 Revenue: $634.7 million
Four-year growth: 181%
The teen-centric retailer has opened approximately 200 stores since early 2009, and now has 638 units in 44 states. After emerging from bankruptcy in 2003, Rue21 found success in outlet stores with apparel priced below Gap and other big chains.
2010 Revenue: $1.8 billion
Four-year growth: 123%
Food that's consistently fresh, a bonus for busy consumers looking for a quick bite.
2010 Revenue: $1.9 billion
Four-year growth: 121%
The appliance and electronics chain has taken over a bunch of former Circuit City stores to fuel sales growth. Still, competition from Best Buy and Wal-Mart makes for a tough road ahead.
2010 Revenue: $613.3 million
Four-year growth: 121%
The restaurant chain has found the formula for becoming the go-to spot for sports fans looking to watch the game with beers and wings. Analysts expect the chain to keep growing--the only question is whether the fun sports bar concept proves to be a fad against a slew of potential competition.
2010 Revenue: $2.2 billion
Four-year growth: 117%
Steadily growing its content library to stay ahead of the curve and create an uphill battle for the new Dish Network-Blockbuster alliance. The biggest challenge ahead: analysts warn that the cost of content is on the way up
2010 Revenue: $513.9 million
Four-year growth: 115%
Analysts say a good menu mix combined with their own handcrafted beer gives BJ's a leg up on similar chains.
2010 Revenue: $12 billion (estimate)
Four-year growth: 94%
The cozy stores selling iPads and iPods yield $2,000 a square foot, more than double what Best Buy gets. Customer service is great--but of course Apple will need to keep innovating to keep sales humming.
2010 Revenue: $1.5 billion
Four-year growth: 92.7%
The beauty products retailer, based in Bolingbrook, Ill., recently reported 10% same-store sales growth for the 2010 fourth quarter. Analysts like the concept of essentially taking the department store cosmetics counter--always located right up front--and moving it to its own space to make it more convenient for shoppers
2010 Revenue: $620 million
Four-year growth: 86.8%
The seller of hardwood flooring lowered its profit forecast for 2011; shares are off about 25% year-to-date. But analysts like the high-margin niche the company has carved out.
