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That thread runs across the vital financial signs of the Star Tribune 100, Johnston notes. Trucking giant C.H. Robinson Worldwide, which serves many of the nation’s retailers with its supply chain fulfillment services, was one of the top losers of market capitalization this year, along with Target and Tile Shop Holdings.
But several Minnesota consumer products companies are holding their own, including Polaris, which has substantial government contracts and effectively managed the supply of its rugged recreational vehicles through the economic downturn. Food companies, including General Mills and Hormel, also are showing strength, but Johnston notes that they have a mix of wholesale and retail.
“If you’re doing intermediate goods production, that’s where the action is,” he said. “The only spot that’s cursed is those dealing directly with households.”
Myles Shaver, who teaches strategic management and entrepreneurship at the University of Minnesota, noted that most of the movement of jobs and sales among Star Tribune 100 companies stemmed from mergers, acquisitions and sell-offs.
UnitedHealth Group picked up Brazil’s largest insurer and hospital company for $4.9 billion during the year. The purchase explains why the Minnetonka-based company, the nation’s largest insurance company and Minnesota’s largest firm by revenue, added 23,000 jobs during the year, accounting for nearly half of the total of all Star Tribune 100 firms.
Ecolab and Pentair also have been on buying sprees. Pentair, the water filtration manufacturer, completed a $4.9 billion deal for Tyco’s flow service unit in September 2012. Ecolab, which specializes in water treatment, sanitation and chemical services for the hospitality industry, in March completed its third acquisition in 16 months.
The moves boosted Ecolab’s market value by $7.5 billion, and Pentair’s by $3.8 billion. Those two companies also had the largest net profit gains during the year.
Still, the struggle in the retail space “is really swinging things,” Shaver said, though that’s to be expected as the companies slim down, refocus and attempt to turn around their fortunes.
“If one wants to put a little optimistic spin on it … if you look at the market valuations of Best Buy and Supervalu, they’ve stabilized or recovered over the year,” Shaver said. “So it’s not like they’re in a free-fall. These were big moves they had to make that might be paying off.”
But that old catch phrase about a “new normal” remains on the minds of economists. Consumers’ free-spending days have yet to return, and an aging population isn’t inclined to shop for the high-margin household goods that drive retailers’ bottom lines. Meanwhile the younger generation is putting off homeownership, marriage and starting a family.
The demographic shifts suggest that trends in consumer spending, which powers nearly three-quarters of the U.S. economy, are bigger than the recent economic downturn. And potentially longer-lasting.
“So, is this going to ripple down or is this a fundamental shift?”, asked Johnston. “Is the amount of production going to consumers actually going to fall? There’s nothing wrong with that, but it would be a reversal of about a 70-year trend.”
Jackie Crosby • 612-673-7335