Minnesota’s largest retail companies have faced a challenging market as they continued to fight for the attention of an often-distracted consumer.
“It’s been a tough go,” particularly for traditional retailers, said Ken Perkins, president of Retail Metrics. “You’ve seen this shift where millennials are driving spending, but are really more focused on experiences.”
Many of the state’s most storied companies — who throughout the 25 years of the Star Tribune 100 have shown huge growth as consumers filled their ever-growing houses with more and more things — have had to adjust. These days, those consumers are just as likely to spend that money instead on concerts, traveling and going out to eat.
Against that backdrop, Target Corp. managed to show steady but modest growth under Chief Executive Brian Cornell in his first full year on the job. The Minneapolis-based retailer has been rallying after dealing with two major setbacks: a massive data breach in 2013 and a disastrous expansion into Canada. In 2015, the company’s revenue rose 1.6 percent to $73.8 billion. Profits rose 10 percent.
The cheap-chic retailer has been showing progress as it focuses most of its investments in its most profitable categories such as style, baby, kids and wellness.
One major hit in that realm was its limited-time designer collaboration with Lilly Pulitzer last spring that flew off the shelves in minutes. But that Black Friday-like sales event also exposed some of the weaknesses of its website, with Target.com nearly crashing from the crush of online traffic.
Last year, Target also divested itself from a number of side businesses, including selling its pharmacies to CVS Health. With that off its plate, it’s now doubling down on other initiatives such as improving its in-stock levels and overhauling its grocery department to offer more fresh and organic items.
Meanwhile, it was an up-and-down year for Richfield-based Best Buy Co., which is in the midst of a multiyear turnaround led by Chief Executive Hubert Joly.
The nation’s largest electronics retailer showed promise in the first half of 2015, recording one of its best quarters in years over the summer. But Best Buy’s momentum stalled in the second half, unable to overcome the overall malaise in the consumer electronics sector. The main problem was that manufacturers did not have many new, shiny products to inspire shoppers, such as game-changing innovations in smartphones. As a result, Best Buy ended 2015 with overall revenue down 2 percent to $39.5 million. Its profit sank 35 percent.
Still, Best Buy did better than some expected, given the industry challenges, as it gained the most bang for its buck out of products that were in the midst of an up cycle, such as appliances, 4K TVs and connected home devices.
On the whole, Target’s and Best Buy’s earnings per share were a bit higher than their peers in 2015, but their revenue was a bit lower, compared with the 119 publicly traded retailers that Retail Metrics follows, Perkins said. The average gain in revenue among those retailers in 2015 was 3.6 percent. But that number was pulled higher by Home Depot and Lowe’s, which were among the best performers as they benefited from the boom in the housing recovery.
“There really wasn’t a ton of sizable revenue gains,” Perkins added. “The top line in retail has been very, very difficult to grow.”
While they aren’t showing a lot of big growth as they did in previous decades, the firms are a critical part of the state’s economy. The 16 companies in the retail sector comprise about a third of the overall revenue and 16 percent of the profits of the Star Tribune’s 100.
The other top retailers on the list include Eden Prairie-based Supervalu, which posted a 2.7 percent increase in revenue and 26.4 percent growth in profits last year.
The company had been building a comeback in the cutthroat grocery sector, but some of that momentum has begun to stall in recent months. Its discount chain, Save-A-Lot, which had been its fastest-growing business, is now being prepared to be spun off.
And Eden Prairie-based C.H. Robinson Worldwide, the global logistics firm, had a profitable year despite flat revenue growth last year.