CSG Recession Busters

Our panel of Industry Experts and authors of CSG Through The Ages, brings you this year’s series: Recession Busters

Businesses need vision, strategy, and the right leadership to find success even in a tough economy.

Using the vast CSG database of historical data and inside knowledge of each industry, our expert panelists have followed the trends for the last decade and selected the Top 10 companies in each segment that survived the recession.

Each month we reveal a top company that weathered the storm. We will examine what they did, how they did it, and where they are going in the future.

H & M is a multinational clothing company. The fast-fashion retailer opened its first U.S. store on Fifth Avenue in New York City, in March 2000. The company currently operates 270 stores in the U.S. H & M brings fashion to all ages through its 3,200 stores in 53 countries around the world. Along with trendy apparel, H & M also sells its own brand of cosmetics, accessories, footwear and home goods.

H & M stores are fun to shop at and feature house music and an ever-changing assortment of the latest trends in apparel and accessories. The retailer has the following of a designer without the high prices that go along with designer brands. They make fashion affordable to the masses. H & M is able to offer its products at a lower price point by using in-house designers, purchasing in large volumes, and choosing the right merchandise for the market. H & M does not own factories, but instead buys products from independent suppliers.

Catering to the whole family, and creating a one-stop-shop for all things fashion, has helped H & M’s popularity soar and its store count multiply. Over the past six years H & M has grown their unit count by 79%. Over the same period, the company’s annual sales have grown 118%. The last fiscal year-end sales reported for H & M were almost $2 billion.

The company’s affiliation with FOX’s former show Fashion Star boosted H & M’s following as a leader in the fashion industry. In August of 2013, H & M officially launched online shopping for U.S. customers, featuring all product lines including plus size offerings and home products, in addition to some “online exclusive” products. This move allowed consumers in unserved markets to become an H & M loyal.

Family Dollar’s recession-proof performance has been built on a platform, largely based on a well thought out merchandising plan, which began before the recent turn of the century. The company realigned its coordination of private label products with an expanding palette of national brands. The retailer then embarked on a campaign to greatly expand its offerings of perishable groceries.

This of course required a great investment, as the company had to install refrigerators and freezers, in at the time over 5,000 stores, while creating new supply lines for its growing variety of grocery offerings. These new product categories also changed the dynamics for the planning of new store locations. Now nearby food stores had to be considered in the equation for judging the viability of new locations. Of course, the ‘wealth’ of the many ‘food store deserts’ which sprawled across the country, easily added to the number of communities seen as likely beneficiaries of Family Dollar’s new grocery concept.

Somewhat ironically, the recession’s stunning economic conditions are some of the chief reasons Family Dollar has grown so aggressively during the recession itself. Not only did residents of lower socio-economic classes find themselves relying on Family Dollar’s attractive low price points, many denizens of the middle and even upper classes found themselves enjoying the lower-priced shopping experience offered by Family Dollar. At this time, few were not subject to the sudden loss of a job or the threat of such hanging over one’s head.

Family Dollar also was able to take full advantage of harsh recessionary conditions to eagerly scoop up parcels of real estate at suddenly bargain prices. Often these new locations opened in neighborhoods which were most in need of the retailer’s diverse offerings at recession busting prices. In many areas, new store openings offered cash strapped shoppers much of what they needed for their daily lives, with the added benefit of little to no commute in terms of cost or time. At the same time many local consumers saw relatives and family members take advantage of local employment opportunities. This not only provided area families with the means to shop and eat, it also served as a bond of loyalty between shoppers and the retailer.

At the start of the recession, in late 2007, Family Dollar was operating just over 6,400 stores. Today the company owns well over 8,000. During this period, the company’s weakest year for growth saw Family Dollar expand by 55 locations. That was during the first year of the recession. The next year the company netted an additional 230 locations and there was no looking back. Last year, Family Dollar netted 474 additional locations and is currently on track to reach this year’s goal of 500.

The company added cigarettes to its product lineup relatively recently. As cigarette taxes and prices continue to climb, this can only benefit a discount oriented purveyor. If Walgreens follows the CVS lead and drops tobacco, ubiquitous discounters such as Family Dollar stand to gain mightily.

Recently, Family Dollar fired its President, COO Michael Bloom. This move is expected to lead to a partial overhaul of the company’s merchandising scheme. Despite the company’s dynamic recessionary growth, strong companies don’t rest on their laurels. Recently rumors have surfaced of a possible acquisition offer from Walmart.

Hi-School Pharmacy Services LLC headquartered in Vancouver WA, has had an impressive growth rate in both sales and store count over the past six years. Dealing with difficult economic conditions, the company more than doubled its store count, growing it by 150% over the past six years and now has a total of 25 locations. Thanks in part to that rapid expansion, sales grew 56% over the same six year period.

Hi-School Pharmacy’s original store opened nearly 90 years ago in 1925 across the street from Vancouver High School on Main Street, Vancouver Washington. In 1939 two brothers, Ken and Matt Zapp, opened a pharmacy in an old Safeway building adjoining the store which then doubled the size and increased the amount of merchandise offered. The store became known as the place to have prescriptions filled. After several ownership changes, the company began to expand in the 1970’s and made a key strategic decision to bring Ace Hardware into many of the stores in the 1980’s creating a one-stop shop destination. There was a period of growth in the mid through late 1990’s and then decline in the early 2000’s, but the chain has since experienced an impressive resurgence over the past several years.

Hi-School Pharmacy looks to keep growing with its combination hardware/drugstore model. The company attributes its recent success to committed high quality, courteous customer service. The brand represents caring people, quality merchandise at competitive prices and above all customer satisfaction.

Sprouts Farmers Market has been one of the true success stories in the supermarket industry. Through organic store openings and acquisitions, Sprouts has experienced phenomenal growth over the past six years with no signs of slowing down. In 2013, the company went public with an IPO, and within the first day of trading its stock price had doubled the IPO price. Sprouts today is valued today at more than $5 billion. The company’s unit count has grown an astounding 351% since 2008, while sales have grown more impressively 421% over the same time. Most of the company growth can be attributed to acquisition, namely the 2011 merger with 43 Henry’s and Sun Harvest stores and the 2012 purchase of the 37-unit Sunflower chain. However, the combined companies of Sprouts, Henry’s and Sunflower opened an average of 17 stores per year from fiscal 2008 through fiscal 2013. The stores focus heavily on healthy and natural living, with large produce bins and bulk foods than resemble farmers markets. Traditional supermarket departments including dairy, frozen, deli and bakery are also in most stores.

Sprouts has a very aggressive growth strategy for the near future. It is expected to open between 22 and 24 new stores in fiscal 2014 while netting 16% to 18% sales growth. Based on outside research, the company sees potential for nearly 1,200 locations under its current operating format in the United States. Its most recent fiscal data reported 27 consecutive quarters of positive same store sales comps and a 22% increase in net sales from fiscal 2012. Along with Whole Foods, Sprouts is capturing significant market share from conventional supermarkets while operating as a ‘natural and organic’ food retailing. With an increased consumer focus on health and wellness combined with a desire to find value and a unique retail shopping experience, Sprouts is positioned well to continue its strong growth in the supermarket industry.

One of the fastest growing concepts in the foodservice industry over the past six years is Smashburger, a Denver-based hamburger chain that takes its name from its cooking process of smashing a ball of meat and grilling it on a hot griddle. Similar to its bigger competitor, Five Guys Burgers and Fries, burgers are made to order to the customers’ specifications with a choice of multiple toppings. Unlike Five Guys, Smashburger offers chicken sandwiches and salads. The company also creates regional burgers, featuring localized favorite flavors, such as the Twin Cities smashburger developed for the Minneapolis market with melted Cheddar bar cheese, Swiss cheese, and garlic-grilled onions or the Sin City smashburger in Las Vegas topped with a fried egg, applewood smoked bacon, American cheese, grilled onions, and haystack onions on an egg bun.

Operating just 10 locations six years ago, the company now has more than 250 locations in 30 states and four international markets. Unlike many rapidly growing chains, growth for Smashburger has and will be accomplished through a combination of recruiting experienced multi-unit franchisees as well as continuing to develop company-owned and company-operated restaurants. The company was recently named to the Top 10 of Forbes List of America’s Most Promising Companies and is aiming to have 500 locations within the next few years.