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Ten “Healthiest” Retailers

9/1/2010

For the second consecutive year,

The study, by Consensus Advisors, a Boston-based boutique investment firm specializing in retail, tracked four components over a five-year period: sales growth, asset utilization, pricing power and the strength of the company’s balance sheet. It examined various factors within each individual component, including gross margin volatility, sales volatility, growth momentum and inventory productivity.

Overall Top 10

Here are the retailers that had the healthiest financial rankings, according to Consensus Advisors: 1. Amazon.com 2. Aeropostale 3. Urban Outfitters 4. CVS/pharmacy 5. Walmart 6. Bed Bath & Beyond 7. Coach 8. Buckle 9. Guess 10. lululemon athletica

The ratings are focused on long-term business-building competency—with an emphasis on the long term. Retail pundits and executives have expressed growing frustration that too much emphasis is placed on same-store sales—by nature, a short-term metric—as a measure of a chain’s overall health. Consensus Advisors agrees and offers its ratings to provide context to same-store sales data on nearly 160 publicly traded U.S. retailers. According to the firm, comp-store sales suffer from calendar shifts and prior-period sensitivity, and can mask unhealthy margins, inventory levels and advertising spend, and lack balance sheet/leverage context.

“In light of the significant trauma to the economy over the past 18 months, it is more important than ever to study retailer health comprehensively rather than relying on potentially misleading comp-store sales growth statistics,” said Doug Stebbins, managing director, Consensus Advisors.

The retailers that topped the overall list run the gamut in size, and range from the nation’s largest retailer to a specialty niche-apparel upstart.

“Our highest rated company, Amazon.com , has exploited the increasing availability of broadband Internet and mobile technology to build a fast-growing and highly efficient retailing super-power,” said Michael O’Hara, CEO of Consensus Advisors. “Other financially strong businesses in the RHR Top Ten, like Aeropostale, Coach, Guess and Lululemon, have used the exclusivity of their increasingly powerful, vertically integrated brands to navigate the macroeconomic trauma of the last 18 months by taking market share from their competitors, maintaining margins and inventory turns, and avoiding debt.”

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