In pursuit of double-digit top-line growth, many retailers relentlessly
open new stores, even when doing so destroys the profitability of their
businesses. This addiction is fueled by Wall Street and a capitalist
culture that’s obsessed with growth. It’s hard to kick, primarily
because companies don’t know when or how to turn off the growth
machine—or what to replace it with. To explore the problem, the authors
studied the financial data of 37 U.S. retailers with recent sales of at
least $1 billion whose growth rate had faltered. They found that the
less successful retailers had continued to chase growth by opening new
stores far past the point of diminishing returns. By contrast, the more
successful retailers had drastically curtailed expansion and instead
relied on operational improvements at their existing stores to drive
additional sales. This allowed them to increase revenues faster than
expenses, which had a powerful positive impact on earnings. This article
lays out a framework for determining when to switch to a low-growth
strategy and how to put it into practice. If retailers execute well,
they can stay in the maturity stage of the life cycle for a very long
time, forestalling decline. [ABSTRACT FROM
AUTHOR]