Liz Claiborne Tops Forbes’ List of Most Profitable in 1980s
Liz Claiborne Inc., a top women’s apparel maker, was the most profitable public firm in the United States during the 1980s, according to a survey by Forbes magazine.
Liz Claiborne had an average 51.8% return on equity during the nine years since it went public, placing it ahead of the second most profitable firm, Rollins Inc., a pest control and alarm system firm, which had an average return on equity of 47.2%, Forbes said in its issue dated Jan. 8.
In compiling its rankings, Forbes said it considered only firms for which at least eight years of financial data was available. The magazine said it evaluated 1,150 U.S. companies in 20 industries.
To be considered for Forbes’ rankings, a company must have had revenue of at least $400 million, or in the case of banks and electric utilities, $800 million. Biotechnology firms do not have to meet the minimum revenue requirement.
Return on equity is a measure of corporate profitability expressed as a percentage of a company’s net worth.
Forbes ranked Price Co., a San Diego wholesaler, third with an average return of 40.5%, and the apparel retailer Limited Inc. was No. 4 with an average return of 39.9%. Commerce Clearing House Inc., a publisher, ranked fifth with a 39.7% return.
Cereal maker Kellogg Co. was No. 6 with a return of 38.9%, General Motors Corp.'s EDS subsidiary ranked seventh with a return of 37.9%, Highland Superstores Inc. was eighth with 37.3%, Student Loan Marketing Assn. was listed ninth with 37.1%, and Apple Computer Inc. of Cupertino, Calif., ranked 10th with 36.6%.
Other California companies making the list included: Pic ‘N’ Save of Los Angeles, ranked 13th with a return on equity of 35.2% over the 10-year period and 20.9% during the latest 12-month period; Syntex of Palo Alto, No. 28 with 31.2% and 47.9%; Woodland Hills-based 20th Century Industries, No. 39 with 29.5% and 34.9%, and Columbia S&L; of Beverly Hills, No. 47 with 28.4%--but a minus 44.8% in the latest 12 months.
The median return on equity for the entire survey was 14.3%, Forbes said.
Forbes noted that a company’s average return on equity during the decade may not necessarily be a good indicator of how well the company has fared most recently. For example, Apple Computer had a 36.6% average return during the decade, but in the past 12 months has enjoyed a return of 43.2%.
The magazine also pointed out that special dividends paid out during a corporate restructuring could distort a firm’s results.
The most profitable industry group during the 1980s was the health industry, Forbes said. The 39 companies that compose the industry, according to the magazine’s rankings, had a median average return on equity of 18.7%.
The food, drink and tobacco industry was second, with a median average return of 18.4%; No. 3 was entertainment and information, with a return of 17.3%; business services and supplies was fourth with 16.7%, and retailing ranked fifth with 16.7%.
The No. 6 industry was aerospace and defense, with a return of 15.7%; consumer nondurables ranked seventh with 15.2%; No. 8 was chemicals with 15%; insurance was ninth with 14.4%, and financial services was 10th with 14.3%.
No. 1 Liz Claiborne is based in New York, the home city for the most industry group leaders in the Forbes rankings. Other industry group leaders included Exxon Corp. among international oil firms, Bankers Trust Co. among multinational banking companies, CBS Inc. in the broadcasting industry, Wal-Mart Stores Inc. among retailers and Calabasas-based Lockheed Corp. among aerospace and defense firms.
While looking back over the 1980s, Forbes also looked ahead to the 1990s and selected 20 firms that it said were best positioned for the coming decade. They were Boeing Co., Kelly Services Inc., Emerson Electric Co., Dow Chemical Co., Apple Computer, Ryland Group Inc., General Motors, Johnson & Johnson, PacifiCorp, Consolidated Natural Gas Co., Walt Disney Co., BankAmerica Corp., Sysco Corp., International Paper Co., Humana Inc., Geico Corp., Lafarge Corp., Wal-Mart, Norfolk Southern Corp. and AMR Corp.