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Can You Guess the Most-Hated Company in Retail? (Hint: It's Not Wal-Mart)

By Rich Duprey – Mar 13, 2016 at 7:42AM

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Although the king of retail comes in for a lot of criticism, there's another retailer -- a clothing store aimed at the younger generation -- that's leaving customers wanting more.

Wal-Mart may not be liked by large swaths of consumers, but there was one company that customers liked even less in a recent survey. 

There are few retailers that consumers love to hate more than Wal-Mart (WMT 0.56%). From its gargantuan size to its employees being unwilling or unable to provide assistance, the shopping experience at the world's biggest retailer is rarely pleasant and anything but satisfying.

A peasant uprising
It's made attempts to mollify critics who say it treats its employees poorly by giving them raises, but the effort offers no guarantee in payoff for the consumer. Wal-Mart hopes that by paying employees more it will boost morale, which will trickle down into more helpful, less surly customer service representatives, but even when it announced the initiative it noted it was looking long term. Such changes in attitude and ability don't come easily or quickly.

And that shows up in its financial reports as sales growth stagnates and consumers look for better shopping experiences, even if it means paying a little more.

Wal-Mart competitor Target (TGT 2.87%) had surprisingly strong numbers in the fourth quarter of 2015 and was able to record positive same-store sales growth in all four quarters of last year. It's also apparently spilling over into the online channel as well since Target reported digital sales grew 34% last period whereas Wal-Mart said its e-commerce business grew just 12%.

And those wage raises caused Wal-Mart's profits to tumble, too. Now it's closing hundreds of stores as it exits the small-format store business.

Saving money isn't everything
The low esteem the retailer is held in by shoppers also surfaces in any number of consumer surveys and polls where the supposed king of retail is ranked at or near the bottom in reputation.

The latest blow comes from the American Customer Satisfaction Index, which finds that Wal-Mart is ranked dead last among department and discount stores with a dismal 66 rating. Heck, even Sears Holdings (SHLDQ) ranks higher, and one survey indicates women would rather shop at used clothing stores than at its stores!

Every year ACSI polls the opinion of more than 70,000 consumers on how satisfied they are with more than 300 companies in 43 industries and 10 economic sectors. Based on the responses, ASCI assigns a score to the companies of between 100 and -100.

So Wal-Mart's ranking is pretty poor, but it might come as a surprise that across all of retail, there's actually a company that is held in even lower regard on the customer satisfaction survey than the shopping giant.

We know it isn't Sears (it actually scored a 71 on the index), and Kmart got a 76 rating, so that rules it out, too. Other retailers that recorded rough years last year like Best Buy and Kohl's scored better, too, as did online retailers like

Customers were more likely to be dissatisfied with Abercrombie & Fitch than any other retailer in the entire industry, but recent results indicate that may be about to change.

A model of rectitude once more?
No, the worst-rated retailer of any business ACSI surveyed consumers about, was none other than Abercrombie & Fitch (ANF 0.93%), which was only able to generate a score of 65.

Last quarter's performance notwithstanding, the results of the customer satisfaction survey reflect just how poor the teen retailer's operations have been.

Abercrombie was late to realize that consumer preference had shifted away from heavily logoed apparel, dark stores with shirtless models preening at the entrance, and endless boorish advertising.

Instead customers had switched to fast-fashion as exemplified by H&M, Forever 21, and Zara, and though it took some time Abercrombie did finally see the light. It jettisoned its logoed clothing, remodeled its stores, and offered more mature advertising. Abercrombie also converted its Hollister brand into a fast-fashion house, and more lately did the same with its name brand stores, too.

But it took a long time for the makeover to gain traction and its financial results were weighed down by a promotional retail environment brought on by a cautious consumer.

In the fourth quarter of 2015, however, it seems the changes are finally resonating with the consumer. Comparable-store sales were positive for the first time in three years, and bucking the trend of heavy discounting, it held the line on prices and enjoyed a surge in profits, which jumped 30% in the quarter to $57.7 million.

That bodes well for Abercrombie & Fitch in next year's customer satisfaction surveys, though its namesake brand remains troubled. Comps were still negative at Abercrombie, down 2% in the quarter and 6% for the year, compared to a 4% increase at Hollister for the fourth quarter and flat for the year.

Yet with Abercrombie's numbers moving in the right direction, it indicates the specialty retailer may also be on the path to redemption with consumers, suggesting Wal-Mart may once again be the sole basement occupant in customer satisfaction.

Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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