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Keeping Our Finger On The Pulse Of The Retail Industry

Retailers Report Mixed Results for July

Same-Store Sales Up 2.9%

Department stores and discounters in the U.S. generally reported solid July sales, but apparel stores suffered from a slow start to the back-to-school shopping season.  Retail Metrics' same-store sales index averaged a gain of 2.9% in July, just beating the research firm's estimate of up 2.8%, but missed forecasts when excluding Wal-Mart and a boost from drug store sales.

Due to the very hot weather and shoppers timing their purchases based on tax holidays and other factors, analysts were not very optimistic for the retailers in July.  Tax-free sales weeks were shifted to August in two significant states, Florida and Texas.  The sales for the first week of August, a key back-to-school week, were reported in the July period this year, which helped July figures but will most likely reduce sales for August.

“In the most recent period retailers continued to focus on clearing summer goods and bringing in back-to-school merchandise,” said Redbook analyst Catlin Levis.  “Core consumer goods such as food and household supplies continued to drive sales at discount stores.  Moreover, retailers in 14 states and the District of Columbia are gearing up for the tax holidays in August, where back-to-school items will be able to be purchased without paying sales taxes.”

Wal-Mart stores said same-store sales rose 1.9% in July after it cut prices on back-to-school items to drive shoppers into its stores.  This increase was better than expected. Target saw its same-store sales rise 10.8%, above Wall Street’s 9.8% forecast.

Macy’s same-store sales fell 1.4% in July, while analysts expected a 1.5% drop.  Dillard’s Inc. said same-store sales dropped 6% during the month, hurt by weak sales of juniors and children’s apparel.

In the high-end market, Nordstrom Inc. reported same-store sales increased 9.4% in July, beating analysts’ expectations of a 4.2% gain.  Meanwhile, Saks Inc., said same-store sales rose 14.9%, a bigger rise than the 10.7% expected.

Teen retailers continue to have a tough time during the summer months, many of which have experienced very disappointing sales in July.  Hot Topic posted a 7.4% drop. American Eagle Outfitters, which reported a 6.4% drop, said in a statement, that its poor results were “largely due to later back-to-school starts across the country, as well as Florida and Texas moving tax-free events from July to fiscal August.”

“Despite the slight dip in the final week of the fiscal month, the overall pace of July sales was the strongest monthly growth since March 2007,” said Mike Niemira, chief economist at ICSC who compiles the index. 

The Top 100 Retailers of 2006

The July 2007 edition of NRF Stores featured the banner article “Top 100 Retailers: The Nation’s Retail Power Players”. This years rankings were sponsored by SAP. As the authoritative ranking of the largest U.S.-based retail companies by annual revenues, the Top 100 is the most widely recognized and respected symbol of achievement for the nation’s elite retailers.

The top retailer in each retail sector, along with their ranking, are listed below:

We have listed the first 10 companies from the complete list of the Top 100. To view the complete list, Click Here, or go to: http://www.hartsystems.com/cgi-bin/news.cgi?id=42 

Back to School Spending to top $18 Billion This Year

Families to Spend Almost 7% More than Last Year

According to the National Retail Federation’s 2007 Consumer Intentions and Actions Back-to-School survey, families with school-age children are expected to spend $563.49 on back-to-school merchandise, up 6.9% from last year’s $527.08 average.  Total back-to-school spending is expected to reach $18.4 billion.

According to the survey, the electronics category will see the biggest increase in sales this year, with families spending 13% more on electronics than last year ($129.24 vs. $114.38).  Footwear will also see a higher-than-average sales increase, with sales expected to rise 10.3% over last year ($108.42 vs. $98.34).  Families are also expected to spend $94.02 on school supplies, up from $86.22 a year ago.

Though the majority of shoppers will be purchasing clothing and accessories this year (95.4%), spending in that category is expected to be flat, with consumers spending an average of $231.80 on those purchases, similar to last year’s $228.14.  Clothing and accessories remains the largest spending category at $7.6 billion.

Though discounters will remain the most popular destination for back-to-school shopping, fewer consumers plan to hit mass merchants this year, with 67.7% of parents planning to shop at discount stores compared with 72.2% last year.  All other categories are expected to see traffic increase, as consumers will be shopping more at office supply stores (41.4% vs. 35.8% last year), drug stores (17.9% vs. 16.3%),  department stores (54.9% vs. 53.3%) and specialty stores (31.6% vs. 30.9%).

Teens Splurge in Back-To-School Luxury

As tweens and teens become increasingly savvy about fashion, they’re asking for luxury products, such as $200 designer handbags and $100-plus jeans… according to a recent report by Mae Anderson of the Associated Press which was published on Forbes.com.

Mid-tier and discount retailers have been facing pressure this year, as consumers cut down on extra expenses to battle rising gas prices and a sagging housing market. 

Meanwhile, the luxury market is booming.  Sales worldwide topped $150 billion last year.  Teens are playing an increasing part in that, according to experts, as Web sites, tabloids and TV shows detailing celebrities and fashion make kids more aware and demanding for luxury goods than ever before.  “They’re prime candidates for luxury,” said Gerald Celente, publisher of Trends Journal.  “Their world is the entertainment world and that’s what they’re focused into.”

Bloomingdales’ fashion director Stephanie Solomon said this year, teen shoppers at the department stores nationwide are clamoring after $300 Chanel sunglasses, designer handbags by Marc Jacobs, Chanel and Chloe – which can cost between $900 and $1,250 and $200 to $300 Tory Burch shoes.  “It’s really about the accessories,” she said.  “The fact that you can wear sunglasses everyday and carry the same handbag every day justifies the expense.”

Where parents put their foot down depends on their income, said Klaris.  And while a wardrobe of Prada might be too much for a parent to handle, they might be more willing to spend on accessories, she said.

Best Practices — It’s Good to be GREEN

As detailed in Smartreply.com’s white paper, today’s consumers are committed to preserving the environment — so much so that they are willing to shift their purchase decisions and brand loyalties toward green retailers.

Discussion of environmental issues has increased so much that the subject has graced the covers of nearly every business and news magazine. As a result, consumers are getting more involved in protecting and preserving the earth and their behavior is affecting every purchase decision they make.

The good news: many retailers already are on board. From conserving energy to building environmentally friendly buildings to reducing product packaging and marketing materials, more and more companies are heeding the call from their customers. Even better news: companies fully engaged in environmental strategies are reaping positive bottom-line benefits as a result.

The environment is no longer somebody else’s problem. Your customers have made it their responsibility, which means they have also made it your responsibility.

Retailers and manufacturers are growing increasingly more committed
Whole Foods… Staples… Unilever… Williams-Sonoma… Home Depot… Dell… Wal-Mart… Safeway… the list of retailers and manufacturers using a sustainability strategy as a competitive advantage is growing every day.  “We are seeing a strong up tick among retailers and catalogers toward green marketing in the last two years,” says Aaron Sanger, director of the Corporate Action Program.  While many started getting involved from a defensive posture, now, he says, “they see it as a market opportunity, and they’re out there investing money in it.”

In addition, catalogers such as Victoria’s Secret and other Limited Brands lines, as well as Land’s End and LL Bean are saving trees by incorporating more recycled paper into their catalogs. Tesco is saving more than 10 million bags a week by offering one loyalty point for every bag returned.

MAKING THE BUSINESS CASE FOR GOING GREEN
Today, the business case for adoption of sustainable business practices is being discussed in nearly every major corporation around the world, to the benefit of their P&Ls.

“This is all about doing the right thing for the earth, but it’s also about doing the right thing for the brand image of the company,” says Pat Kachura, senior vice president for ethics and consumer affairs for the Direct Marketing Association. “We’re going to be improving the environment, our brand image and making money too.”

THE TIME TO START IS NOW — OR RISK LOSING YOUR COMPETITIVE EDGE
Anyone who is not on board with a green marketing plan may risk losing some customers to companies that already have a plan in place.

In the end, it’s still about customer relevance. “In business, the key to profit — sustainable or otherwise — lies in finding out what people really care about, and in helping them attend to what they care about in meaningful and sustainable ways,” said Paul Sheldon, professor, Presidio School of Management and senior consultant with Natural Capitalism Solutions.

The sooner you start planning and implementing your green strategy, the faster you will reap the customer relationship and bottom-line benefits that result. The facts show that people care about protecting the environment and they want the brands they do business with to care too.

Movers and Shakers

People You Know Who Are On The Go

This monthly installment to The Hart Monitor includes executive moves within the retail industry —

as reported in publications such as WWD, Hoover's, and various other sources.

Wal-Mart Stores, Inc.:

Former Kraft Foods executive Linda Hefner has moved to Wal-Mart Stores as their new EVP and general manager, home division.

Jones Apparel Group, Inc.:

CFO Wes Card changed to president and CEO, succeeding Peter Boneparth. John McClain was named CFO.

Circuit City Stores, Inc.:

Former Best Buy VP Bruce Besanko will put out his Yankee Candle (where he is SVP finance and CFO) light to be EVP and CFO. Besanko replaces Mike Foss, who resigned earlier this year.

Best Buy Co., Inc.:

Julie Owen was tapped to be SVP entertainment, replacing Gary Arnold. Julie is charged with strategically boosting sales to females. Arnold is now senior entertainment officer.

Alliance Boots plc:

As KKR took drugstore company and drug wholesaler Alliance Boots private, executive chairman Stefano Pessina took over the duties of CEO Richard Baker. Managing director Scott Wheway also left the company.

Borders Group, Inc.:

Cedric Vanzura, EVP, emerging business and technology and strategy officer, is checking out of the bookstore. The company is eliminating his position, but some of his duties will go to Susan Harwood, who starts as CIO in September.

Blockbuster Inc.:

EVP, CFO, and chief administrative officer Larry Zine is busting out of the movie rental company by the end of the year.

Increase Count Accuracy with Post-Count Balancing

While there are many checking and auditing techniques to help identify and correct counting errors after the fact, there is one particularly good technique for enforcing accuracy right up front – during the counting associate’s “first pass”.

Post-Count Balancing is simple: after a counting associate has scanned all of the merchandise in a section, they are required to enter the total piece count for that section into the scanner.  The scanner software then compares the scan count (what was actually scanned) to the piece count that was keyed by the associate.  If they are not in balance, the associate is forced to re-scan the section.

There are many variables to choose from – some percentage of sections selected at random, specific sections selected for particular merchandise classes or price points, variance thresholds allowed, “rewards and punishments”, etc.  Post-Count Balancing keeps your counters “on their toes” and identifies error-prone counters right away.

To learn more about this and other best practices for ensuring accuracy in your physical inventory, call Hart Systems at (800) 252-2818.

HART SYSTEMS The Self-Inventory Experts 

To learn more about how we can help you achieve your physical inventory goals, please call us at 800-252-2818, click here -Tell Me More- to send an e-mail, or visit our website at http://www.hartsystems.com/.

To view a previous Hart Monitor, click May, June, July

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Hart Quote !!!

“Sometimes opportunity knocks, but most of the time it sneaks up and then quietly steals away.”

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