THE  

Keeping Our Finger On The Pulse Of The Retail Industry

Retailers Report Weak January Results

Sales rise 0.3%

Sales at stores open at least a year, a key measure of retailers' performance, rose just 0.3% in January, according to an index compiled by Thomson Financial, below expectations for a 1% gain. Half of all retailers tracked by Thomson turned in disappointing results.

With few exceptions, nation's retailers had a terrible start to 2008. Many leading merchants, including Wal-Mart Stores Inc., reporting January results that were even worse than already grim Wall Street forecasts.

Judging by the numbers reported, it was clear that consumers are still struggling with high gas and food prices, a slumping housing market, an escalating credit crisis and a weakening job market. The disappointments cut across all sectors, from apparel specialty stores to discount retailers.
 

Those that had an increase in same-store sales include:

Costco Wholesale Corp. – reported a 7% gain in same-store sales.

BJ’s Wholesale Club - same-store sales rose 7.8%, ahead of analyst expectations, helped by sales of gas and food.

Saks Inc. - same-store sales rose 4.1% on strong demand for jewelry, women's designer apparel and eveningwear, men's accessories and shoes, and cosmetics.

The Buckle Inc. - whose January same-store sales rose 19.1.%,
 

Those that had a decrease in same-store sales include:

Limited Brands - reported an 8% drop in same-store sales, worse than the 6.9% forecast.

Pacific Sunwear - suffered a 7.4% drop in same-store sales; analysts expected a 1.2% rise.

Wet Seal Inc.'s - same-store sales fell 5.7%.

Gap Inc. - reported same-store sales fell 2%.

Valentine’s Day Spending to Top $17 Billion

According to a study issued by the National Retail Federation (NRF), the average consumer plans to spend $122.98 on Valentine’s Day, up from $119.67 in 2007.  Total retail spending for the February 14^th holiday is expected to reach $17.02 billion.

Of the 61% of consumers who plan on celebrating Valentine’s Day this year, the NRF said 90% will spend the most on their significant others or spouses.  But other loved ones will not go forgotten: 60% plan to buy something for their family members, and 20% said they would send a gift to friends.

This year, over 48% of consumers plan to celebrate the day by taking their significant others for a special night out, up from 45% in 2007.  But the NRF said other traditional Valentine’s Day presents will remain popular too, with nearly 48% of consumers planning on purchasing candy, 36% with expectations of buying flowers, and 17% who said they would buy their special someone jewelry.  57% of those surveyed plan on buying a card for their Valentine, the NRF said.

“Valentine’s Day is a great time to get creative with gift options,” said NRF President and CEO Tracy Mullin.  “Most people agree that it’s the thought that counts, but shelves will also be filled with traditional gifts for those who want to celebrate the old-fashioned way.”

Men will outspend women by almost double this year, spending an average of $163.37 on gifts and cards, compared to an average of $84.72 spent by women, according to the NRF.

Luxury “Trading Up” Slows Down

During the 2007 holiday shopping season, the middle-class consumers who spent the last decade splurging on $300 saucepans and $600 scarves, tightened their purse strings in the face of slipping home prices and rising energy costs.

As a result, an entire economy built around aspiration is starting to collapse. Affordable luxury purveyors like Tiffany & Company, Nordstrom and Coach have experienced slowing sales and plunging stock prices.

But one of the biggest casualties may be the illusion of wealth that millions of Americans enjoyed for years, one Burberry trench coat at a time.

The phenomenon earned many nicknames — mass affluence, new luxury, masstige — and was best summarized by the retail experts Michael J. Silverstein and Neil Fiske in their 2003 book, “Trading Up: The New American Luxury.”

They posited that Americans with household incomes of $50,000 and above tend to “trade up” to high-end products in categories that are emotionally important to them like kitchen appliances or bedding, while perhaps pinching pennies elsewhere to compensate.

Dozens of chains rode this masstige wave, and earned billions in the process. Coach persuaded women to buy $400 handbags when a $60 version from Macy’s could have sufficed. Williams-Sonoma trained shoppers to covet a $35 stainless-steel hand-crank can opener, even though Wal-Mart sells a high-quality electric model for less than half the price.

But trading up was always a fragile phenomenon. It rested, in large part, on consumer psychology — a feeling of wealth derived from soaring home values and the steady growth of real income, that is, income adjusted for inflation.

Today, any growth in real income is all but canceled out in consumers’ minds by falling home prices and rising energy costs. Michael J. Kowalski, the chief executive of Tiffany, calls this “the wealth affect.”  Even if people have plenty of money on paper, he said, they suddenly feel less rich. “It is a reaction to the general economic uncertainty that everyone is feeling.”

So what will become of masstige if the economy actually tips into a full-blown recession?

Trading down, of course. Experts predict Americans will now grudgingly shift to cheaper brands for much of their shopping. For his part, Mr. Silverstein, the grandfather of trading up, is confident that consumers will pay a premium for the products that matter most to them.

Congratulations to the NY Giants – World Champions

Thrilling Win Over Patriots in Most-Watched Super Bowl Ever

According to an article published in the LA Times, the New York Giants’ shocking upset victory over the previously undefeated New England Patriots in Super Bowl XLII was the most-watched Super Bowl ever… and the second-most watched television program in American history.

Nielsen Media Research said that 97.5 million US viewers watched Sunday's telecast of the Super Bowl, in which the Giants won the game with a final score of 17-14.  Throughout the game, the teams were never separated by more than a touchdown.

That broke the old Super Bowl ratings record of 94.08 million viewers set in 1996 when the Dallas Cowboys defeated the Pittsburgh Steelers 27-17.

The only television program in US history watched by more people was the 1983 final episode of the series "M-A-S-H", which attracted 106 million viewers.

NYC Ticker-Tape Parade honors Giants

While Popes, presidents and other heroes (including Charles Lindbergh, Dwight D. Eisenhower and the Apollo moon astronauts) have been honored with New York ticker-tape parades since 1886, when the very first ticker-tape parade celebrated the dedication of the Statue of Liberty, the city hosted its first ever ticker-tape parade for a football team this past Tuesday (although this is the fourth Super Bowl title won by NY football teams – 3 for the Giants and 1 for the Jets).

Super Bowl Ads Cost $2.7 Million for :30

Anheuser-Busch Wins Survey for Best Ad

Anheuser-Busch grabbed the top spot in USA TODAY's Super Bowl Ad Meter for a record tenth year in a row. Anheuser- Busch's Budweiser ad featuring a Dalmatian training a Clydesdale to make the beer wagon team was the most popular, according to USA TODAY's Ad Meter. Volunteers gave the ad a score of 8.73 (on a scale of 0 to 10).

Below are the top 5 ads according to the survey:

For all of the USA Today ad meter results, Click Here or go to:

http://www.usatoday.com/money/advertising/admeter/2008-02-04-results-chart_N.htm

Previous Ad Meter winners:

    2007 -- Anheuser-Busch: Crabs worship a cooler of Bud on -- 8.56
    2006 -- Anheuser-Busch: Secret refrigerator -- 8.39
    2005 -- Anheuser-Busch: Pilot jumps out of airplane -- 8.65
    2004 -- Anheuser-Busch: Dogs fetch Bud Light -- 9.04
    2003 -- Anheuser-Busch: Replay -- 8.99
    2002 -- Anheuser-Busch: Satin Sheets -- 9.11
    2001 -- Anheuser-Busch: Cedric's dream date -- 8.63
    2000 -- Anheuser-Busch: Rex the Dog recalls his worst day -- 8.09
    1999 -- Anheuser-Busch:  Separated at Birth -- 8.01
    1998 -- Pepsi: Flying Geese -- 9.08
    1997 -- Pepsi: Dancing bears -- 8.22
    1996 -- Pepsi: On security camera, Coke driver nabs Pepsi -- 9.42
    1995 -- Pepsi: Boy gets sucked into bottle -- 9.66
    1994 -- Pepsi: Chimp escapes lab, hits the beach -- 9.34
    1993 -- McDonald's: Jordan and Bird shoot hoops -- 9.00
    1992 -- Nike: Bugs Bunny and Michael Jordan team -- 8.51
    1991 -- Diet Pepsi: Ray Charles' new jingle catches on -- 8.52
    1990 -- Nike: Famous announcers call imaginary game -- 8.17
    1989 -- American Express: Dana Carvey and Jon Lovitz travel to the Super Bowl -- 7.52.

Movers & 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.

Advanced Auto Parts:

EVP and CFO Michael Moore has left his position at auto parts retailer Advance Auto Parts. Mike Norona (a former Best Buy executive just like president and CEO Darren Jackson) has been named as his replacement.

Best Buy Canada:

SVP Mike Pratt was upgraded to president at electronics retailer Best Buy Canada. Pratt succeeded Kevin Layden, who was named COO, Best Buy International, at parent company Best Buy.

BJ’s Wholesale Club:

At wholesale retailer BJ’s Wholesale Club, Laura Sen was promoted to president and COO. Herb Zarkin, who had held the title of president, remains as chairman and CEO. SVP and controller Chris Neppl was named as EVP Merchandising and Logistics. Also, SVP and general merchandising manager consumables Bruce Graham takes the additional job of general merchandising manager perishables and VP Mark Titlebaum was named SVP and general manager general merchandise.

Bulova:

With Citizen Watch’s purchase of Bulova complete, chief strategic officer Dennis Perry has been named president, following Herbert Hofmann’s resignation. Also, Carl Rosen (who had been SVP worldwide operations) was named COO.

Deb Shops:

Diane M. Paccione, formerly of Charming Shoppes, has been hired as CEO, succeeding Marvin Rounick, who has served in a consultant capacity since October.

Dollar General:

Rick Dreiling has exchanged his job as chairman, president, and CEO at drugstore Duane Reade for that of CEO at discount retailer Dollar General. Interim CEO Dave Beré will continue as president and COO.

Duane Reade:

SVP and chief marketing officer Dave D’Arezzo was named interim CEO at drugstore operator Duane Reade.

J. Crew:

Jeffrey Pfeifle, president of J.Crew Group for the past five years, will leave his post effective Feb. 1, the company announced. 

Kingfisher:

Ian Cheshire has been named Group CEO at home improvement retailer Kingfisher. Formerly CEO of B&Q division, Cheshire succeeds Gerry Murphy, who retired.

Liz Claiborne:

Liz Claiborne Inc. has hired Isaac Mizrahi as its creative director for its namesake brand.

Michelin North America:

EVP of personnel Dick Wilkerson will become chairman and president at tire company Michelin N.A. when Jim Micali retires August 15.

Starbucks:

Coffee shop operator Starbucks has Howard Schultz as its president & CEO, again. Schultz, who is chairman, succeeded the resigning Jim Donald. Also, Terry Davenport was promoted to SVP marketing, Harry Roberts was rehired as SVP and chief creative officer, Michelle Gass was named SVP global strategy, Chet Kuchinad was promoted to EVP partner resources, and VP and CTO Chris Bruzzo will act as CIO. 

Talbots:

Lizanne Kindler, who had been SVP and general merchandising manager at AnnTaylor Loft, has been selected as SVP merchandising and general merchandise manager, Talbots Brand.

Target:

President Gregg Steinhafel will become the CEO at Target Corporation, succeeding the retiring Bob Ulrich.

Pep Boys:

SVP and CFO Harry Yanowitz will be leaving the automotive parts retailer as soon as a successor is named.

Yankee Candle:

Candle maker Yankee Candle will hire Bruce Hartman as SVP finance and CFO starting in February, a job vacant since Bruce Besanko left to work at Circuit City Stores.

Shrink Strategies

Best Practices of Five Leading Retailers

Addressing the problem of shrinkage has been giving the retail industry its share of headaches for as long as there have been accountants with pencils. There are five companies whose average rate of loss is an incredibly low 0.9%, as compared to the industry average of 1.59%, which equates to a total savings of almost $1.1 billion a year (their combined annual revenue is over $160 billion).

As reported by Adrian Beck and Colin Peacock in the September/October edition of Loss Prevention Magazine, the ECR Europe Shrinkage Group identified the five companies who consistently beat the industry averages: the Target Corporation, Limited Brands, Best Buy, CVS/pharmacy, and The Gap.

The element that was consistently part of their successful corporate culture was a proactive rather than reactive approach to the problem. The key factors contributing to their successes were boiled down to three areas: Strategic, Cultural, and Operational.

Strategic Factors:

Establishing Senior Management Commitment: The ability to create, sustain, and embed an organizational awareness and commitment to dealing with inventory loss is the foundation for effective loss prevention.

Ensuring Organizational Ownership: Each developed methods to ensure that all components of their organization took ownership of the shrinkage problems.

Embedding Loss Prevention:  The organizational commitment was embedded within the business practice, procedures, policies, and strategic thinking at all levels of management.

Cultural Factors:

Providing Strong Leadership and Developing a Team: The ability to offer passionate direction and leadership to each of their loss prevention teams across the organization was evident.

Using Barometer Management: The generation and analysis of data, which monitors the rate, and extent of shrinkage was key to informed decision making within the corporation.

Innovating and Experimenting: The prioritization of a culture which generates and analyzes data used to monitor the rate and extent of shrinkage was a necessary component.

Talking Shrink: All five companies had developed methods of keeping the company as a whole informed as to how the shrinkage was affecting the business, and how each area could contribute to the solution.

Prioritizing Procedural Control: Recognizing that all processes and procedures in the corporation can have an impact on shrinkage sets the stage for maintaining a priority on process control.

Operational Factors:

Empowering Store Staff: A strong consensus existed that empowering the staff to take responsibility for dealing with the problem of shrinkage was necessary.

In conclusion, if U.S. retailers could mirror these five leaders and lower their collective shrinkage by 0.6%, it could potentially translate into a savings of $18 billion a year!  That would buy enough aspirin to cure a lot of headaches!

HART SYSTEMS The Self-Inventory Experts 

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