THE  

Keeping Our Finger On The Pulse Of The Retail Industry

Retailers Report Weaker Sales in December

Weakest Holiday Sales Results Since 2002

In the overall retail sector, Thomson Financial, which also compares monthly results at 43 of the nation's largest retail chains based on analysts' estimates, said total December same-store sales rose just 0.5% compared to its revised estimate for a 0.7% gain. That's much weaker than the 3.3% gain for the same period in 2006.

The UBS-International Council of Shopping Centers’ same-store sales tally was up a meager 0.9% in December, far below their original prediction of 1.5%.  That caps off a November-December holiday sales period that was the weakest since 2002.

The poor performance raised more concerns about consumer spending, and caused many retailers to lower their fourth-quarter earning forecasts.

Due to a shift in the retail reporting calendar, a lot of the results looked much worse than they actually were. The Thanksgiving holiday also came earlier this year, shifting some of the key shopping days away from December into November. Bad weather in some regions also kept some prospective shoppers at home. December 2007 was the third coldest of the past 15 years, and the snowiest since 2000, according to weather tracking firm Planalytics.  Another growing concern for retailers is the weakening job market.  The Labor Department’s jobs report last week showed that hiring practically stalled in December, and the national unemployment rate stands at a two-year high of 5%.

The sluggish results could be seen across all retail categories. But department stores and specialty apparel retailers, with a few exceptions, were hit the hardest. Among the few bright spots was Wal-Mart, which posted results that exceeded Wall Street expectations, as it benefited from shoppers trading down to cheaper stores amid higher gas prices and a slumping house market.  Costco also enjoyed higher sales, reporting a 7% increase, as did TJX (including TJ Maxx, Marshalls and HomeGoods) with a 3% increase in same-store sales.  On the apparel side, teen retailer Aeropostale bucked the trend with an increase of 12.2%.

Wal-Mart – posted a 2.4% increase
Target Corp. – sales rose by only 0.1%
Costco Wholesale Corp. – 7% increase
Aeropostale Inc. – same store sales jumped 12.2%
Macys – posted as 7.9% drop
J.C. Penney Inc. – sales fell 7.5%
Nordstrom Inc. – sales fell 4%
Saks- inch up 0.8%
The Limited inc. – posted a 8% drop
AnnTaylor- posted a 9.4% decline
Gap – 6& decline

“I am very pessimistic about the outlook for consumer spending,” said Carl Steidtmann, chief economist at Deloitte Research, who forecasts declines in same-store sales in coming months. “There is a strong host of headwinds that consumers are facing.”

Best Practices for PCI Compliance to be Developed by NRF

There has been a steady rise in theft of data that customers have knowingly or unwittingly entrusted to retailers, banks, service providers and credit card companies.  In response, the payment card industry countered the criminal onslaught with a broad security initiative - The Payment Card Industry (PCI) Data Security Standard is a comprehensive security standard that establishes processes and precautions for handling, processing, storing and transmitting credit card data.

In September 2006, a group of the five leading payment brands - American Express, Discover Financial Services, JCB, MasterCard Worldwide and Visa International - jointly announced formation of the PCI Security Standards Council, an independent council established to manage ongoing evolution of the PCI standard.

The PCI Data Security Standard requirements apply to all payment card network members, merchants and service providers that store, process or transmit cardholder data, and affect all payment channels, including retail stores, mail order and e-commerce.

While the newly-established PCI Security Standards Council will manage the underlying data security standard, compliance requirements are set independently by individual payment card brands. Non-compliance penalties vary among major credit card networks, and include barring companies from processing credit card transactions, applying higher processing fees; and in the event of a serious security breach, fines of up to $500,000 can be levied for each instance of non-compliance.

In response to the new PCI requirements, the NRF (National Retail Federation) announced last week that it is developing an IT Best Practices reference library to provide guidance for retailers in implementing effective business processes – and the first contribution will be on PCI Compliance. NRF’s goal is to define the best PCI practices with variations by retail segment in the first half of 2008.  NRF’s CIO Council will convene at NRF’s Annual Convention later this month to discuss the Best Practices reference library and the PCI Compliance guidelines. 

According to William Franks, EVP and CIO of Saks, “Retailers have invested a significant amount of time and money to fully understand and implement the controls to meet PCI requirements.  As the required compliance audits roll down to all retailers, published Best Practices based on the actual experiences of many will result in cost savings, congruence, and will enable maximum protection of our customer’s information.” 

The Best Practices Guides will be developed by collecting “how we do it” information from contributing retailers and vendors.  All contributions will be analyzed by the committee and amalgamated into the “best practice.” Draft best practices will be posted to websites for further critique and enhancements before being declared “Best.”

Other best practices to be included in the NRF IT Best Practices library are privacy, spam control, environmental protection, record retention and data management.  Best practices will be developed by a sub-committee of the CIO Council supplemented with technical assistance by the ARTS Standards committees.

The Association for Retail Technology Standards (ARTS) is an international membership organization dedicated to reducing the costs of technology through standards. Since 1993, ARTS has been delivering application standards exclusively to the retail industry.  Membership is open to all members of the international technology community- retailers from all industry segments, application developers and hardware companies. For more information on ARTS, go to www.nrf-arts.org.

Gift Cards Entice Extra Spending… in January

Spending on holiday gift cards may climb 25% to $35 billion this year, according to Archstone Consulting LLC.  The research firm estimates that gift cards may account for 5.9% of total U. S. holiday spending, up from 4.9% in 2006. 

Macy’s, Best Buy and Abercrombie & Fitch may get a boost in store traffic and revenue in the next few weeks from the redemption of gift cards, which are growing faster than retail sales.  Redemption of gift cards may help some retailers facing the worst holiday shopping season since 2002.  Use of the cards may shift $5 billion of December Sales into January and early February, said Burt Flickinger, managing director at Strategic Retail Group in New York.  Roughly 10% of November-December sales happen the week after Christmas, according to the National Retail Federation, but early January is also gaining ground.  Apparel retailers are responding by putting out new lines of fashion, an effort to entice full-price sales. 

Retailers usually don’t record revenue from gift cards until a purchase is made.  Consumers often spend twice the value of the card, making up the difference with their own cash, Flickinger said.   “More and more I think we’ll see stores marketing the same discount message as always after the holiday, but offering more fresh items at full price”, said Paula Rosenblum, managing partner of Retail Systems Research LLC. 

Retailers catering to teenagers may get the biggest boost in post-holiday sales from gift cards, according to Howard Tubin, an analyst at RBC Capital Markets in New York.  He estimates that about half of gift cards sold at teen retailers such as Abercrombie and American Eagle Outfitters Inc. are redeemed in December and 30% in January. 

Illinois Law Requires Gift Cards to Remain Good for 5 Years

If you’re a retailer selling gift cards in the state of Illinois, take note of the following:

A new law that took effect in Illinois at the beginning of this year requires that gift cards sold on or after January 1st be good for five years.  Also, no fees can be charged that will diminish gift card value.

In addition, unredeemed and/or expired gift cards are refundable.  Illinois Treasurer Alexi Giannoulias says that even expired gift cards might be worth cash, and his office is holding more than $5 million in unused gift card balances for Illinois residents.  Owners of expired gift cards can go to the state’s unclaimed property database to search for refunds.  However, since most retailers do not record the name or contact information for the gift card purchaser or recipient, a claim must be filed with the treasurer’s office using the serial number on the expired gift card.

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.

Advance Auto Parts, Inc.:

Former Best Buy EVP Darren Jackson will head up Advance Auto Parts, starting January 7, 2008, as president and CEO. Interim leader Jack Brouillard will remain chairman at the auto parts retailer.

The Bon-Ton Stores, Inc.:

Jim Zamberlan is retiring as the EVP stores and visual merchandising - and  SVP Barbara Schrantz will take that role starting February 29, 2008. 

CompUSA, Inc.:

With electronics retailer CompUSA going out of business, CEO Roman Ross resigned and Bill Weinstein was named interim president.

Hibbett Sports, Inc.:

Nissan Joseph will join the company as President and Chief Operating Officer.

Stater Brothers Markets:

George Frahm has been promoted to the position of Executive Vice President of Retail Operations and Administration and Dennis McIntyre to the position of Executive Vice President of Marketing.

The Talbots, Inc.:

Jeannie Barsam has been named SVP merchandising planning and analysis at women's clothing retailer The Talbots. She had been a VP at The Gap's Old Navy.

Tuesday Morning Corporation:

Elizabeth Schroeder is resigning as EVP, CFO, secretary, and treasurer, effective January 15, 2008.

Wal-Mart Canada Corp.:

When president and CEO Mario Pilozzi retires January 31, 2008 and David Cheesewright will succeed him.  Cheesewright is currently COO at another Wal-Mart Stores' unit, ASDA Group.

Zale Corp.:

Neal Goldberg (formerly president of The Children’s Place) will replace the resigning Betsy Burton as president and CEO.

The Favorite 50 Online Retailers

Stores Favorite 50 Online Retailers make an impact

The October 2007 edition of Stores featured the banner article “Favorite 50 Online Retailers: The online retailers that shoppers like most”. This year’s rankings were sponsored by Microsoft. As the authoritative ranking of the largest internet-based retail companies, they based their report on a poll of the most frequently used websites by BIGresearch.

Online research prior to buying has increased in 2007, whether the purchase is made online or in a store. It was found that with adults 18+, 43% regularly research, 47% occasionally research, and only 9% never research online prior to purchasing.

By age bracket, the sites most frequented vary considerably. For example, the largest demographic group of customers for Amazon.com are in the 25-34 age group, while Target.com are in the 18-24 range and Google.com are 65 or over.

Education levels also vary among shoppers: for Target.com and Google.com the largest customer base has 1-3 years of college, while for Amazon.com they have a Bachelor’s degree.

The largest group of shoppers by household income for all three is in the $50,000-$75,000 bracket.

The five most popular things people research online before buying are electronics, apparel, appliances, home improvement items and shoes.

When asked which aspects of an online shopping experience were most important, the following responses were made in order of importance: low prices, free shipping, flexible return policy, website ease of use, toll-free “live” customer service person, and pick up or return at store.

The following list includes the results of the 50 Favorite Online Retailers.  Is your company on this list? To find out, click the link below.

Favorite 50 Online Retailers

Stay updated on new retail technology and network with your peers by attending conferences, such as this upcoming event in New York City:

According to the NRF website:

NRF is dreaming BIG for Retail's BIG Show 2008.
Join us in New York City January 13–16, 2008 and be a part of something important, something vital to the industry, and something big – Retail’s BIG Show.  We are dreaming of exciting speakers and educational content; energetic networking events; and even bigger dreams for a bigger EXPO floor.

Find out more at http://events.nrf.com/annual08/public/enter.aspx

If you're planning on attending the BIG Show, please consider visiting the Hart home office on Long Island.  We do not have a booth this year, but we’ll be visiting the NRF Convention. Please contact us if you would like to arrange for a meeting in NYC and/or tour of our offices.

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 October, November, December

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