THE  

Keeping Our Finger On The Pulse Of The Retail Industry

U.S Retail Sales Mixed

Lower-priced Stores Up

U.S retailers posted mixed results for February. According to the International Council of Shopping Centers, there was 1.9% increase in sales at stores open at least a year. While that was above the council’s forecast range of 0.5% to 1%, the increase was largely due to Wal-Mart Stores Inc. reporting better than expected sales, said Michael Niemira, chief economist for ICSC.

Department store sales fell and women’s apparel continued to struggle. Lower priced outlet stores were favored by cash strapped consumers.  “Retailers who had more of a value orientation...tended to do relatively better against other retailers,” said Niemira.

Wal-Mart Stores said same store sales at its U.S. stores rose 2.6% in February excluding fuel sales. The company cited continued strength in grocery, health and wellness and entertainment.

Costco Wholesale posted a 7% increase in February same-store sales, while BJ’s Wholesale Club reported a 5.9% increase. Both saw their sales helped by rising gasoline prices as both operate gas stations at their main stores.

Teen apparel retailers continue to be another strong sector. Pacific Sunwear of California said same-store sales rose a better than expected 6% and Aeropostale rose a better than expected 7%.

Women’s apparel retailers continue to disappoint.  Ann Taylor Stores posted a 1.7% drop in same-store sales, while Chico’s FAS same-store sales were down 14.9% at company-owned stores.

“Looking forward to March," Niemira added, "we expect spending to improve slightly, as we are projecting an increase of about 2 percent."

St. Patrick’s Day Spending Dips as Holiday Falls During Holy Week

The luck of the Irish has not been extended to St. Patrick’s Day this year as a calendar shift is likely to hamper spending.  According to the National Retail Federation’s 2008 St. Patrick’s Day Consumer Intentions and Actions Survey, conducted by BIGresearch, consumers will spend an estimated $3.64 billion on St. Patrick’s Day, less than last year’s 3.76 billion.

Though the average person will spend slightly more on the holiday than they did last year ($35.04 vs. $34.89), fewer people will be celebrating this year ($46.0% in 2008 vs. 48.3% in 2007).  One of the primary reasons for a dip in celebrating is that, for the first time since 1940, St. Patrick’s Day falls during Holy Week, the sacred seven days before Easter.  In fact, some cities like Savannah, GA; Philadelphia and Milwaukee, are moving their city celebrations to March 14^th, the Friday before St. Patrick’s Day.

“Retailers and restaurants that benefit from the St. Patrick’s Day holiday are up against a double whammy of an early Easter and the holiday falling on a Monday”, said NRF President and CEO Tracy Mullin.  “With the holiday just six days before Easter, many retailers are finding that they don’t have enough space on their shelves to promote Shamrocks and Easter bunnies at the same time.”

Restaurants and bars are still poised to see strong sales for the holiday.  According to the survey, nearly one-third of consumers (30.6%) will celebrate St. Patrick’s Day by attending a party at a bar or restaurant.  In addition, one in five will attend a private party (18.4%) or make a special dinner (33.7%).  Others will celebrate the holiday in smaller ways by wearing green (82.5%) and decorating their home or office (23.6%).

Young adults remain the largest celebrators of the holiday, with more than two-thirds (71.8%) of 18-24 year-olds planning to celebrate St. Patrick’s Day.  And at $42.20 per person, young adults will also spend more than average.

Americans Eager to File Tax Returns This Year, According to NRF.

Fatigued by rising gas prices and sinking home values, millions of Americans are breathing a sigh of relief in anticipation of a refund from Uncle Sam.  The National Retail Federation’s 2008 Tax Returns Consumer Intentions and Actions Survey, conducted by BIGresearch, found that 61.2 percent of consumers have already filed their tax returns or will file a return by the end of the month.  The survey also found that consumers filed earlier this year than they did last year; nearly one-third (28.5%) of Americans filed by mid-February, compared to 21.6 percent who had filed by that time last year.  The remaining will file in March (23.7%) and April (15.2%).

“With high gas prices, a sluggish housing market and low wage growth, consumers are in the middle of the perfect storm”, said NRF President and CEO Tracy Mullin.  “Americans who receive a tax refund will be anxiously awaiting those checks to buy necessities, pay down debit, or indulge in something they have been putting off".

This year, seven out of ten consumers are expecting a refund (69.2%) when they file their 2007 taxes.  Of those expecting a refund, 27.0 percent will spend it on everyday expenses, 12.1 percent will treat themselves to a major purchase and 12.1 percent will take a vacation.  Consumers will also pay down their debt (46.5% vs. 43.1% in 2007).

Retailers Step Up Recruiting for Top Young Executives

Retail CEOs are in agreement that the challenge they are facing today is no longer financial capital but rather the recruitment of high-quality managers, which are scarce and the most valuable resource to ensure economic performance and top-level succession.

Susan Reda, Executive Editor of STORES, reports that this is an uphill battle and retail companies are competing against financial services and other industries in their attempts to attract top candidates.  Major retailers, including Macy’s, JCPenney, Saks Fifth Avenue and Kohl’s, have revisited their recruitment strategies and training programs to attract, groom, and retain promising young talent.

Kathy Mance, Vice President of the NRF Foundation, agrees that “Having a strategy in place for attracting college graduates and developing future managers appears to be a solid investment, but this is a daunting challenge”. The Bureau of Labor Statistics estimates that we will face a labor shortage of 10 million workers by 2010; and the 500 largest companies can expect to lose half of their senior management in the next five years.

Entry-level retail jobs could be restructured to attract the college graduate by giving real tasks, tangible rewards, and senior-management support. The general consensus is that this generation of potential young executives is not about the money but rather the opportunity to step into a career, have responsibility and move quickly. 

Some of the largest retailers have already begun to rethink recruitment, training and retention strategies and have created programs intended to expose incoming talent to a cross-section of what the company has to offer and exposure to senior management. 

JCPenney maintains visibility on college campuses throughout the nation, running an active internship program, investing time and money on college recruits.  A college recruit is brought into one of three training programs for up to seven months.  Approximately 80% of the recruits who go through the program step into jobs in the company.

Macy’s training program is comprehensive and considered by some to be the industry vanguard.  The programs are broken down into four areas – executive development, store management executive development, buying executive development and planner development.  CEO Terry Lundgren is as hands-on as time permits. 

Lord & Taylor has a formal recruiting strategy, including relationships with eight top business schools.  The company’s training program is offered twice a year and consists of a blend of classroom and hands-on learning.  The group is nurtured and provided with exposure to senior-level executives.

“The most successful retail companies are those that are visible on campus and really get involved with our students.  Internships are vital to building relationships with young people and to determining if they’re a fit inside that culture down the road.” says Cheryl Bridges, director of the Center for Retail Studies at Texas A&M University. 

Bridges insists that it’s important for college students on the cusp of entering the business world to feel like they’re a part of something.  “This generation thrives on connections,” she says.  “Companies that give them responsibility and involve them in projects are more likely to retain them.”

Phase-Out Milestone for Common Ozone-Depleting Refrigerant (R-22) Approaching

Retailers Urged to Prepare for 2010

According to an article in Supermarket News, an executive from refrigerant maker DuPont recently warned food retailers that the 2010 milestone for a sharp reduction in the production of R-22 refrigerant is only 95 weeks away. R-22 is commonly used in the food industry to refrigerate store cases and displays.

“If you’re a supermarket owner and you have 100 stores, it would be an appropriate time to begin planning for the phase-out of R-22,” said Nick Strickland, market development manager, DuPont Refrigerants, during a Web seminar hosted by SN in cooperation with Contracting Business magazine.

Background:

In order to make sure that the United States would comply with the Montreal Protocol on Substances that Deplete the Ozone Layer ("Montreal Protocol"), the U.S. Congress passed the 1990 Clean Air Act that ordered the EPA to enact regulations to phase out R-22 and other ozone-depleting chemicals.  Initially, this included phasing out chlorofluorocarbons (CFCs) which were quickly banned by the mid 1990's.  Now the EPA must begin the phase-out of hydrochlorofluorocarbons (HCFCs) and it has chosen to begin this process by completely phasing out the most harmful chemical (HCFC-141b) used in foam insulation, and by limiting the production and import of moderately ozone-depleting chemicals, including R-22 (also known as HCFC-22).

According to the EPA website:

“After 2010, chemical manufacturers may still produce R-22 to service existing equipment, but not for use in new equipment. As a result, heating, ventilation and air-conditioning (HVAC) system manufacturers will only be able to use pre-existing supplies of R-22 to produce new air conditioners and heat pumps. These existing supplies would include R-22 recovered from existing equipment and recycle”.

Strickland said that after January 1, 2010, this reduction in production will result in “price volatility associated with supply and demand imbalances and the potential that not enough R-22 will be reclaimed to counter that volatility.”

In addition, Strickland projected a “labor shortage associated with the demand for retrofits” as well as the potential for a black market for R-22 to emerge. Some retailers are beginning to replace R-22 with non-ozone-depleting refrigerants as well as to test new refrigeration systems that require less refrigerant.

It would seem that getting stuck without a phase-out plan for the refrigerant could become very un-COOL.

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.

Sears Holdings Corp.:

Sears Holdings (which owns retailers Sears, Roebuck and Co. and Kmart) is shopping for a new CEO. President and CEO Aylwin Lewis resigned and EVP of supply chain and operations Bruce Johnson was named interim president and CEO. Also, Microsoft's Jim Barr has been hired as SVP online, a new position.

Claire’s Stores, Inc.:

Jewelry and accessories retailer Claire's Stores has hired former Centene executive Per Brodin as SVP and CFO, replacing Ira Kaplan.

Container Store, Inc.:

Storage products retailer The Container Store has a new CFO: former Harold's and Baby Superstore CFO Jodi Taylor.

Fashion Bug:

Charming Shoppes' EVP and COO Joseph Baron is buzzing with new responsibilities; he has been named interim president at subsidiary Fashion Bug. Diane Paccione left the women's apparel retailer to lead Deb Shops.

Frederick’s of Hollywood Group, Inc.:

Frederick's of Hollywood Group was formed with the merger of lingerie retailer Frederick's of Hollywood and lingerie designer Movie Star. Peter Cole became executive chairman to lead the company. Mel Knigin remains as CEO of Movie Star and Linda LoRe as CEO of Frederick's of Hollywood, Inc. Thomas Rende became SVP and CFO of the combined company.

Gap, Inc.:

With Dawn Robertson resigning as president from Gap subsidiary Old Navy, president of Gap Inc. outlet Tom Wyatt fills the gap as interim president at the discount family apparel retailer.

Macy’s, Inc.:

Tony Spring, a 20-year veteran executive, is the new president of Macy's Bloomingdale's division, filling a position that has been vacant since 2004.

Pacific Sunwear of California, Inc.:

Interim CFO Michael Henry now shines as SVP and CFO at casual apparel retailer Pacific Sunwear of California (PacSun).

Sharper Image Corp.:

Turnaround expert Robert Conway has been assigned the job of CEO at retailer Sharper Image. Steven Lightman resigned.

Attend Upcoming Loss Prevention Conferences

Two of the LP industry’s leading conferences are right around the corner:

Retail Industry Leaders Association (RILA) Loss Prevention Auditing & Safety Conference in Dallas,Texas – April 29 – May 2 

From the RILA website:

Loss Prevention Auditing & Safety 2008 is the meeting place for loss prevention executives and their retail partners. With the experts themselves presenting on some the top issues facing loss prevention including organized retail crime, shortage analytics, hiring talent and building partnerships within an organization, RILA’s Loss Prevention conference continues to be recognized as the most important educational event in LP and asset protection. 

http://www.retail-leaders.org/latest/rlEducationEvents.aspx?section=EDUCPC

National Retail Federation (NRF) Loss Prevention Conference & Expo in Orlando, Florida – June 23 – June 25

From the NRF Website:

The NRF Loss Prevention Conference & Expo is the Nation's leading retail-specific loss prevention conference. NRF's event can help you Predict, Prevent, Protect company assets- focusing on key issues: organized retail crime, on-line fraud, eFencing, interviewing, investigating, pandemic preparedness and more!

http://nrf.a2zinc.net/lp08/public/enter.aspx

As usual, Hart Systems will be participating in both of these exciting events, and we'll be discussing loss prevention through inventory control, and displaying our rental system for self-scanned inventories - the most accurate physical inventory system available today.

We're also planning some fun and interesting networking events.  To find out more about these events, to make arrangements for a private demonstration at the conference, to get your free Exhibit Hall passes or to simply learn more about our scanning solutions, Click Here or call us at (800) 252-2818.

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 December, January, February

Each month, the Hart Monitor is sent out to over 6,000 executives in the retail community.

Sign up a friend.  Have any friends or colleagues in the retail world that may be interested in receiving this information periodically?  We'll be happy to send them our free newsletter!  Click here -Send to a Friend- and put the e-mail address in the body of the message.

To change your e-mail address, click here -Change My Address- and include your new address in the body of the e-mail.

To unsubscribe, send an email to HartMonitor@hartsystems.com with the word "Unsubscribe" in the subject line of the message.

© 2008 Hart Systems, Inc.

Hart Quote !!!

"The most effective way to cope with change is to help create it."

L.W. Lynett - 1960s IBM executive

Hart Systems Inc.
60 Plant Ave
Hauppauge, NY 11788