The Hart Monitor - April Edition

THE

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VII, Issue 4

April 2009

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March Sales Fall as Late Easter, Recession Impact Spending

US chain stores fell 2.1% in March

According to a tally by the International Council of Shopping Centers, same-store sales fell 2.1% in March. But ICSC chief economist Michael Niemira said that includes a three-percentage-point decline related to the later Easter and calendar shift.

Retail sales fell in March as the recession continued to hamper consumer spending. But similar to February, the declines were more moderate than in previous months. Also, while most retailers posted same-store sales declines, a good number of them topped analysts' estimates, and several retailers even raised their quarterly earnings outlooks. Many retailers cited the late Easter holiday as cutting into the March results.

“Today's numbers are the type that the tone from retailer's comments is better than the reported performance,” Mr. Niemira said. “It's really a mixed bag.”

Mr. Niemira added that because of Easter, a shift in the calendar and the plunge in gas prices, looking at March and April figures together will be a better indicator of any stabilization in consumer spending.

“On the surface, March is weaker than we've been seeing last few months but we know that's not the underlying trend,” he said. “The tone and comments from retailers really reflect a better performance than reported, but the jury is still out on whether we really have stabilized.”

Discounters continued to report better results than most retailers, but there was some improvement in results for mall-based chains such as Gap Inc. and Limited Stores Inc.

Groceries, health products and accessories remain the most popular sellers, as consumers continue to shop cautiously amid massive job cuts and tight credit. The retail sales reports came as the Labor Department’s new jobless claims fell more than expected last week, to a seasonally adjusted 654,000, down from a revised 674,000 the previous week. Still, claims are stuck at a high level, while those continuing to receive unemployment insurance set a record for the 11th straight week. Wal-Mart Stores Inc., the world's largest retailer, said same-store sales rose 1.4 % excluding fuel sales, falling short of the 3.2 % rise analysts polled by Thomson Reuters predicted.

Easter Bunny Brings Joy But Less Candy, According to NRF

The Easter bunny will be handing out fewer jelly beans, chocolates and other gifts this year. According to NRF’s 2009 Easter Consumer Intentions and Actions Survey, conducted by BIGresearch, Americans will spend an average of $116.59 on Easter candy, gifts, food and decorations, down from an average of $135.03 last year. Total spending on the holiday is expected to reach $12.23 billion.

Survey findings indicate that many people will opt for less expensive celebrations this year. American’s largest Easter expense will be in preparing a meal, with the average person expected to spend $37.67 on food (down from $41.09 last year). People will also spend on gifts ($17.30 vs. $21.42 last year), flowers ($7.55 vs. $9.11 in 2008) and candy ($16.55 vs. $18.12 in 2008).

According to NRF President and CEO Tracy Mullin, “Retailers are hopeful that a late Easter will bring warmer weather and put shoppers in the mood to buy clothing, flowers, and other holiday gifts.”

Even with Easter falling three weeks later than it did in 2008 and the deals offered by retailers, fewer consumers are planning to purchase new spring attire this year. According to the survey, Americans will spend an average of $19.44 down from $23.82 last year.

Where will consumers shop?

Discount retailers	64.0%
Department stores	32.5%
Specialty store	22.5%
Online	11.4%
Specialty clothing store	5.9%

“Many Americans view Easter as the official kick-off to spring,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “A later holiday could mean people will take advantage of retailers’ Easter promotions as a way to spruce up their spring wardrobe.”

Fun Easter Facts:

The amount of Marshmallow PEEPS eaten at Easter could more than circle the Earth’s circumference.

Ninety million chocolate Easter bunnies are produced each year.

76% of people prefer to eat their chocolate bunny’s ears first.

April is Autism Awareness Month!

For the fifth consecutive year, Autism Speaks and retailer TJ Maxx will partner in April on a fundraising and awareness effort. From April 9th through May 9th at 800 TJ Maxx stores nationwide, customers will be invited to purchase an Autism Speaks puzzle piece at checkout for a donation of $1. No purchase is necessary to make a donation, and all proceeds will benefit Autism Speaks. Last year's campaign raised over a million dollars!

From the Autism Speaks website (www.autismspeaks.org):

One in 150 children is diagnosed with autism. For all the children and families affected by this disorder -- and all those who will be -- the time to act is now.

Your contribution will fund autism research, awareness, advocacy and family services. With your support, we will transform a community of heartbreak into a community of hope.

Deep Discounting Begins Early for Spring

According to Karen Talley of Dow Jones Newswires, retailers of all types, whether it be high-end Saks to lower-end Target, are offering large price reductions on a multitude of merchandise. "The markdowns are [being made] earlier on spring goods, and the percent of discounts are, and will likely continue to be, more aggressive," said Todd Slater, retail analyst at Lazard Capital Markets.

Investors may want to take note, Slater said. The fact that the spring selling season "is already kicking off with price- based promotions means that a meaningful turn in profitability for the industry, particularly the high end, is not yet in sight," Credit Suisse analyst Michael Exstein said in a research note.

Despite attempts by retailers to start the spring selling season with less inventory, work out better vendor terms, and have on-hand lower-priced merchandise; price cutting is still being implemented. Retailers are limited in attracting consumers who are short on cash and fearful in this economy and who have become used to buying at big discounts.

"There is still so much nervousness on both sides," said Tim Calkins, clinical professor of marketing at Northwestern University's Kellogg School of Management. "I think we will see very early and significant discounting in the spring and into the summer because the last thing retailers want again is too much inventory."

"Retailers' approach is again early, but hopefully won't be as deep as over the Christmas season when prices that were reduced by 90% were hardly unheard of,” Calkins said. Retailers have been introducing their new seasonal merchandise early this year with markdowns beginning before the official start of spring on March 20.

Many retailers have increased their promotional activity inside stores and at their online sites with spring and summer staples in the fore front. Some retailers involved are Ralph Lauren’s web site featuring white pants for women marked down, Sears’ weekly flyer advertising spring shoe sales, Target’s new phrase "frugalista fabulous”, spring sales at Kohl's, Cabela's, and Bloomingdale's. Hundreds of women's spring and summer apparel have been marked down by Saks and it is cutting inventory by 15%. Spokeswoman Julia Bentley said “the company isn't following the steep price- cutting path it took over the holidays and the current markdowns aren't being done more quickly or deeply than last spring for merchandise that had been on its racks for a while”

Roxanne Meyer, who follows apparel retailers at UBS, said: "The majority of the in-store spring assortments haven't been refreshed yet," meaning newer spring and summer merchandise aren't on display at stores. Meyer noted an increase in markdowns compared to her previous visit to Abercrombie & Fitch Inc. with more spring items on sale. Also seen were markdowns on clearance items at Gap, with some spring items reduced by 40% to 45%. There were more promotions at J. Crew Group Inc with a compelling spring collection.”

Shopper Survey – “Cheap Chic” Fashion

Based on a BIGresearch Consumer Intention and Actions survey conducted in February 09, color, shape and hemlines are not influencing the trend in fashion this spring. Consumers are shopping to find seasonal items at prices that agree with their new sense of value.

According to the survey, 62% of shoppers 18 and older “usually” buy clothing when it’s on sale, and 25% “only” buy when apparel has been marked down. Family budgets have become tighter and the label staples in wardrobes are now considered less essential with 62% of women and 55% of men responding that familiar labels were not important when clothes shopping.

Additional information from the survey provided insights into feelings about fashion – men vs. women. More men, 37%, are inclined to prefer a traditional, conservative look than women at 31%. Women believe that the newest trends and styles are important – 16% compared to 9% of men.

The one thing both men and women are in agreement on (54% vs. 53%) is the importance of fashion relative to value and comfort.

California Sales Tax Increases

Californians will start feeling the recently negotiated state budget fix when a “temporary” increase in the state sales tax will force consumers to pay more for goods such as cars, furniture, laptops and toys.

California’s sales tax will rise to 6 percent, bringing the average local sales tax rate to almost 9 percent – one of the highest in the nation.

According to the San Francisco Examiner, Businesses and manufacturers are worried that the temporary tax increase could prolong the worst recession in recent memory and further dampen retail sales. In the coming months, Californians will also see an increase in personal income taxes.

Gov. Arnold Schwarzenegger and lawmakers agreed to $12.5 billion in tax increases as part of a $42 billion deficit-closing plan. California expects to bring in an estimated $5.8 billion before the sales tax increase expires on July 1, 2011, but could last another year if voters agree to extend it. State officials predict consumers will spend less because of the tax, and included a 1% reduction in their revenue calculation.

According to the Tax Foundation, an independent Washington, D.C.-based nonprofit that educates the public about taxes, the median national rate of state and local government sales taxes was 5.5% at the beginning of 2009. The last time consumers across the state saw an overall rate increase was 2002.

If Proposition 1A on the May 19 special election ballot passes, Californians will pay even more. The measure, one of five budget-related initiatives on the ballot, asks voters to limit the amount the state can spend each year based on revenue growth. In exchange for tougher spending restrictions, all four of the tax hikes would be extended by one to two years.

Consumers will likely adjust to the higher rate over time, said Bill Dombrowski, president and chief executive of the California Retailers Association.

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.

BI-LO:

Mike Byars, former Minyard Group executive, has become CEO at supermarket company BI-LO. Interim CEO Randall Onstead remains as chairman.

Brookstone:

Gadget retailer Brookstone president and CEO Lou Mancini has resigned while Philip Roizin, formerly the EVP finance and administration, CFO, treasurer, and secretary has been named interim president and CEO. Jackson Tai is now chairman, succeeding Ron Sim (who remains as a director).

Walgreen:

George Riedl was named SVP pharmacy innovation at drugstore operator Walgreen, while Bryan Pugh, formerly of purchasing, is now VP of merchandising, and Thomas Connolly as VP of facilities development. William Shiel, who had been SVP facilities development, retired.

Sam's Club:

CEO Brian Cornell of Michael’s Stores, has moved from the craft retailer as CEO at Wal-Mart Stores' warehouse club retailer SAM's CLUB. He succeeds Doug McMillon, who became president and CEO of Wal-Mart International.

Michaels Stores:

John Menzer, former Wal-Mart Stores vice chairman and chief administrative officer, is now CEO for arts and crafts retailer Michaels Stores. Brian Cornell has resigned to join Wal-Mart Stores' SAM's CLUB.

Nike:

Former Wal-Mart Stores' Walmart.com CEO Jeanne Jackson has joined shoemaker NIKE as president, direct to consumer.

Perry Ellis International:

Perry Ellis International, men's sportswear maker, has gained Gary Rubin as president, direct-to-consumer. He had been SVP merchandise and design for lifestyle brands.

The Yankee Candle:

At candle maker and seller The Yankee Candle Company, Craig Rydin will leave his CEO role October 1 but will remain as chairman. President and COO Harlan Kent will step up as CEO.

Cabela's:

Outdoor sporting goods retailer Cabela's, has added Remington Arms' CEO Tommy Millner as president and CEO; Dennis Highby will remain as vice chairman.

Books-A-Million:

Sandra Cochran has moved to Cracker Barrel Old Country Store's table, chairman and former CEO Clyde Anderson has been named CEO.

Estée Lauder:

On July 1 at The Estée Lauder Companies, president and COO Fabrizio Freda will be made president and CEO. Freda, a former Procter & Gamble executive will succeed William Lauder at the cosmetic and fragrance company. Lauder will become chairman; current chairman Leonard Lauder will become chairman emeritus.

ShopKo Stores:

Paul Jones, president and chief merchandising officer became CEO at discount and drugstore operator ShopKo Stores; Mike MacDonald will join shoe retailer DSW in April as its new president and CEO.

The Talbots:

Women's apparel retailer Talbots has promoted EVP human resources and administration John Fiske to EVP and chief stores officer, succeeding the retired Michele Mandell (former EVP stores for the Talbots brand).

Haggar Clothing:

Buxbaum Group's Paul Buxbaum has joined men's apparel maker Haggar Clothing as CEO; Terry Lay has retired.

Every issue of The Hart Monitor will contain a 'TIPS' section of helpful information regarding Inventory or Loss Prevention for retailers, including some of the industry's "Best Practices." If you have any Inventory or LP tips that you'd like to share, please CLICK HERE

Attend Upcoming Loss Prevention Conferences

Retail Industry Leaders Association (RILA) Loss Prevention Auditing & Safety Conference in Orlando, FL – May 3 through May 6, 2009.

From the RILA website:

RILA’s Loss Prevention, Auditing & Safety 2009 is not a trade show, but an educational event where you’ll develop strategies to manage risk and drive performance in a volatile economic environment and a rapidly changing world.

Attend Loss Prevention, Auditing & Safety 2009 to:

Gain the knowledge you need to maximize shrink reduction, increase productivity, streamline operations, and control expenses.

Grow your industry peer network at interactive forums attended by top retail loss prevention, auditing & safety executives.

Find solutions in the exhibit hall, featuring strategic vendors across all three functions.

Loss Prevention Auditing & Safety 2009 will feature more than 40 sessions on topics critical to LP professional. Attend this cutting edge event in convenient Orlando, Florida where the leaders of LP will gather for this the best education and networking in the business.

http://www.rila.org/latest/rlEducationEvents.aspx?section=EDUCPC

As usual, Hart Systems will be participating in this event, 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.

Please stop by the Hart booth, introduce yourself, and enter our free raffle to win a 42” LCD Digital Television.

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/.

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