The Hart Monitor - February Edition

THE

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VII, Issue 2

February 2009

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Retail Gloom Deepens in January

U.S. chain store sales fall 1.6 % in January

U.S. chain store sales for January fell by 1.6% on a year-over-year same-store basis according to ICSC’s index. As shoppers continued to focus on necessities, many of the nation’s retailers posted sales declines in January. Although January is considered the least important month of a retailer's sales calendar, the figures only confirmed the decline of consumer spending.

"January sales were slightly better than anticipated, but still continued to be weak overall, marking the fourth consecutive month of year-over-year declines for retail sales," said Michael P. Niemira, ICSC chief economist and director of research.

"Wholesale clubs, excluding gasoline sales, posted the strongest segment gain (3.7%) which was also the category’s strongest showing since September. Sales at discounters improved on a year-over-year basis, posting (1.1%) their best increase since August 2008," said Niemira.

The weakness crossed the spectrum of retailing, from department store chains to specialty apparel chains. Gap, Wet Seal and Stage Stores were among those posting deeper-than-expected sales declines.

There were some noteworthy exceptions. Wal-Mart reported sales that beat Wall Street's forecast. Teen retailer The Buckle reported a 14.7% rise in January same-store sales, and Aeropostale’s same-store sales increased 11% for the month.

"This ends a very tough fourth quarter (Nov-Jan) and fiscal year. The lingering recession will continue to be a drag on spending in the months ahead," he added. "ICSC anticipates that 2009 will be a transition year for retailers as sales will remain down for the first half of the year and positively improve toward the end of 2009," noted Niemira. "The February outlook for retail sales will be down 1% to 2%.”

Valentine’s Day Spending to Reach $14.7 Billion

Total spending expected to be down almost 14% from last year

The National Retail Federation’s 2009 Valentine’s Day Consumer Intentions and Actions survey finds that consumers plan to spend, on average, $102.50 on all Valentine’s gifts this year, down 16.7% from last year’s average of $122.98.

“While some Americans will forego a gift and opt for quality time at home instead, others will simply set budgets and fixed amounts when exchanging presents,” said Phil Rist, executive vice president of strategic initiatives at BIGresearch, the company that conducted the survey. “Valentine’s Day this year will be more about small tokens of affection rather than extravagant purchases.”

Most consumers will still buy traditional favorites: 36% say they’ll buy flowers, 16% say jewelry, and 47% plan to dine out. More people also intend to buy the standard greeting card compared to last year – 58.6%, up from 58.0%.

91% of consumers will spend the most on their spouse, with smaller gifts going to other members of the family, friends, classmates or teachers, co-workers and pets.

The 35-44 year old age group plans to spend the most this year, an average of $119.19, the 18-24 year old group plans to spend $113.68 and 55-64 year old group plans to spend the least, an average of $83.76.

Total Valentine’s Day spending is expected to be about $14.7 billion, down 13.6% from the $17 billion spent in 2008.

Retailers Focus on Changes in Consumer Spending

For years, dieticians urged Americans to practice mindful eating. Eat slowly. Enjoy every bite. Now, as reported by Jayne O’Donnell and Sandra Block of USA Today, as the country slogs through the worst recession in decades, consumers are increasingly taking a similar approach to spending.

"Most of the consumer behavior we saw in 2008 will continue well into this year," says Rosalind Wells, NRF's chief economist. "Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power."

Even though spending is expected to increase in late 2009, no one's predicting a return to the devil-may-care shopping from earlier this decade. Now, when consumers spend, they're paying more attention to what they buy. And this shift toward more cautious spending is likely

Essentials, such as food, health and beauty aids are selling, but even there, consumers are shifting to less-costly store brands - and sales of big-ticket items, such as cars and vacation packages, have fallen.

"In 2009, the consumer will act rationally," says J.C. Penney CEO Mike Ullman. "They will shop for what they need and less for what they want. And they don't need much."

"We need newness, freshness and unique products that will get people interested in buying again," he says.

To compete in this environment, retailers need to go back to their roots, says Janet Hoffman, Accenture's global retail managing partner. That means "knowing their customers and coming up with a unique offer or product, price or, in some cases, service," she says.

Offering better prices

After a holiday season in which many consumers waited until prices were slashed 75% or more to buy, marketers are rethinking pricing strategies. The new directions include adding more lower-cost store brands or products and working with manufacturers to come up with starting prices that products are more likely to sell at.

Karen Jacobs of Reuters reported that price has become the most important factor in U.S. consumer purchase decisions and retailers must adapt to that new reality if they are to be successful.

"What's so intriguing these days, whether you work on Wall Street or in Wal-Mart, is that it has absolutely become chic to be cheap," National Retail Federation President and CEO Tracy Mullin said. "It's all about price. Factors like quality, selection, store location and customer service are taking a back seat, We believe this will continue for the foreseeable future."

Alexi Sarnevitz, global retail strategist for SAS further states “Gone are the days where the retailer could convince people they needed something that they don’t”.

In summary, the new perception for consumers is that they no longer need to buy for the sake of buying. Mindless spending is the way of the past and retailers need to recognize this going forward.

Simplification – The New Consumer Mantra

With the continued climb of unemployment figures, the downward tumble of 401K and the sagging housing market, most consumers are making a big switch and simplifying their lives, according to Stores Magazine January 2009 issue. There are the three D’s to live by – Downsize, Decrease and De-clutter for 2009.

The first and biggest step towards simplification that consumers have taken is their decrease in spending. It is reported by American Pulse Survey from BIGresearch, that 71% of adults are planning to spend less and 44% will “settle for less”. This is a big attitude change for people used to hearing “Don’t settle for less” most of their lives.

It was also polled that 42% will do more activities at home, such as enjoying time with family and friends, watching TV, and playing with the kids. They are also putting time at home to de-clutter: 36% are focused on ridding themselves of personal junk – some of which may have helped bury them in credit card debt.

Adults polled between 35- to 54-year-old ages showed the strongest desire to decrease spending (75%) and to settle for less (49%). For those 18 to 34 they are more apt to downsize in their cars. Households that have an income of $50,000 or less are the furthest on the path to simplifying their lives. Just above half (51%) say they now settle for less.

The True Cost of Out-Of-Stocks

According to Stores Magazine January 2009 issue, the negative reaction from shoppers due to out-of-stocks is affecting many retailers. In fact, it’s costing retailers dearly.

The results from research conducted by IHL Group show that retailers lose sales on at least one item from over one-fifth of customers due to out-of-stocks. Some shoppers are irritated enough over out-of-stocks that they no longer frequent specific retailers.

According to the study, consumer electronics retailers are hit hardest by out-of-stock problems. It is reported that frustrated shoppers actually leave a store without making a purchase 21.2% of the time.

In monetary terms, retailers actually lose money due to out-of-stocks for every consumer that enters their store.

The loss per consumer differs by store type:

Retail Store:	$1.35 loss for every consumer
Warehouse Club:	$1.78 loss for every consumer
Grocery Store:	$0.68 loss for every consumer

“Retailers remain in denial, when it comes to consumers’ perceptions of out of stocks,” says Greg Buzek, president of IHL Group. He goes on to say, “Nine percent of all consumers in our study have simply stopped shopping at one or more retailers in the last 12 months do to the problem.”

Hart Systems provides scanning equipment and custom software on a rental basis for a variety of applications for retailers, not just physical inventories. In fact, Hart Systems is currently supporting a leading auto parts chain in their efforts to identify and reduce out-of-stocks in their stores.

For more information on self-scanning solutions designed to reduce out-of-stocks, or other cost-saving and process-improvement applications, please contact Hart Systems at sales@hartsystems.com or 800-252-2818.

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.

JJB Sports:
Deputy chairman David Jones of sporting goods retailer JJB Sports is now executive chairman. Chris Ronnie remains as CEO and Roger Lane-Smith takes over the deputy chairman role. Peter Williams, former Selfridges Retail executive has become executive director, strategic development.

Borders:
Ron Marshall is the new deputy of the bookstore operator Borders. He has succeeded president and CEO George Jones, who resigned. Replacing chairman Larry Pollock, is one time director Mick McGuire. Mark Bierley, SVP finance, was named EVP finance and CFO, replacing Ed Wilhelm; EVP human resources Dan Smith was named to the additional new position of chief administrative officer; and Anne Kubek has replaced Rob Gruen as EVP merchandising and marketing.

Weis Markets:
President and COO Dave Hepfinger is now president and CEO at Weis Markets, the grocery retailer. He has succeeded Norman Rich, who retired.

Wal-Mart Stores:
Effective February 1, at discount retailing giant Wal-Mart; SAM'S CLUB CEO Doug McMillon will become Wal-Mart International's president and CEO. McMillon succeeds Mike Duke, who will be succeeding Wal-Mart Stores CEO Lee Scott.

Charming Shoppes:
Former Lane Bryant and Fashion Bug executive MaryEllen MacDowell has been named president of Charming Outlets at apparel retailer Charming Shoppes, which owns the Lane Bryant and Fashion Bug chains. She succeeds Jeffrey Elliott, who has resigned.

Chico's FAS:
At women's apparel retailer Chico's FAS, Director David Dyer now has the title president and CEO. Dyer, former head of Tommy Hilfiger and Lands' End, succeeds Scott Edmonds, who retired. Ross Roeder was named chairman.

Columbia Sportswear:
Chief accounting officer Tom Cusick, at skiwear and outerwear maker Columbia Sportswear's, now wears the titles of VP, CFO, and treasurer since January 23. He succeeds Bryan Timm, who was previously promoted to EVP and COO.

Target:
On January 30, Chairman Bob Ulrich retired at retailer Target. President and CEO Gregg Steinhafel has added chairman to his name while Bob Ulrich stays on as chairman emeritus.

Carter's:
At kids apparel maker Carter's, former Land's End and Hewitt Associates executive Richard Westenberger has become EVP and CFO. VP finance Andrew North has been interim CFO since Mike Casey became CEO, replacing the retired Frederick Rowan.

Best Buy:
On June 24, President and COO Brian Dunn, of consumer electronics retailer Best Buy, will succeed the retiring Brad Anderson as CEO.

Zale:
SVP and controller Cindy Gordon, at jewelry retailer Zale, added the title, that of interim CFO when Rodney Carter resigned.

V.F:
Apparel maker V.F. has split up its outdoor unit into outdoor Americas headed by Steve Rendle and action sports Americas headed by Stephen Murray. Dave Gatto, president, outdoor Americas, has resigned. Scabbia Guerrini was named president, sportswear and contemporary brands, EMEA.

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

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Hart Quote !!!

"Change is the law of life. And those who look only to the past and present are certain to miss the future"

John F. Kennedy (1917 - 1963) 35^th President of the United States of America

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