The Hart Monitor - March Edition

THE

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VII, Issue 3

March 2009

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U.S. Chain Store Sales Fell 0.1% in February

Weak Performance… But Better Than Expected

U.S. chain store sales for February 2009 were down 0.1 % on a year-over-year same-store basis, according to ICSC’s index.

Americans remained focused on groceries and other necessities in February, resulting in another month of sales declines for many merchants. Consumers are still struggling with job cuts, tight credit and the plunging stock market. But the results were not as steep as Wall Street expected. With the exception of Wal-Mart, retailers posted another round of sinking sales numbers.

The biggest drop was reported by Saks Inc., which saw sales drop 26% year-over-year in February. The company blamed the sales drop on continued weakness across all merchandise categories.

Wal-Mart, which has seen their business grow in recent months as shoppers look for lower prices on necessities, same-store sales increased 5.1%. This beat the prediction of analysts, who projected, on average, a 2.4% gain.

Several other retailers saw sales drop:

Target Corp.- same-store sales dropped 4.1%

Nordstrom Inc.- sales fell 15.4%

Limited Brands – 7 % drop

The Gap Inc. – sales fell 12%

J.C. Penney- 8.8% decline

"Although Wal-Mart may have been the poster child of February's relatively better-than-expected industry sales performance, there was a slightly broader industry improvement for the month," said Michael P. Niemira, ICSC chief economist and director of research. "Moreover, the last four months show an increasingly less negative performance for the industry — which is an encouraging sign and one that ultimately will form a foundation for stronger sales performance later in the year," he added.

For March, ICSC Research expects comparable store sales to be down 1% to flat on a year-over-year basis.

Consumers Plan to Cut Back on St. Patrick’s Day Celebrations

According to NRF’s St. Patrick’s Day Consumer Intentions and Actions Survey, conducted by BIGresearch, people celebrating the Irish holiday will spend an average of $32.80 on decorations, food and beverage and festive attire, compared to an average of $35.04 in 2008. Total spending is expected to reach $3.29 billion (this spending figure is extrapolation of US adults 18 years old or older). Total spending this year is projected to be about 10% less than last year, which was estimated at $2.64 billion.

While young adults are usually eager to celebrate St. Patrick’s Day, spending is expected to decrease for 18-24 year-olds from an average of $42.20 last year to $36.05 this year. According to the survey, 25-34 year-olds will spend the most, with an average of $39.42 per person.

“Increased concern about the economy among young adults has forced many of them to pull back on discretionary spending,” said NRF President and CEO Tracy Mullin. “Many Americans will celebrate St. Patrick’s Day in small ways with special meals or a few decorations.”

Among the small ways Americans will celebrate:

Wear something green:	81.9%
Make a special dinner:	33%
Decorate home or office:	22%

While fewer people plan to celebrate the holiday this year (44% vs. 46% in 2008), smaller private parties (17%) and bar/restaurant celebrations (30%) will still be popular.

About the Survey

The NRF 2009 St. Patrick’s Day Consumer Intentions and Actions Survey, conducted by BIGresearch, was designed to gauge consumer behavior and shopping trends related to St. Patrick’s Day. The poll of 8,426 consumers was conducted from February 3-10, 2009. The consumer poll has a margin of error of plus or minus 1.0 percent.

New Legislation to Fight Organized Retail Crime

As the recession continues for retailers, one thing is clear - retailers can’t afford the losses. New legislation was recently introduced to fight the $30 billion-a-year problem of organized retail crime, saying introduction comes at a time when the nation’s economic crisis has more shoppers turning to “bargain” merchandise they might not realize is stolen or tainted.

According to NRF Vice President for Loss Prevention Joseph LaRocca, organized retail crime is a rapidly growing problem, especially as the challenging economy fuels the increase in the market for stolen merchandise. Retailers are seeing their inventory disappear in increasing amounts, and the goods end up at flea markets or on the Internet at tempting prices. LaRocca adds further that losses from these crimes ultimately drive up the price of legitimate merchandise --at a time when consumers can least afford it. Lawmakers are ready to stop treating the perpetrators of ORC like shoplifters and recognize them as professional criminals.

Three major bills on ORC were recently introduced. The measures are similar to legislation first introduced last summer. While the bills offer different approaches to combating ORC, taken together they would define ORC as a federal crime for the first time, and require review and necessary amendments of federal sentencing guidelines for criminals convicted of ORC. They also require operators of online auction sites to cooperate with retailers and law enforcement officials in their investigations of ORC, and, in some cases, hold auction sites responsible for the sale of stolen merchandise that could have been prevented.

Measures specific to the Internet are necessary because online auction operators don’t do enough to cooperate with retailers to stop ORC, typically working with police only after an incident is reported and not taking sufficient proactive steps to keep stolen merchandise off their sites.

Retailers lose as much as $30 billion to ORC each year, according to the FBI and retail loss prevention experts, and an NRF survey found a record 85% of retailers were victims of ORC in the past year.

Consumers: Still Going Green in This Economy

Maintaining ecological balance in product packaging may not be an essential incentive for most people’s purchases but an outright disregard for it may turn off consumers from purchasing brands which do not combine green business practices with their products.
A study entitled “Sustainability Outlook: The Rise of Consumer Responsibility,” conducted by The Hartman Group, based in Bellevue, Washington, identified 88% of the population as members of the "world of sustainability."

What the study found was the ability of packaging to have some kind of afterlife feature actually matters to the consumer and being recyclable reigned supreme.

The recycling packaging preferences that consumers felt most important were:

75% viewed the return of packaging to the marketplace as very important

71% chose biodegradability

62% favored minimal packaging

67% wanted recycled content

63% refillable containers

60% containers reusable for other purposes

51% compostables

“Consumers are increasingly aware of the back-end—where it goes when it enters their home and after they touch it,” said Alison Worthington, The Hartman Group’s managing director of sustainability. “Packaging is also a great way to communicate your sustainability message… how it's disposed of—the three Rs [Reduce, Reuse, Recycle].”
New consumer research from Mintel, has shown the number of consumers who regularly buy green products remains unchanged since 2008 at 36%. That number had previously tripled from the prior year (12% in 2007). Despite the state of the economy, it seems that consumers are sticking with “Going Green” – although at a less accelerated pace.

As usual, cost is a factor. The survey found that the majority of consumers are willing to pay a little extra for green products and 54% of those declared they would buy more green products should costs become less.

There are many opportunities for growth in the green markets over the next few years. Although the economy is expected to impact sales through 2009, forecasters are predicting a 19% overall growth for green products through 2013. Markets that are anticipated to do well overall include green personal care and environmentally friendly household cleaners. Organic food should also continue its steady growth over the next five years.

Will the Recession Doom the Last Sunday Blue Laws?

As reported by Yahoo! News, a handful of state legislatures have declared it’s closing time for Sunday alcohol sales restrictions, saying an extra day of sales could give their foundering budgets a much-needed shot of revenue. Those states – Georgia, Connecticut, Texas, Alabama and Minnesota – enjoy overwhelming voter support for an extra day of sales.

Proponents of Sunday sales argue that state budgets are under plenty of pressure and that by allowing people to buy beer, wine or liquor on Sunday at grocery or package stores, states could reap millions of dollars in tax revenue. Besides, as President Roosevelt learned in the 1930s when he successfully repealed Prohibition, drinks have a way of keeping hopes high when things look bleak. In Johnathan Alter’s The Defining Moment: FDR’s Hundred Days and the Triumph of Hope, President Roosevelt recognized that legally procured cocktails were the way to keep spirits high when Americans were trying to get used to putting their trust into the nation’s crumbling banking system again. And, it could be argued, that sales also helped stimulate the economy in the middle of the Great Depression.

“Sunday sales legislation always comes bubbling up when the economy goes south,” says David Laband, an Auburn University economics professor who authored Blue Laws: The History, Economics, and Politics of Sunday-Closing Laws. Blue laws, which restrict shopping of any kind on Sunday, date back to the colonial era, Laband says. However, those laws gradually died off as economic forces made some states realize that they could stand to gain by having stores open on Sunday. For example, the entry of women into the workforce in World War II made weekend shopping a necessity. “Slowly and systematically we’ve seen these laws lifted in the past century, even more so when there has been an economic downturn,” Laband says. “States realize that consumers will migrate to a place where they can buy what they want. And, whatever their reasons are for not wanting to sell on Sunday, these states realize they’re paying a price for it in foregone tax revenues. So once the economy goes bad, then the cost of their policies are apparent to them.”

Three states – Georgia, Connecticut and Indiana – ban the sale of beer, wine and spirits, while 15 ban only liquor sales. Connecticut is considering repealing its ban because it has been losing revenue to New York, Massachusetts and Rhode Island, three neighboring states that repealed the Sunday sales ban in 2003. Texas is also reconsidering Sunday sales bans of liquor, with two of the three bills specific to sales along the Texas-Mexico border. “States are seeing Sunday sales as a positive way to raise revenue without raising taxes or cutting valuable programs,” says Ben Jenkins, spokesman for the Distilled Spirits Council of the United States. “That, along with consumer demand, is driving this change.”

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.

Cato

Jeff Shock is now SVP and controller (formerly held by EVP and CFO John Howe) at women’s apparel retailer Cato.

Charming Shoppes

Retailer of women’s apparel, Charming Shoppes, has given Anthony Romano the title of EVP business transformation. Bill Bass was named interim president, Charming Direct; Rachel Ungaro was promoted to SVP general merchandising Fashion Bug; and James Ferree was named SVP general merchandising, Fashion Bug as well.

Chico's FAS

Cynthia Murray has changed her EVP and chief merchandising officer title at Stage Stores to brand president, Chico's.

Walgreen

President and COO Greg Wasson has become the CEO at drugstore company Walgreen; he will continue as president. Acting CEO Alan
McNally remains as chairman.

TJX Companies

At The TJX Companies, discount retailer, Jeff Naylor's executive roles have changed. The former CFO will now have the titles SEVP, CFO, and chief administrative officer. EVP and CFO Trip Tripathy has resigned.

J. C. Penney

Janet Dhillon, from US Airways Group's general counsel, has become EVP, general counsel, and secretary.

OfficeMax

Bruce Besanko, former CFO at the now liquidating Circuit City Stores, has moved his office to OfficeMax and is now the new EVP and CFO.

Tesco

Grocer Tesco brought on Laurie McIlwee as group finance director, replacing Andrew Higginson. Higginson has moved to chief executive, retail division.

Wal-Mart Stores

Jeff Gearhart has become EVP and general counsel at mega-retailer Wal-Mart Stores. Gearhart succeeds Tom Mars, who was promoted to EVP and chief administrative officer, Wal-Mart US.

hhgregg

hhgregg, appliance and electronic retailer, will have president and COO Dennis May as their new CEO effective August 5. Chairman and CEO Jerry Throgmartin will become executive chairman. CFO Donald Van der Wiel has resigned; Jeremy Aguilar was named interim CFO.

ASDA Group

ASDA, Wal-Mart Stores-owned retailer, has promoted Andy Clarke to COO and exchanged the titles of Darren Blackhurst to chief merchandising officer and Rick Bendel to chief marketing officer.

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

Increase Count Accuracy with Post-Count Balancing

While there are many checking and auditing techniques to help identify and correct counting errors after the fact, there is one particularly good technique for enforcing accuracy right up front – during the counting associate’s “first pass”

Post-Count Balancing is simple: after a counting associate has scanned all of the merchandise in a section, they are required to enter the total piece count for that section into the scanner. The scanner software then compares the scan count (what was actually scanned) to the piece count that was keyed by the associate. If they are not in balance, the section is canceled and the associate is forced to re-scan the section.

Exception reports, including Canceled sections, are available in real-time – to be viewed by store management, and also remotely on the web. Post-Count Balancing keeps your counters “on their toes” and identifies error-prone counters right away.

To learn more about this and other best practices for ensuring accuracy in your physical inventory, call Hart Systems 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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Hart Quote !!!

"If we had no winter, the spring would not be so pleasant; if we did not sometimes
taste of adversity, prosperity would not be so welcome”

Anne Bradstreet (1612 – 1672) English-American writer, the first notable American poet,
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