The Hart Monitor - October Edition

THE

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VII, Issue 10

October 2009

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Retail Sales Weak, But Stores Post First Gain Since July ‘08

Many retailers top expectations in September

The nation's stores saw their first sales gain in more than a year in September, a sign of life from shoppers that fuels some hope for the holiday shopping season. A late Labor Day and delayed school openings helped raise back-to school sales and offered some relief to merchants in September, helping to boost sales above Wall Street expectations. Most stores still posted sales declines, but felt encouraged since the drops were less than in recent months. Consumers focused on necessities amid job worries and tight credit.

"Let the retail recovery begin," said Michael Niemira, chief economist at International Council of Shopping Centers. "This is the start of a better performance and better fundamentals." The International Council of Shopping Centers-Goldman Sachs preliminary tally registered an increase of 0.1% for September, compared with a 1.0% drop a year ago. The results mark the first gain since July 2008, when the index was up 1.3%. The tally is based on sales at stores opened at least a year and are considered a key indicator of a retailer's health. The tally excludes Wal-Mart Stores, which stopped reporting monthly sales after it released April results. Stores had struggled with 13 straight months of sales declines, hitting the bottom in November 2008 when sales plummeted 7.7%.

Aeropostale continued to outshine the competition, with a 19% jump in same-store sales, this beat Wall Street's expectations of a 12.4% increase. Gap, dragged down by low sales and Banana Republic, posted a 1% sales decline, a bit worse than the 0.4% dip that was expected. But its lower-price Old Navy division continued to shine, posting a 13% gain in same-store sales.

The Children's Place Retail Stores’ posted a 4% gain in September, beating Wall Street forecasts for a decline. Limited Brands reported a 1% gain, better than the 2.4% slide predicted. American Eagle reported flat sales, beating the estimated 4.1% decrease. Buckle said its same-store sales rose 5.1%, a bit lower than the 5.8% gain anticipated. Wet Seal had a 4.5% decline, but analysts had expected a 7.8% drop. Abercrombie & Fitch saw its sales drop 18%, versus analysts’ estimates of a 20.4% decline.

As Economy Impacts Halloween, Americans Get Creative

Shoppers to Spend $56.31, Down From $66.54 Last Year

As reported by the National Retail Federation, one of the scariest parts of Halloween this year may be the amount people plan to spend on their celebrations. According to the National Retail Federation’s 2009 Halloween Consumer Intentions and Actions Survey, conducted by BIGresearch, consumers are expected to spend an average of $56.31 on Halloween, down from $66.54 last year. Total spending on the holiday is expected to reach $4.75 billion.

Nearly one in three (29.6%) consumers say the state of the U.S. economy will impact their Halloween spending plans. Of those who will be affected, the largest majority (88.0%) plan to spend less overall; others will be buying less candy (46.5%), using last year’s decorations without buying new ones (35.4%), making costumes instead of purchasing them (16.8%), reusing last year’s costumes (15.8%), and not participating in as many Halloween activities such as haunted houses or fall festivals (26.4%).

“The economy has caught up to Halloween this year,” said Tracy Mullin, President and CEO, National Retail Federation. “Since retailers know that Americans will be looking to celebrate on a budget, there’s no doubt we will see creative costume and decorating ideas in every price point imaginable.”

As more evidence of the effect of the recession, fewer people plan to celebrate Halloween this year (62.1% vs. 64.5% last year), and those who are celebrating will participate in fewer activities. According to the survey, one-third (33.4%) will dress in costume, compared to 35.3 percent last year. The number of people carving a pumpkin will also drop (42.4% compared to 44.6% last year). Additionally, fewer people will throw or attend a party (30.2% vs. 31.1% in 2008), visit a haunted house (17.0% vs. 18.1% in 2008) and hand out candy (71.2% vs. 73.7% last year). Even with the very popular life-sized yard decorations in recent years, fewer people plan to decorate their home or yard (47.3% vs. 50.3%).

Young adults, who were last year’s big spenders for Halloween, plan to scale back dramatically this year. According to the survey, the average 18-24 year-old will spend $68.56 on the holiday, compared to $86.59 last year and $81.91 in 2007.

“With part-time jobs more scarce and parents unable to help out financially, many young adults have been impacted substantially by the economy,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “The overriding theme for Americans’ Halloween celebrations this year will be, ‘How creative can I be, and how little can I spend?’”

The survey found consumers plan to spend an average of $20.75 on costumes, which includes children’s and pets’ costumes; $17.99 on candy; $14.54 on decorations and $3.02 on greeting cards.

This Year’s Most Popular Costumes:

Top Adult Costumes

1. Witch

2. Vampire

3. Pirate

4. Clown

5. Wench/Tart/Vixon

6. Cat

7. Devil

8. Scary Costume/Mask

9. Athlete

10. Police Officer

Top Kids Costumes

1. Princess

2. Witch

3. Spider-Man

4. Pirate

5. Pumpkin

6. Vampire

7. Disney Princess

8. Star Wars Character

9. Tinker Bell

10. Batman

Top Pet Costumes

1. Pumpkin

2. Devil

3. Bowties/Fancy Collars

4. Witch

5. Superdog/Supercat

6. Princess

7. Bat

8. Dog

9. Angel

10. Bee

Toys"R"Us 2009 Holiday Hot Toy List – The Fabulous 15

According to the PRNewswire, on Sept 24, 2009 Toys “R” Us, the world's leading specialty toy retailer, revealed the Holiday Hot Toy List, which includes the best toys of the holiday season, known as the “Fabulous 15”.

"The Toys"R"Us Holiday Hot Toy List is the result of countless hours dedicated to tracking, testing and identifying the best products throughout the year," said Karen Dodge, Senior Vice President, Chief Merchandising Officer, Toys"R"Us, U.S. "There are so many great new toys, games and kid-friendly electronics available this year that we had a difficult time narrowing down the items on the list. And, with toys spanning every price point, parents will have lots of affordable fun options to choose from this holiday season at Toys"R"Us."

Following are the Toys"R"Us "Fabulous 15," representing the best new toys of the holiday season (listed in alphabetical order):

BAKUGAN BATTLE BRAWLERS NEW VESTROIA Maxus
Helios 7 in 1 from Spin Master

ChixOs Pink Design-A-Luxury Loft from Spin Master

Color Me a Song from Crayola Beginnings

Disney Netpal from ASUS

Disney-Pixar Toy Story Interactive Buddies Talking Action Figures (Buzz and Woody)
from Thinkway

Disney Princess: Just One Kiss Princess Tiana Doll from Mattel

Fast Lane JLX OVER DRIVE RADIO CONTROL ALL TERRAIN VEHICLE from Toys"R"Us

Laugh & Learn Learning Farm from Fisher-Price

Little Mommy Baby Ah-Choo from Fisher-Price

Mindflex from Mattel

NERF N-Strike Raider Rapid Fire CS-35 from Hasbro

Star Wars Fan's Choice Anniversary Edition Home One Mon Calamari Star Cruiser from LEGO

TRANSFORMERS: REVENGE OF THE FALLEN CONSTRUCTICON DEVASTATOR from Hasbro

Wii Sports Resort from Nintendo

Zhu Zhu Pets Hamster from Cepia

H1N1 Virus (Swine Flu) Preparedness For Retailers

In a recent article by Rhett Asher posted in Loss Prevention, the concerns of retailers and customers are alike regarding the H1N1 influenza virus, known as the swine flu, and are taken seriously as we approach the official flu season. Each year, seasonal flu kills approximately 36,000 people in the United States. The recent outbreak in 2009 of the H1N1 influenza, shows just how rapidly a new strain of flu can suddenly appear and quickly spread throughout the world. Asher points out, “As the 2009 flu season approaches, many people have begun to ask about the H1N1 virus and my thoughts on its potential to become a full-blown epidemic. Are people worried? they ask. How can I make sure my employees are healthy? Will this keep people out of stores? What are businesses doing to prepare?”

Every threat is taken seriously since none of us know who the flu will affect or how bad it will become. Any virus has the potential to become more serious than others. “If past historical disasters and challenges are any indication of future behavior, I am not too worried,” claims Asher. “The initial outbreak last spring gave our country an early warning and time to react and to prepare. Retailers are a resilient, responsive and prepared industry.”

Many retailers have made or are making plans to protect employees, customers and their bottom line; this includes planning for absenteeism, what to do during a severe outbreak as well as avoiding unexpected interruptions in supply chains.

There are on-line resources available to guide a retailer’s preparedness, for example www.Flu.gov which is the CDC Weekly H1N1 Flu Update. Rhett Asher also recommends the following as well to stay informed: the Centers for Disease Control guidelines and to check out recommendations from the Department of Homeland Security that include tips on how to write a business continuity plan, steps for keeping employees healthy, FAQs on H1N1 and many more resources available on-line.

Also consider taking these pro-active steps to aid in the prevention of spreading the flu and illness in your stores:

Encourage employees to get vaccinated, either on their own or through a company-sponsored program. The seasonal flu shot is now available and the H1N1 shot should be available in early October.
Remind employees to wash their hands many times throughout the day. The CDC recommends reciting the “happy birthday” song twice while washing.
Keep hand sanitizers handy - near the cash registers, in the break room and bathrooms. You might even want to consider handing out pocket-sized hand sanitizer bottles for associates to sanitize their hands throughout the day.
When you have a plan, communicate it to employees at all levels so they know they should do if they feel sick or are running a fever.

Jobless Rate Reaches 9.8 Percent in September

The unemployment rate rose to 9.8 percent in September, the highest since June 1983, as employers cut far more jobs than expected.

According to AP Economics Writer Christopher Rugaber, the report shows that the recession is still inflicting widespread pain and that consumers, worried about job losses and stagnant wages, will ultimately restrain spending. This will affect the scope of the economic recovery. Consumer spending accounts for about 70 percent of the nation's economy.

Federal Reserve Chairman Ben Bernanke said Thursday that even if the economy were to grow at a 3 percent pace in the coming quarters, it would not be enough to quickly drive down the unemployment rate and that it is likely to remain above 9 percent through the end of 2010.

Most analysts expect the economy to continue to improve, but at a slow, uneven pace. Even with government stimulus programs, like the Cash for Clunkers auto rebates, economists worry that growth will slow once the impact of such programs fades.

"Consumers ... are going to struggle to increase their income," said Brian Fabbri, North American chief economist for BNP Paribas. "If they're struggling, they're not consuming. That just takes some of the legs out of recovery."

All told, 15.1 million Americans are now out of work. And 7.2 million jobs have been eliminated since the recession began in December 2007. 571,000 of the unemployed dropped out of the work force last month, some out of frustration over the lack of jobs. That sent the participation rate, or the percentage of the population either working or looking for work, to a 23-year low. The number of people out of work for six months or longer jumped to a record 5.4 million, this makes up almost 36 percent of the unemployed.

The average hourly work week fell back to a record low of 33 in September. That figure is important because economists are looking for companies to add more hours for current workers before they hire new ones.

The uncertainty that surrounds the recovery has made employers reluctant to hire. The Business Roundtable, a group of CEOs from large corporations, said earlier this week that only 13 percent of its members expect to increase hiring over the next six months.

On the bright side, temporary help agencies eliminated only 1,700 jobs, down from the previous month. Economists see temporary jobs as a leading indicator, as employers are likely to hire temp workers before permanent ones.

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.

Aeropostale:
Aeropostale veteran Julian Geiger is stepping down from his CEO role at the end of the year with plans to stay on as chairman of the board. Geiger, who has lead the company since 1996, will be succeeded by co-CEOs Mindy Meads and Thomas Johnson.

GameStop:
Former CFO, David Carlson, at game retailer GameStop, will remain as EVP finance until his full retirement March 1, 2010. Cathy Smith has been hired as EVP and CFO.

Levi Strauss:
Levi Strauss & Co. has brought on former Eastman Kodak executive Jaime Szulc as SVP and global chief marketing officer of the Levi's brand.

Urban Brands:
Former Ann Taylor Stores COO Laura Weil is now women's clothing retailer Urban Brands’ CEO.

The Finish Line:
At athletic footwear retailer The Finish Line, CIO Don Courtney has a new role as president of e-commerce.

The Pantry:
Former Coca-Cola Enterprises EVP Terry Marks is now president and CEO at convenience store operator The Pantry. He succeeded Pete Sodini, who has retired.

Lowe's:
Home improvement retailer Lowe's Companies has brought on Alan Huggins as president, Lowe's Canada. He succeeds Don Stallings, who will work with the company's Woolworths joint venture.

Starbucks:
Coffee retailer Starbucks added in former PepsiCo VP Annie Young-Scrivner as global chief marketing officer, Michelle Gass as president of Seattle's Best Coffee, and John Culver as president of global consumer products and foodservice.

Skechers U.S.A.:
COO David Weinberg adds on the title of CFO when Fred Schneider resigns in February at footwear maker Skechers U.S.A.

Avon Products:
Effective October 30, president, Liz Smith, will be leaving direct seller Avon Products.

Coldwater Creek:
Chairman and co-founder Dennis Pence at apparel retailer Coldwater Creek is now its new president and CEO. Former President and CEO Dan Griesemer has resigned.

Tesco:
At grocery retailer Tesco, former distribution director, Laurie McIlwee, is now group finance director. She succeeds Andrew Higginson, who was previously named chief executive retail.

Gap Co-Founder, Donald Fisher, Dies at 81

Donald George Fisher was born Sept. 3, 1928 to middle-class parents and was a lifetime resident of San Francisco. At the age of 41 he turned his focus from real estate development to retail in August 1969 when he was unable to return a pair of ill-fitting Levi jeans and could not find a store that carried all sizes.

Fisher and his wife Doris bought a shop in San Francisco; named it the Gap (short for Generation Gap) and sold blue jeans and records appealing to the younger crowd. As reported by the Associated Press, what Fisher anticipated as a possible 10 stores, grew to be one of the nation’s largest specialty retailers with more than 3,000 stores in over 25 countries. Fisher was quoted as saying, “I didn’t plan to go into the clothing business. I was just fortunate to have a bit of bad luck.

San Francisco financier Warren Hellman, a friend since childhood, said Mr. Fisher “came as close to being a man for all seasons as anyone…a sensational athlete, a hell of a businessman, a terrific family man, and he was generous.” He was spoken of as a great entrepreneur and philanthropist who helped shape the retail world and his local community. Fisher’s main object of philanthropy was education. He provided the seed money for the non-profit “Knowledge is Power Program” and continued to donate over the years as well as contribute to “Teach for America”.

In 1976, Gap, Inc. became a publicly traded company. Fisher was CEO until 1995 and chairman until 2004. He remained a company director until his death. Glenn Murphy, CEO and chairman of Gap Inc. said in a statement, “Today we lost a friend, a mentor and a great visionary.”

Fisher is survived by his wife Doris, their three sons and ten grandchildren. His son Bob Fisher continues to serve on Gap’s board of directors and Doris serves as an honorary lifetime member of the board.

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