THE 

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VIII,    Issue 5

May  2010

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Slim Sales Gains in April

Easter being a week early this year had no doubt moved a good portion of what would have been April sales into March. The rainy weather in the second half of the month also took a toll on retailers’ sales in April. Still, many chains said combined results in March and April that stripped out the Easter impact showed solid consumer demand. A host of retailers, including Kohl's Department Stores and Macy’s, boosted their first-quarter outlook as revenue climbed faster than expected. 

Overall, retailers' April sales rose 0.5%, missing estimates of a 1.7% increase, with about 27% beating forecasts and 70% of retailers missing analysts' estimates, Thomson Reuters data showed. Combining results for both March and April, however, sales rose 4.8%, stronger than trends seen in both January and February and the best since November 2007, Thomson Reuters data showed.

“Consumers took a breather in April," said Ken Perkins, president of RetailMetrics, a research firm, in an Associated Press report. "But overall, retailers have to be pleased with the spring selling season."  But Perkins added that the consumer spending recovery is still likely to be slow amid persistent high unemployment and tight credit.

According to the International Council of Shopping Centers Index of 30 retailers, the key measure was up 0.8%, compared with a 2.7% decline a year ago. For the March and April months combined, the index rose 4.9%, well above the average pace of 4.1% since January.

"The real takeaway is that profitability continued to improve on the healthy underlying demand," said Michael P. Niemira, chief economist at ICSC.

Discounters, including Costco Wholesale Corp. and BJ's Wholesale Club, were among the biggest winners in April. Macy's also had solid gains. Teen merchants continue to struggle with declines.

  • Macy's, same-store sales edged up 1.1% in April, beating the decline analysts predicted.
  • Kohl’s said its same - store sales decreased 7.7% in April and total sales decreased 5%, which the chain attributed to the timing of Easter and grand-opening events at Kohl’s Department Stores.
  • J.C. Penney said its sales fell 3.3%, with overall sales falling 3.7% to $1.22 billion.
  • Bon-Ton Stores said its stores fell 5% in April, hurt by the shift of Easter sales into March this year. Total revenue for the four weeks ended May 1 fell 5.2% to $189.1 million, from $199.4 million in the prior-year period.
  • Saks’ sales rose 3.2% in April. Analysts had expected a rise of 4.4%. Saks said total sales for the month of April rose 3.4%.
  • Dillard’s sales dropped 5%, worse than Wall Street had expected.

Mother's Day Spending to Reach $14.6 Billion

The National Retail Federation's 2010 Mother’s Day Consumer Intentions and Actions Survey revealed that total spending for Mother's Day this year is expected to reach $14.6 billion. Behind the winter holidays, Mother’s Day is the second largest U.S. consumer spending holiday. Having spent slightly more on Valentine’s Day, Easter and even St. Patrick’s Day this year, consumers are continuing the trend and will spend a little bit more on Mother's Day as well. The survey, which was conducted by BIGresearch and polled 8,197 consumers, found that the average person will spend $126.90 on Mother’s Day gifts, compared to $123.89 last year.

Nearly two-thirds (65.2 percent) of celebrants will buy flowers, totaling $1.9 billion, while an additional 51.8 percent will treat mom to a brunch or dinner, spending $2.9 billion. Jewelers will also see some traffic this year, with 26.2 percent of people planning on buying a special bracelet or earring set, totaling $2.5 billion. Others will buy clothing or clothing accessories ($1.3 billion), gift certificates ($1.5 billion), personal service—such as a day at the spa—($933 million), consumer electronics ($906 million) and greeting cards ($671 million).

Where Will People Shop?

Department Stores                                            30.6% (compared to 27.2 % last year)
Specialty Stores (such as florists or jewelers)      33.6%
Discount Store                                                  30.4%
Online                                                              19.7%
Specialty Clothing Store                                      6.2%
Catalog                                                              2.5%

Of the 83.3 percent of Americans celebrating the holiday this year, most will focus on buying a gift for their mom or stepmom (62.6 percent), or wife (20.6 percent). Others will treat their daughter (9.4 percent), grandmother (7.9 percent), sister (7.6 percent), friend (6.8 percent) or godmother (1.7 percent).

Men will spend more than women on Mother’s Day, shelling out an average of $154.74, compared to women who will spend an average of $100.46. Adults ages 25- to 34-years-old will spend the most, with the average person expected to spend $156.84. Young adults will spend only slightly less at $155.52 average per person. 

U.S. Apparel Retailers Map an Expansion to the North

As reported in an article in the Wall Street Journal, risk-shy from the recession but anxious for growth, U.S. retailers are expanding internationally at a creep—into Canada.

J. Crew Group Inc. is scouting its first non-U.S. locations. Limited Brands Inc. is bringing Victoria's Secret north, and plans to double its Bath & Body Works stores there by year end. Gap Inc. is opening more outlet stores. Limited is expanding its Pink young-adult lingerie stores in Canada, including one in Waterloo, Ontario.

The border crossings underline a wider dilemma facing CEOs in many industries. Many feel the economy is still too fragile to take big ambitious risks, but they still need to restart growth. Canada offers a way to expand internationally, but in a market that's closer and more familiar than Europe or Asia.

Apparel CEOs have saturated the U.S. in the last decade that even as consumers reopen their wallets, many retailers must look outside the country for substantial growth longer term. Crossing into Europe and Asia is tricky. Retailers must learn different labor laws, shopping habits, body sizes and tastes. In the past, most U.S. clothing retailers have just stayed home. One exception, Gap Inc. expanded into Europe and Asia in the 1990s but slowed to focus on domestic sales.

Canadians, by contrast, know American brands and share similar taste and body types. Canadian sales have held steadier through the global downturn than those in the U.S., and the market is less built up.

Still, it's not foolproof. Canadians tend to be slower, steadier shoppers than Americans, with a preference for higher-quality goods and more interest in outdoor looks, says Sam Winberg, a principal at brokerage Northwest Atlantic Canada Inc. Kmart stumbled there, and ended up selling the majority stake in its Canadian operations in 1997 after business failed to keep up with its domestic turnaround efforts.

Millard "Mickey" Drexler, J. Crew's CEO, is heading north cautiously, having learned the risks of aggressive international expansion at the helm of Gap in the 1990s. As Gap expanded abroad —an initiative pushed by its late co-founder Donald Fisher—revenue grew but profit lagged. "I don't know what the rush to be big is for, to be outside the United States," Mr. Drexler said during a panel discussion in January. He cited "minimal" returns on foreign businesses at Gap as reason for skepticism and pointed out what he saw as significant hurdles, including European labor laws and Asian language barriers. He said international growth can be a "distraction" from domestic operations. But in March, the company said it was scouting real estate in Canada, and sees potential for 10 to 15 stores.

Limited executives also are focusing international efforts in Canada, drawn by its proximity and familiarity. "Canada is a market with over 90% awareness of our brands — and it's a market that we can actually drive to from Columbus, Ohio," where the company is based, said Martin Waters, executive vice president of international at Limited, at the company's most recent investor meeting. The company has been slowly laying groundwork recently to expand in Canada. In 2007, it acquired Canadian lingerie brand La Senza. It opened a handful of Bath & Body Works to test the market in 2008. They're generating 2.5 times the sales per square foot as the average U.S. store, says Mr. Waters. "Now we have our feet on the ground we're going to start plowing forward," said Limited's Chief Executive Leslie Wexner.  Mr. Wexner plans to double Bath & Body Works to at least 60 stores in Canada by year end, and will introduce Victoria's Secret this year there with four 10,000-square foot megastores. He's also expanding its Pink young-adult lingerie chain there to nine stores from four.

Gap is further along in Canada, with 200 Gap, Banana Republic and Old Navy stores. CEO Glenn Murphy— a Canadian himself—says he's learning from earlier mistakes Gap made there as he looks to restart measured international growth elsewhere. Gap was slow to open outlet stores in Canada, for instance, so is adding 10 this year. It won't offer online sales until this fall, more than a decade after launching e-commerce in the U.S. "Talk about being late to the party," Mr. Murphy says. When Gap expands in Italy and China later this year, it will launch online and outlet sales either immediately or shortly thereafter. 

New $100 Bill Unveiled to Prevent High-Tech Counterfeits
In a recent article by The Associated Press, the U.S. Treasury Department declared that it was revamping the $100 bill yet again to inhibit counterfeiters. The new design uses a "moving" microprint technology — was "like something straight out of the Hogwarts School of Witchcraft and Wizardry," quoted the Associated Press.

To boost the new bill, the Treasury had set up a website featuring a clock counting down the hours, minutes, and seconds to its unveiling. Treasury officials recently unveiled the new bill with Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke on hand for the occasion. "This note incorporates the best technology available to ensure we're staying ahead of counterfeiters," Geithner said at the unveiling.

This makeover is the Treasury's latest effort to stay ahead of counterfeiters. Officials are especially concerned with the $100 bill because it is the favorite target of counterfeiters, who continually upgrade their tech arsenals with new color-copying and other software.

One exceptionally high-quality type of counterfeit $100 bill is known as the Superdollar. It is the product of high grade technology believed to be superior to that used in producing the real thing. This Superdollar has been a thorn to the Treasury enforcers for over a decade and no one knows its true origins.

According to a 2006 New York Times Magazine piece by Stephen Mihm, the government's inability to crack the Superdollar case caused a 1996 redesign the $100 bill, its first since 1928. That version featured watermarks as its chief anti-counterfeiting tool. The new bill goes beyond that, featuring a security thread decades in development: the microprinted mobile image that has inspired all the Harry Potter chatter. When the bill is moved side to side, the image on the bill appears to move up and down, and it's moved up and down, the image appears to move side to side.

The new bill will go into circulation later this year. Also keep an eye out for a new design for the $5 bill. For some U.S. currency users, it's still not all about the Benjamins.

As Consumers Become More Optimistic, They Go Shopping
According to a recent article published in USA Today, a panel of government based economists can’t agree on when or whether the recession has ended. According to a research poll taken by BIGresearch, the country is still in recession. However, shopping carts filled with economic optimism are showing something different in many consumer polls.

Last month’s retail sales, when compared with March 2009, showed the biggest increase in more than 10 years. And while many purchases still tend toward the practical, luxury retail sales are way up, and furniture stores seem to be making a comeback as well.

There are different factors that make for a cautious optimistic outlook. March sales were being compared with one of the lowest points in retail history, unemployment rate remains at a dismal 9.7%, heavy snow at the start of the year for much of the country, followed by warmer than usual weather. Other factors include Easter falling almost a week earlier than last year, moving holiday-related sales up a month.

The index track that was used to track consumer cash flow and help predict future spending, stated the increase was due to the decline in unemployment claims, which peaked a year ago, and the lower tax rates thanks to last year’s federal government stimulus package. Many feel that if they weren’t laid off, they likely won’t be. Consumers were simply nervous about shopping much of last year, but they are getting their courage back.

"Thrift only lasts so long. You eventually have to replace stuff," says David Wyss, chief economist at Standard & Poor's. "People are making up for lost time." The average person is still focused on savings, yet the outlook for sales of clothing, shoes and some home furnishings are brighter than they have been in the past. Most consumers are still feeling better than they have in the past 6 to 9 months. With the housing market still low and home owners owing more than what their home is worth, consumers are starting to spend on smaller and affordable investments in their homes, to improve their quality of life.

Stores that sell to the middle class, have done well as the economy has improved. Retailers such as JCPenney have increased in popularity and Amazon showed that first quarter profits grew 68%. With the value still weighing on the consumer family budget, shoppers will continue to be pragmatic about where they spend, according to the CEO of JCPenney. “People who come and discover us aren’t returning to their former loyalties.”

According to BIGresearch, a consumer intelligence firm, sales are “up, up, up. We are going in the right direction, but it’s going to take sometime.” 

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.
BCBG Max Azria:
Apparel Retailer BCBG has appointed Brad King as their VP of Loss Prevention.

Forever 21:
Dan Poelstra, CFI was named Corporate LP Manager for the clothing retailer Forever 21.

T.J. Maxx:
At fashion retailer T.J. Maxx, Luis Colon has been promoted to Regional LP Manager.

RadioShack:
Electronics retailer RadioShack has hired former LodgeNet Interactive executive Scott Young as EVP and chief merchandising officer.

Z Gallerie:
At clothing retailer Z Gallerie, Cheryl Barry was appointed Director of LP/Risk Management while Mike Jackson was named Regional LP Manager.

Duane Reade:
Drugstore retailer, Duane Reade, has named Bob Serenson as Director of Loss Prevention.

Barnes & Noble:
Former Travelocity president of North America Tracey Weber has been brought in as EVP textbooks and digital education at book retailer Barnes & Noble.

Coldwater Creek:
Former VP financial planning James Bell has been promoted to SVP and CFO clothing retailer Coldwater Creek. He succeeds John Hayes, who was interim CFO and will remain as SVP, general counsel, and secretary.

Signet Jewelers:
Former New York & Company president and CFO Ron Ristau has been hired as the CFO designate at jewelry retailer Signet Jewelers. He will succeed Walker Boyd as CFO when Boyd retires in June 2010.

ASDA Group:
Retailer ASDA Group is looking for a CEO. President and CEO Andy Bond will stay on as CEO and acting chairman of the executive committee until a replacement is found at the Wal-Mart Stores-owned company.

Lowe's:
Home improvement retailer Lowe's has made Janet Saura SVP and deputy general counsel. 
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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From the NRF Website:
 

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