THE 

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VIII,    Issue 11

November 2010

Hart Systems, LLC is the rental solution for inventory scanning.
We Make Self-Inventory Simple!
Contact us to find out how we may help you improve your physical inventory process.

Heavy Discounts Help Make for Gains in October
 
Many retailers reported solid gains in October as heavy discounting on cold-weather items get shoppers to spend amid unusually warm temperatures in much of the country. There were a few weak spots, however, with weak sales of seasonal merchandise at some retail chains. Overall, Thomson Reuters, which tracks same-store sales for a group of 28 national chains, said total sales for the group were expected to post a 1.6% increase in same-store sales for October.

Costco Wholesale Corp. and Limited Brands were among the chains that reported larger increases than Wall Street analysts expected. Macy's also had a good performance and also raised its earnings outlook. Target Corp. had a small gain that inched above Wall Street estimates.

October is typically a slow month because it falls between back-to-school shopping and the start of the holiday shopping period. However, shoppers appeared to take more of a breather than usual as they struggled with continued economic uncertainty.

In the apparel segment, Zumiez said its same-store sales rose 21.5% in October, far above the 7.8% analyst estimate reported by Thomson Reuters. Limited Brands turned in another strong performance, with a 9% increase in same-store sales.

Abercrombie & Fitch Co. said its sales rose 2% in October, below estimates, but quarterly revenue came in above analyst expectations.

Among the retailers that did worse than expected in October was Hot Topic, whose same-store sales fell 8.5%. The figure fell 10.7% at namesake stores, but rose 2.9% at its plus-sized Torrid division.
  • In other apparel same-store results for October:

             •    The Buckle outdid estimates, with a 2.6% increase
             •    Ross Stores reported a 4.0% increase
             •    Gap’s sales increased 2%
             •    Cato reported a 2% increase
             •    The Wet Seal reported a 1.3% decline in sales
             •    Aeropostale’s sales decreased 2%
             •    Abercrombie & Fitch Co. reported a 2% rise, below analysts’ estimates

Stores Push Black Friday Into October
 
As reported in an article from the New York Times, the year’s most popular discount shopping event, referring to the Friday after Thanksgiving, arrived ahead of Halloween this year, with some promotions beginning last week and others throughout November.

Both retailers who have had tepid sales lately and those with rising sales are pushing the tradition forward in a bid to grab shoppers’ limited money. Recession-trained customers are also pushing the stores to offer big deals now or risk losing out to competitors, though there is some skepticism about how significant some of the early discounts are.

Black Friday creep has been around for a while, but analysts say this year breaks new ground: the range of stores offering early discounts is wider; the discounts are steeper and the sale periods longer — in some instances, a full month before the real thing.

“Consumers have been trained to buy merchandise only ‘on sale,’ ” Sherif Mityas, a partner in the retail practice at the consulting firm A. T. Kearney, said in an e-mail. “Given a limited budget, if retailers don’t capture that first or second purchase, they may find themselves with a lot of inventory the week before Christmas and the need for massive discounting to save the holiday.”

Traditionally, stores used low prices on the Friday after Thanksgiving to attract shoppers, who, they hoped, would put full-price items in their carts alongside the bargains.

In 2008, as the economy sank, the offers became more intense. “Retailers had to go even further in the breadth and depth of their sales post-Black Friday in attempts to salvage some degree of revenue,” Mr. Mityas said. Last year, with consumers trained to look for deals, “sales growth improved, but at the cost of profitability — retailers were essentially buying their foot traffic,” he said.

This year, the pre-Friday deals are expanding more than ever. And consumers and retailers are more evenly matched, Mr. Mityas said, as shoppers demand early and frequent sales, and retailers “aim to drive foot traffic without resorting to ‘70 percent off everything’ signs in the windows.”

Even with the effort to capture more sales through early promotions, there is no guarantee that retailers will see a bounce in their bottom lines. In the three years before the financial crisis, there was accelerated spending in early November, said Mike Berry, director of industry research for MasterCard Advisors SpendingPulse, which estimates total retail sales. But in 2008 and 2009, as shopping creep took hold, spending was weaker. One explanation is that retailers cut prices too steeply, leading perhaps to increased traffic but low revenue over all. And customers simply refused to buy anything at full price.

First NRF Holiday Spending Survey Shows Glimmers of Hope
 
Although Americans are still operating as recession-conscious consumers and have changed their shopping habits, some initial findings from the NRF’s first holiday survey indicate consumers won’t only be focusing on low prices and basic necessities this year. According to NRF’s 2010 Holiday Consumer Intentions and Actions Survey, US consumers plan to spend an average of $688.87 on holiday-related shopping, a slight rise from last year’s $681.83.

Most holiday gift-givers will spend the largest portion of their budget buying gifts for family ($393.55) and friends ($71.45). People will still find room in their budgets for tokens of appreciation for both co-workers ($18.26), and others ($34.82). Total spending on gifts ($518.08) is expected to rise 2.1 percent from last year, which is in line with NRF’s 2010 holiday forecast.

What else will Americans spend on?
 
Decorations $41.51
Greeting Cards/Postage $26.10
Candy/Food $86.32
Flowers $16.86
                                       
“Consumers will still shop with the economy in the back of their minds, but we’re starting to see shoppers take baby steps toward a new normal,” said NRF President and CEO Matthew Shay. “As Americans open up their wallets for more discretionary gifts like jewelry or take advantage of sales to buy for themselves, retailers will begin to truly believe that the worst may be behind them.”

Will Electronics Shortages Cause Holiday Retail Crisis
 
According to Forbes.com this year, holiday sales may be weaker than usual for gadget makers. This is not just only due to frugal shoppers. Analysts are warning that an inadequate supply of electrical components could lead to shortages of smartphones, game consoles and MP3 players, all of which traditionally sell briskly during the holidays.

“There are a lot of conflicting signals within the supply chain right now,” says Jason Busch, the founder and Managing Director of Advisory firm Azul Partners. “The losers will be consumers who might not get the products they want and manufacturers who will see an impact on all.”

Industry experts trace the crunch to the 2008 financial crisis when a number of China-based factories shut down or curtailed production. Many plants remain shuttered or continue to operate at less than full strength. This lack of capacity, in turn, increases lead times for manufacturers, which can delay the arrival of new products to market and the restocking of popular products. Shortages could hurt manufacturers’ reputations and dent the retail industry’s all important holiday sales figures. Despite a national unemployment rate of 9.6%, the National Retail Federation is forecasting a 2.3% increase in holiday sales this year and analysts expect consumers to purchase at least one or two trendy gadgets. “It will be an off fourth-quarter, because of manufacturer, not consumer behavior.”

Experts say the solution to the inventory conundrum is smarter sales and operation planning. “If manufacturers were more accurate about what they need the following quarter-and stuck to their forecasts-there would be less pain,” says Busch.

Rising commodity costs make these evaluations even more important. Gartner supply chain analyst Mickey North Rizza recommends that manufacturers offer fewer products and focus on markets they can control or at least take a good share of. Careful guidance may encourage factory owners to finally boost production-a process could take anywhere from six months to several years, if a new facility is required.

Until then, however, expect a holiday squeeze, at least with some devices.

Business Inventory Gains Continue to Slow
 
As reported by Paul Vigna and John Shipman of Wall Street Journal.com, the inventory build that gave the U.S. economy a boost this year is slowing down. There is a rising uncertainty among manufacturers whether or not the elasticity of the inventories has been stretched too far and may possibly snap back later this year or in 2011, according to third-quarter earnings reports.

This “bullwhip effect” is caused by the resumption of demand after a recession that creates a “snapback” effect that is, for the most part, larger than customer demand. The inventory gains slow and companies begin to match their output demand more closely.

Tupperware Brands C.F.O., Michael Poteshman, said last week that their Corporations inventories are currently higher “than we’d like”. He also added: “this is an area of focus for us.”

David Rodgers, the Finance Chief of the lawn-mower engine manufacturer Briggs & Stratton, said retailers “continue to be somewhat cautious in reordering inventory for the current season, so that they do not risk a carryover of their inventory into next spring”

Although the mining and agricultural markets are booming, suppliers are keeping a close eye on stocks. Caterpillar Inc.’s sales have climbed back after a three year lull but its dealers are staying vigilant when it comes to their inventories.

A report from the Federal Reserve Bank in Dallas showed declines in materials and finished goods inventories, only at a slower pace than in recent months. An analogous report by the Philadelphia branch said “firms continue to report overall declines in inventories”

15 Data Security Tips to Protect Your Business
 
According to Small Business Computing, the Privacy Rights Clearinghouse published its latest Chronology of Data Breaches, which showed that since 2005 more than half-billion sensitive records have been breached. Of those breached records -- which contained such sensitive data as customer credit card or social security numbers – approximately one-fifth came from retailers, merchants and other types of non-insurance-related businesses, the majority of which were small to midsized.

The 7 Causes of Security Breaches:

1. Unintended Disclosure
2. Hacking or Malware
3. Payment Card Fraud
4. Bad Employees
5. Lost, Discarded or Stolen Paper Documents
6. Lost, Discarded or Stolen Mobile Devices
7. Stolen Computers or Servers

15 Ways to Protect Against Data Security Threats

1. Identify what sensitive information you have, what you use it for and where it resides.
2. Isolate/segregate sensitive data.
3. Encrypt sensitive data.
4. Use Secure Sockets Layer (SSL) or similarly secure connection for receiving or transmitting credit card information and other sensitive financial data.
5. Do background checks and get at least two references for all new employees.
6. Institute a good privacy policy, and make protecting sensitive data a part of the company culture.
7. Use good firewall and a secure wireless connection.
8. Keep anti-virus and anti-spy ware software up to date.
9. Protect sensitive data with strong passwords and change passwords on a regular basis.
10. Make sure you and your employees only download applications that come from reliable sources.
11. Lock filing cabinets and rooms where you keep sensitive data, and only give keys to trusted employees.
12. Use paper shredders, and place them in strategic places around your office.
13. Protect laptops, and be careful where you use them.
14. If you outsource any critical functions, vet third-party security practices.
15. Consider outsourcing security or hiring a consultant to make sure your business is safe and secure.

Movers & Shakers

  People you know, who are on the go…
Walt Disney:
Media conglomerate Walt Disney has added former Yahoo! VP James Pitaro and John Pleasants as co-presidents of Disney Interactive Media Group and Pitaro as head of Disney Online.

Juicy Couture:
Liz Claiborne-owned clothing company Juicy Couture has brought onboard former American Eagle Outfitters executive LeAnn Nealz president and chief creative officer this month.

Guess?:
Former Nike executive Michael Prince is now the COO at apparel and accessories company Guess?.

Charming Shoppes:
Apparel retailer Charming Shoppes is searching for a new CEO after Jim Fogarty stepped down. Anthony Romano has been promoted from VP global sourcing and business transformation to COO.

New York & Company:
Women's apparel retailer New York & Company has hired former Payless ShoeSource executive Eran Cohen as their title EVP and chief marketing officer.

Borders Group:
Bookstore operator Borders Group now has former Las Vegas Sands SVP finance Scott Henry as EVP and CFO. Henry succeeds interim CFO Glen Tomaszewski, who remains as VP and controller.
 
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

    

LOSS PREVENTION TIP
 

Shoplifting accounts for over 30% of all inventory shrink. While every dollar spent on LP programs usually returns more than a dollar, there are other simple, low-cost and proven methods for fighting shrink:
 

  • Make sure your employees are keeping a watchful eye. Establish incentive programs for catching thieves, and procedures for them to follow should they suspect someone is shoplifting.

  • Make sure you can see everything that goes on in your store. Keep counters low, no more than waist-high, and mount mirrors in corners so there are no blind spots.

  • Arrange counters and display tables in such a way that there is no direct route to exit.

  • Arrange displays so that missing items are easily noticed. Place small items in neat rows or clearly defined patterns. Reverse alternate hangers of hanging garments to prevent shoplifters from grabbing the apparel and running.

  • Maintain strict inventory control. Limit employee access to stock and inventory records. Conduct unexpected inventory checks so dishonest employees know they run the risk of being caught by surprise.

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.
 

To view a previous Hart Monitor, click August, September, October
 

Each month, the Hart Monitor is sent out to over 7,500 executives in the retail community.
 

Sign up a friend. Have any friends or colleagues in the retail world that may be interested in receiving this information periodically? We'll be happy to send them our free newsletter! Click here -Send to a Friend- and put the e-mail address in the body of the message.
 

To change your e-mail address, click here -Change My Address- and include your new address in the body of the e-mail.
 

To unsubscribe, send an email to HartMonitor@hartsystems.com with the word "Unsubscribe" in the subject line of the message.

© 2010 Hart Systems, LLC
 

Hart Quote !!!

 “As we express our gratitude, we must never forget that the highest
appreciation is not to utter words, but to live by them.”
John Fitzgerald Kennedy (1917 – 1963) 35th US President, Politician, Author

Hart Systems, LLC
60 Plant Ave
Hauppauge, NY 11788