THE 

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Volume VIII,    Issue 10

October 2010

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September Sales Better Than Expected
 
As reported in chainstoreage.com, retailer’s September same-store results were largely better than expected, helped by a late burst of back-to-school shipping.

Based on an aggregate of analyst’s estimates for 30 chains, same-store sales gained 2.3% last month, according to Retail Metrics. “An upside surprise bodes well for the holiday season,” said Ken Perkins, president, Retail Metrics, “Back-to-school has a pretty strong correlation to holiday.”

The solid results were surprising in that many retailers were up against difficult comparisons from last September, when retailers began to see some relief from the downturn.

The results, however, weren’t strong across the board. Target, Gap and BJ’s Wholesale were among the retailers that fell short of analysts’ estimates. Also, some analysts cautioned that sales may have been more heavily weighted to the first half of the month, raising questions about October and the holiday shopping season.

In the apparel sector, Abercrombie & Fitch Co.’s same-store sales climbed 13% in September, helped by strong international sales. These results beat the 3.6% increase that analysts surveyed by Thomson Reuters predicted.

Other apparel retailer’s September same-store sales results:
 
  • American Eagle Outfitter’s sales rose 4% exceeding analysts’ expectations
  • Limited Brands reported a 12% rise in same-store sales for September
  • At Gap, same-store sales fell 2%
  • Aeropostale beat estimates with a gain of 3%, compared with a projected fall of 2.3%
  • Costco Wholesale Corp. saw a 5% rise in same-store sales

Halloween Spending Bounces Back
 
According to the NRF, Halloween Spending Bounces Back to 2008 Levels.

There will be no shortage of witches and treats this Halloween as 148 million Americans participate in some sort of holiday celebration, spending considerably more than they did last year. According to NRF’s 2010 Halloween Consumer Intentions and Actions Survey, conducted by BIGresearch, Americans will spend $66.28 on costumes, candy and decorations, up from last year’s $56.31 and comparable to the $66.54 average spend in 2008. Total spending for the holiday is expected to reach $5.8 billion.*

“In recent years, Halloween has provided a welcome break from reality, allowing many Americans a chance to escape from the stress the economy has put on their family and incomes,” said NRF President and CEO Matthew Shay. “This year, people are expected to embrace Halloween with even more enthusiasm, and will have an entire weekend to celebrate since the holiday falls on a Sunday.”

When it comes to how much money partygoers and trick-or-treaters will spend, costumes ($23.37) will take up the largest portion of a person’s budget. Americans will also spend an average of $20.29 on candy, $18.66 on decoration, and $3.95 on greeting cards.

This year’s data brings great news for retailers selling costumes: this year, the highest percentage of people in the survey’s history will dress up with (40.1%) planning to wear a costume, up from 33.4% in 2009. (11.5%) will dress up their pets as well.

How will people celebrate?

                    •    33.3% of people will throw/attend a party
                    •    72.2% will hand out candy
                    •    46.3% will carve a pumpkin
                    •    20.8% will visit a haunted house and
                    •    31.7% will take their children trick-or-treating

Second only to the winter holidays in terms of plans to decorate, half (50.1%) of consumers celebrating will decorate their home or yard. Young adults (18-24 year olds) say they will dress in costume (69.4%), the highest of any other age group. Young adults are also more likely than any other age group to throw or attend a party (55.4%) and visit a haunted house (38.6%).

While spending is expected to increase, three out of 10 (30.1%) consumers say the state of the U.S. economy will still impact their Halloween plans, with most of those respondents citing they would spend less overall (86.8%). Others say they will be buying less candy (45.1%), using last year’s decorations and not buying new ones (30.7%), using last year’s costume (18.5%) or making a costume (19.5%). Some plan to cut back on traditional activities such as visiting a haunted house (22.3%).
 

Retailers Plan to Step up Hiring for the Holidays
 
As reported in an article in the Los Angeles Times, Toys R Us plans to hire 45,000 holiday season workers. The addition of the temporary employees will double the company's domestic workforce. It also plans to operate 600 seasonal Toys R Us Express stores, up from 90 nationwide last year.

With plans to operate 600 temporary toy shops for the holidays, Toys R Us Inc. said that it would bulk up its workforce by hiring about 45,000 seasonal workers nationwide, more than it has hired during each of the last three Christmas seasons.

Toys R Us said the temporary employees would double its domestic workforce. In previous years, the company added about 35,000 employees during the Christmas season.

The Wayne, N.J., retailer said that 35,000 of this year's seasonal hires would staff the company's 587 traditional Toys R Us stores and that 10,000 of the temporary employees would work at the Toys R Us Express pop-up locations. Seasonal workers will also be hired to work in the company's nine distribution centers across the country. Toys R Us is also opening about 10 FAO Schwarz holiday pop-up shops around the country, including one at South Coast Plaza in Costa Mesa.

Last week, Macy's Inc. announced that it planned to hire 65,000 holiday workers, a slight increase from previous years. The department store giant said the increased hiring level reflected the company's expectations for sales at stores open at least a year to increase 3% to 3.5% in the second half of fiscal 2010, which ends in January.

As reported on CNBC.com, the majority of the nation’s largest retail chains are planning to hang up the “Help Wanted” signs this holiday season as they either hold seasonal hiring steady compared with year-ago levels or increase the number of workers they are seeking, according to a recent study.

But this finding isn’t as encouraging as it may seem at first glance. Quite a number of those retailers say the slump in sales in the early summer has made them delay their holiday staffing decisions, according to research conducted by Hay Group, a consulting firm. Hay’s survey looked at responses from 20 major US retailers including JCPenney, Abercrombie & Fitch and Pier 1 in order to assess retailer’s plans for the 2010 holiday season. Craig Rowley, VP at Hay’s said he was surprised by the optimism among retailers, but stressed they are still very cautious.

The majority of retailers (61%) will be holding hiring at 2009 levels, which were down sharply from 2007. But 22% plan to hire between 5% and 15% more workers. This is a dramatic change from last year, when 40% of the retailers surveyed by Hay said they were planning on cutting staffing levels. Still, about 13% of the retailers surveyed said that holiday hiring decisions are being put off. “They are planning cautiously,” Rowley said. “The objective is to increase profitability”.
 

Clothing Sector Feels Pinch of High Cotton Prices

 
As reported by in an article by Bertrand Marotte of the Globe and Mail, prices for cotton have almost doubled over the past year as supplies have tightened amid a continued robust demand. A curb on Indian exports, and shortages related to weather in China and Pakistan, have added to the supply constraints.

The steep spike in the price of raw cotton is making its way through the global supply chain in the textile and apparel sectors. This is raising concerns over how high consumers will be willing go to pay for clothing and other cotton products.

For the first time in 15 years, and only the second time since the Civil War, cotton prices jumped above the $1 per pound level. The price reached almost $1.20 per pound in 1995 before gradually making its way down to below $.40 per pound in 2001. The impact is being felt throughout the retail and wholesale sectors, with some apparel manufacturers raising prices.

Manufacturers and retailers are now faced with the difficult task of increasing their prices at the risk of losing their valued customers.

Ron Lawson, managing director of Sonoma, Calif.-based Logic Advisors, says he would be surprised to see significant price hikes at the retail level. "This will result in slightly higher retail prices but it's not going to cause a runaway price explosion," he said.

Due to bumper crops in the U.S. and the resumption of exports from India coming next month, many experts are calling for a drop in cotton prices gradually over the next few months.

"I'm expecting a correction in the near term," said John Robinson, a professor and economist at Texas A&M University.
 

Cash or Credit? More Consumers Turn to Debit Cards
 
According to an article from CNBC.Com, are consumers using more cash or credit? The answer may be a debit card. Shoppers, becoming more wary of the economy; are increasingly shying away from credit cards. They are opting to use cash, checks or debit cards rather than to “pay later” on a credit card.

According to a study released by Javelin Strategy & Research, usage of debit cards surpassed that of credit cards last year. They also found that in 2009, only 56 percent of consumers surveyed during a particular month had used a credit card, down sharply from 87 percent in 2007. If this trend continues credit card usage in 2010 could fall to 45 percent.

“People are extremely wary”, said James Van Dyke, president and founder of Javelin, “They can’t tell which way the economic winds are blowing. They are just incredibly uncertain. This is seen as “A Sea Change” in consumer behavior”.

It’s suspected that debit card usage will continue to grow in the years to come. Based on research the total purchase value for debit cards rose between 3 percent and 7 percent depending on the card brand from 2007 to 2009.

Consumers in their twenties are helping to drive the trend as they are more likely to use a debit card rather than other forms of payment. Reason being, it’s an easier way to keep on a budget. They also feel the credit card doesn’t make sense.

That’s more bad news for the nation’s biggest credit card issuers.These companies are already seeing a less profitable future as consumers spend less and pay off their credit card bills. Raising interest rates and imposing new types of fees isn’t likely to fill the gap.

Creditors will need to come up with new types of products to encourage card spending. Master Card announced last month that it plans to offer its CITI card holders a new card that allows users to set spending controls and receive real time alerts aimed at helping them avoid overspending. This type of product goes right to the heart of why some cardholders are refraining from using their credit cards – they want to be in control of their spending.
 

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.

Best Buy:
At electronics retailer, Best Buy, Aura Oslapas has been named SVP and chief design officer.

Borders Group:
For bookstore operator Borders Group, new titles have been added. Former Chico's FAS brand president Michele Delahunty-Cloutier is now EVP, chief merchandising officer; Eric Kovats is regional VP, Southeast; and Beatrice Vicente is regional VP, West coast. Also, CFO Mark Bierley resigned and Glen Tomaszewski was named interim CFO.

Guitar Center:
Marty Albertson has resigned as CEO, but remained chairman at instrument retailer Guitar Center. Former president and COO Greg Trojan has been named the new CEO.

Wal-Mart:
Chief merchandising officer John Fleming has left retailer Wal-Mart Stores and his responsibilities were split between John Westling, Andy Barron, Jack Sinclair; and Duncan MacNaughton. Westling was named EVP general merchandise and replenishment; Barron was named EVP softlines; Sinclair was named EVP food; and MacNaughton was named EVP consumables, health and wellness, and Walmart.com. Also, Laura Phillips was named SVP toys, seasonal, and network planning; Mark Samuels was named VP planning, pricing, and modular development; Seong Ohm was named SVP of the home, hardlines, and entertainment global merchandising center; Steve Breen was named SVP snacks and drinks; Bruce Nelson was named VP planning, pricing, and modular development; Anne Marie Kehoe was named VP planning, pricing, and modular development; and Michelle Gloeckler was named SVP merchandise execution

Six Flags:
Former Siemens Healthcare Diagnostics executives John Duffey and Lance Balk have moved to theme park operator Six Flags as CFO and general counsel, respectively. EVP and CFO Jeff Speed resigned

Blockbuster:
Former Safety-Kleen EVP and CFO, Dennis McGill is now EVP and CFO at video rental chain Blockbuster.
 
Zale:
At jewelry retailer Zale, John Legg is now their SVP of supply chain.

Michaels Stores:
Arts and crafts retailer Michaels Stores added former Brinker International executive Chuck Sonsteby to its team as CFO and chief administrative 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

    


A Happy Employee is a Loyal and Productive Employee
 
Conduct monthly “contests” that encourage productivity around the store daily (i.e. sales goals, maintaining a clean, organized department, one on one customer service) or even during inventory night (highest accuracy, highest productivity). Prizes could include restaurant or movie theatre gift cards or an extra personal day. Tiered prizes could encourage others to do better next month.

This would not only increase employee productivity but could also encourage lower employee based theft and shrink.
 

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