"It's a warm bath of slow adjustment..."

February 16, 2012

Sears Reduce Expenses By Closing Stores

December 27, 2011

http://www.fibre2fashion.com/news/apparel-news/newsdetails.aspx?news_id=106620

Retail Rallies on Business Spending

September 27, 2010

Retail stocks gained 3 percent Friday as orders for durable goods hinted at a somewhat more confident corporate America.

The S&P Retail Index perked up 13.37 points to 460.61, rounding out a 5 percent gain for the week. Among the retail winners on Friday were The Talbots Inc., up 10.7 percent to $12.06; Pacific Sunwear of California Inc., 8.9 percent to $4.92; The Bon-Ton Stores Inc., 8.9 percent to $8.72; AnnTaylor Stores Corp., 7.5 percent to $20.24; Sears Holdings Corp., 5.9 percent to $75.13, and Abercrombie & Fitch Co., 5.6 percent to $38.79.

Last week’s advance left retail stocks up 12 percent for the year.

Of 171 equities tracked by WWD, 123 were up last week and 43 down, while five were unchanged. The Dow Jones Industrial Average stepped up 1.9 percent, or 197.84 points, to 10,860.26 Friday, making a 2.4 percent gain for the week. On Friday, the Commerce Department said durable goods orders, outside of the transportation sector, rose 2 percent last month.

Increased orders for machinery, computers and communication equipment demonstrated companies’ willingness to spend that could eventually lead to more hiring, lower unemployment and a broader recovery in the economy, helping to ease fears of a double-dip recession and lifting the equity markets.

European markets also posted gains for the week with the CAC 40 in Paris and the FTSE 100 in London both increasing 1.6 percent. Asian investors were feeling more cautious for the week and pushed the Hang Seng Index up a lesser 0.7 percent in Hong Kong as the Nikkei 225 slid 1.6 percent in Tokyo.

For further information, visit: http://www.wwd.com/retail-news?module=tn#/article/business-news/retail-rallies-on-business-spending-3300760

Sears Tower Becoming Green

June 25, 2009

The Sears Tower, that bronze-black monument that forms the 110-story peak of the skyline here and stands as the tallest office building in the Western Hemisphere, will soon have another unique feature: wind turbines sprouting from its recessed rooftops high in the sky.

The building’s owners, leasing agents and architects said Wednesday that they are literally taking environmental sustainability to new heights with a $350 million retrofit of the 1970s-era modernist building — and the turbines are only the tip of the transformation. The plan, to begin immediately, aims to reduce electricity use in the tower by 80 percent over five years through upgrades in the glass exterior, internal lighting, heating, cooling and elevator systems — and its own green power generation.

In such a huge tower, with 4.5 million square feet of office and retail space, 16,000 windows and 104 elevators, the project is bound to be one of the most substantial green renovations ever tried on one site, planners said. The Sears Tower is significantly larger than the 102-story, 2.6-million-square-foot Empire State Building, for instance, which is also undergoing renovation to reduce energy consumption.

“If we can take care of one building that size, it has a huge impact on society,” said Adrian Smith, an architect whose firm designed the Sears Tower renovation. “It is a village in and of itself.”

Buildings are among the world’s largest contributors of greenhouse gas emissions. After the retrofit, energy savings at the Sears Tower, which is to be renamed the Willis Tower this summer, would be equal to 150,000 barrels of oil a year, officials said. The savings are expected to help redeem some of the project’s cost, which is to be financed through private equity investment, grants, debt financing and government funds.

The Sears Tower plans to open a first-floor center to educate the public about the redesign, and hopes to serve as a model for other aging skyscrapers around the world, officials said.

For further information, visit: http://www.cnbc.com/id/31543983

Some Big Chains Reconstruct to Accomodate Consumers During This Recession

June 22, 2009

Shopping as we know it is on the brink of major change.

Hammered by the recession, some of the nation’s biggest retailers are seizing the moment to reinvent their business strategies. And the impact will mean both sweeping changes in the merchandise on their shelves and subtler alterations, like how many pantyhose to keep in stock.

High-end stores like Neiman Marcus, Saks and Coach will offer more midpriced merchandise. Many chains, including Wal-Mart, will carry less inventory and fewer brands. The likes of Sears and J. C. Penney will put self-service computers in stores so customers can browse collections or buy out-of-stock items. And retailers of all stripes will offer more exclusive merchandise and more attentive customer service.

One of the biggest changes consumers are likely to see is greater personalization and regionalization of merchandise.

An initiative known as “My Macy’s” requires the retailer’s merchandisers and other planners to go into stores each week to learn from the sales staff — who keep logs at the cash registers — what shoppers are requesting, snapping up or complaining about.

For instance, when strapless and bare-shouldered dresses were selling well everywhere except Salt Lake City and Pittsburgh, Macy’s employees in those stores knew the problem was that their customers wanted more modest dresses. So they passed that information on to the merchandisers. Out went the strapless dresses; in came dresses with cap sleeves. And sales went from lackluster to robust.

Under the new system it will not be unusual for a local Macy’s to stock the merchandise customers request, be it wide-width shoes or Sean John suits, and for those offerings to be different from the ones in a Macy’s store 100 miles away.

“I think what Macy’s is embarking on is perhaps the largest transformation in our company in a couple of decades,” said Terry J. Lundgren, president and chief executive.

The Macy’s change is just one example of a wide range of initiatives retailers are pursuing as they struggle to cope with an economy where sales are lower than they were just a few years ago.

At high-end stores, the era of ever-escalating prices on luxury goods appears to be over. In the future, consumers will still be able to buy chic brand names, but at a wider range of prices.

“Our customer loves our brands,” said Stephen I. Sadove, chairman and chief executive of Saks. “They don’t want to trade down to lower brands. But they want more of a range in price within the brands that they love.”

And that is what retailers intend to give them. Burton M. Tansky, president and chief executive of Neiman Marcus Group, told investors on a conference call last week that “we’re working with the designers to try and ease a portion of their collections into a new price range.”

Prices will also be lower at some “affordable luxury” chains, like Coach, which is increasing the proportion of handbags it sells for less than $300. About 50 percent of the company’s handbags will cost $200 to $300, in contrast to about 30 percent of handbags last year.

Another change is that consumers will have fewer brands from which to choose. Wal-Mart, Target, Home Depot, and PetSmart are just a few of the chains winnowing their brands. As Home Depot’s executive vice president for merchandising, Craig Menear, put it: consumers are “time-starved” and “looking for simplification in the entire shopping experience.”

That may delight minimalists, because it will be easier to find items on the shelves. But it also limits choice.

Another potential drawback for consumers is that stores may run out of stock more quickly than in the past because, as Mr. Lundgren of Macy’s explained, “retailers learned that you can’t get out of the merchandise that you ordered months before.”

“Instead,” he said, “you’re more likely to see retailers ordering fewer of each individual size and taking that risk that they’ll sell out and not capture every sale, rather than the risk of having too much inventory left over to mark down.”

Another trend is on the horizon: seasonal transitions for apparel will probably have shorter lead times. With strapped consumers buying only what they need when they need it, it has occurred to retailers that selling swimsuits to New Yorkers in early March is not necessarily a winning strategy. And so chains are beginning to work with suppliers to shorten the time between ordering and delivering merchandise.

Consumers will also see even more of the exclusive collaborations between retailers and prominent designers that are so prevalent today. That will help distinguish stores as well as avoid price wars because the same items will not be sold at multiple chains.

Yet another change will be the obliteration of any remaining divide between online and in-store shopping.

In Sears stores, “appliance research centers” with computers are enabling customers to compare local competitors’ prices. (If Sears does not offer the best price, it will match the lowest offer and hand over 10 percent of the difference.) Four J. C. Penney stores in Dallas are testing “FindMore” machines the size of arcade games, letting customers see every item J. C. Penney sells and find out if the item they want is in the store or online.

Shopping by cellphone will also become widespread.

“Everything we are developing is with a mind-set that it’s going to be running on a handset,” said J. C. Penney’s chief information officer, Thomas M. Nealon.

Despite all the new technology, consumers will be getting more attention from sales staff. During the last few years, retailers did not have to work hard to separate consumers from their dollars.

But those days are over. More middle-market chains are striving for Nordstrom-quality service to win customers. Even Home Depot has adopted its “most extensive customer service training ever,” its chairman and chief executive, Frank Blake, told investors and retailing analysts last week.

Of course, luxury chains have always featured a high level of attentiveness. But the chains say that in this economy, customers have heightened expectations. Saks, for one, has invested tens of millions of dollars in the last year on software that provides its sales staff easy access to information about client purchases and preferences, so that a returning customer might be greeted by a sales representative who recalls the shopper’s suit size and penchant for Christian Louboutin heels.

Economists and analysts forecast that it will take up to 10 years to return to 2007 levels of consumer spending — which makes now a good time for retailers to re-imagine the future. Paul A. Laudicina, chairman and managing officer of A. T. Kearney, the management consulting firm, noted that major consumer innovations like Neoprene and Teflon came out of the Depression.

Mr. Lundgren pointed out that if consumers were still throwing money around, stores might not want to alter strategies that were still working.

But with today’s recession, he said, “now is the time to aggressively rock the boat.”

For further information, visit: http://www.nytimes.com/2009/06/20/business/20retail.html

Consumers Are Not The Only Ones Cutting Back

June 16, 2009

Consumers aren’t the only ones cutting back.

Retailers are reining in their spending — with most broadline players slashing millions from their budgets as they try to counter withering sales. Although some, such as Wal-Mart Stores Inc., continue to pump money into their businesses to grab market share, the majority are drastically slimming down within their business models.

And if consumer spending doesn’t bounce back, retailers will have to start making more drastic and ultimately transformational changes that could reshape the industry, said experts.

Sears Holdings Corp., Macy’s Inc., Dillard’s Inc., J.C. Penney Co., Saks Inc., Nordstrom Inc., and Target Corp. cut a collective $668 million in selling, general and administrative expenses in the first quarter, pushing their SG&A expense down 6.3 percent from a year earlier. That means fewer dollars supporting brands and driving foot traffic, the axing of information technology projects and cramped cross-country plane rides for executives who can’t afford to be seen in first or business class as they lay off workers.

“From travel to supplies to benefits to marketing to information technology, we’re leaving no stone unturned,” said Stephen I. Sadove, chairman and chief executive officer of Saks, which reduced first-quarter expenses by $44 million, more than it planned to cut for the whole year. “How we have always done it is irrelevant. We’re approaching every area of the business asking how should we do it going forward.”

Saks rival Neiman Marcus last week revealed plans to reduce expenses by $125 million a year. “Our team has done an excellent job of decreasing their spend,” said Burt Tansky, president and chief executive officer of Neiman Marcus. “We are undergoing a comprehensive process that we believe has been thoughtful and significant.”

About 60 percent of planned expense reductions already have been realized. Neiman’s cut $38 million from selling, general and administrative expenses in the most recent quarter versus its 2008 counterpart.

Sears, which has 3,900 doors under its namesake and Kmart brands and has been criticized in the last few years for not investing enough in its stores, is the industry’s most aggressive cost cutter. The firm surprised Wall Street with first-quarter earnings after it reduced advertising spending by $107 million and payroll and benefit expenses by $84 million.

Cuts are even being made in the off-price channel, despite the competitive advantage that comes from having a value orientation during the downturn. Earlier this year Stein Mart Inc. laid off 178 assistant managers, while the rest of its managerial staff took a 5 percent pay cut and store associates’ hours were cut by 17 percent. Like other retailers, the company stopped paying shareholders a dividend, eliminated its stock buyback plan and halted contributions to employees’ 401(k) retirement plans.

All of this feeds into a vicious economic cycle, where the slowdown in consumer spending prompts businesses to cut workers, increasing the ranks of the unemployed and further weakening spending. Department stores alone eliminated a total of 10,800 jobs in February, March and April, according to government statistics that adjust for seasonal variations in workforce. Last month, the department store channel actually added 4,500 positions, although specialty stores cut 3,300 jobs.

But to every cost-cutting trend, there are exceptions.

Wal-Mart and, to a lesser extent, Kohl’s Corp., actually spent more in the first quarter, investing in their businesses in hopes of grabbing market share while most of the competition is biding its time and many are slimming down their store portfolios.

Wal-Mart upped its operating, selling, general and administrative expenses by $386 million in the first quarter. That spending increase is almost exactly what Macy’s and Sears, the two biggest cost cutters, stripped away.

“This is still Wal-Mart’s game,” said Dean Hillier, consultant and a partner at A.T. Kearney. “They are definitely taking advantage of the circumstances. The market is certainly heading their way and it seems to be sticking somewhat. The others are in a tougher spot and therefore are having to do what they need to do to eke out their profitability.”

Retailers have tried to hide their newfound austerity from consumers by working on inventory controls and cutting corporate staff while attempting to maintain the shopping experience. But chains are now tiptoeing up to cost cuts and other changes that could change the character of the industry. Both Neiman’s and Saks, for instance, said their customers want to spend less while not switching to other brands, and the retailers are trying to accommodate them by urging brands to develop lower entry-level price points.

“If Saks were to go to a lower price-point item on the same brand, would that reduce the brand impact for Saks as a company?” wondered Hillier. “Retailers are pushed into a position now, quite frankly, where they have to take risks with their business. They’ve got to start placing strategic bets. This is a new reality that retailers are dealing with.”

The next cost-saving step for retailers would entail bigger, deeper cuts and strategic moves, such as the shuttering of whole divisions, he said. That’s already occurred for a number of specialty stores, and last month Abercrombie & Fitch Co. indicated it might join them, saying it was undertaking a strategic review of its fledgling Ruehl unit.

A survey by Credit Suisse showed cash capital spending at 80 retailers fell 14.4 percent last year, the first decline since 2002. Spending by specialty apparel retailers dropped 24.2 percent to $3.71 billion and is slated to fall another 34.8 percent this year. Mall anchors cut expenditures by 22.4 percent to $4.26 billion in 2008 and plan to slash another 37.4 percent this year.

Despite the decline in spending, apparel specialty stores are expected to increase their gross selling space by 1.9 percent this year to 784.2 million square feet, while mall anchors add 1.2 percent for 506 million square feet — even as analysts at Credit Suisse say both sectors already have too much selling space.

“Capacity is not coming out of the soft-lines space fast enough,” Credit Suisse said of the apparel specialty stores. “We believe many retailers in this group are now faced with structural issues, primarily that they have too many stores, and would expect a decrease in square footage in 2010 as retailers come to this realization.”

Chains wanting to save money need not look at just their own operations. They can also take new approaches with their suppliers.

The savings so far, as large as they’ve been, are just the tip of the iceberg, said David McTague, executive vice president of partnered brands at Liz Claiborne Inc.

“They haven’t even started yet; it should be in the billions of dollars,” McTague said at the company’s annual meeting.

Together, he said, retailers and vendors can move product more efficiently from factory to selling floor and better manage inventories.

The financial stress of the moment could help set new directions on both sides of the supply/retail divide.

“Hopefully it means that they’re open to a much more collaborative relationship,” McTague said. “It’s a zero-sum game. All of us are trying to move profit dollars. It’s forcing everyone to be a lot more creative.”

For now, though, major changes appear to be mostly in the future. The more immediate question is whether retailers are cutting wisely. And there’s plenty of room for error.

“Some retailers have cut too far because they’ve cut from the top down,” said Antony Karabus, ceo of Karabus Management, noting a 10 or 15 percent across-the-board cut will trim some areas too much and others not enough.

Spending varies across the industry, meaning each company will have to cut in its own way.

According to the Karabus SG&A Retail Benchmark study, which looked at spending across 68 chains for the fiscal year ended January 2008, merchandising expenses range from 0.8 percent to more than 3 percent of sales. Supply chain costs range anywhere from 1.2 percent to 3.5 percent of sales.

As retailers lay off workers, many are concentrating their regional field staffs; for instance, giving district managers more stores to oversee or eliminating a layer of management altogether, said Karabus.

For department stores the danger is an increasingly national stance when customers want local flavor and attention — which is what Macy’s Inc. is trying to prevent with its My Macy’s program.

“When you cut expenses as a department store, you’ve still got to make sure that you’re staying relevant to your local consumer,” Karabus said. “What you’re seeing with a number of chains is that they’re cutting significantly to become more national.”

For further information, visit: http://www.wwd.com/business-news/stores-cost-cutting-may-transform-retail-2167503#/article/business-news/stores-cost-cutting-may-transform-retail-2167503?page=2

Did You Just Say A ‘Drive-Through General Store’?

May 29, 2009

What are Sears stores going to look like in the future? You might get a clue by visiting the retailer’s latest incarnation: a drive-through general store.

MyGofer debuted in Joliet on May 9 with little fanfare. The Sears name is nowhere in sight. Neither is Kmart’s. MyGofer wants no help or hindrances from Sears Holdings Corp.’s better-known brands. Shoppers can order online and pick up their purchases at a drive-through. They can also order at kiosks inside the showroom.

Sears calls it a marriage of online shopping and bricks and mortar. TheStreet.com called it “a bad cross between Amazon.com and Dairy Barn” and named MyGofer to its weekly “Five Dumbest Things on Wall Street” list earlier this month.

After years of high-profile format flops, Sears is testing its latest prototype far from Wall Street in a suburb about 50 miles west of Chicago, known for its casinos, NASCAR racing and ranking (before the housing crash) as one of the fastest-growing Midwestern cities.

“We are still ironing out a lot of the processes and making sure things run smoothly, so we haven’t shouted to the world yet to come on in,” said Neal Siegler, a former Circuit City district manager who joined Sears in February to run the Joliet store. “We’re relying on word of mouth.”

MyGofer occupies an empty Kmart store in a strip mall off Interstate Highway 55. Instead of a traditional store, the building is a warehouse with a showroom in front. There are no shelves or racks of products to touch. Instead product samples are grouped in displays — some under glass, some on the walls. They showcase the range of items MyGofer sells: Windex, a PlayStation video game player, jewelry, a laptop, a Craftsman cordless drill, a Barbie Beach Party Cruiser, Purina Beggin’ Strips.

The space is airy, clean and modern with silver tables and chairs. There are kiosks for placing orders on flat-screen computers and sales assistants in green T-shirts ready to explain how the process works. On the back wall is a giant screen tuned to CNN. An electronic board over the exit displays shoppers’ names and the status of their orders. Outside a covered bay has parking spaces for about a half-dozen cars.

Eric Plautz, 28, waits inside a sedan full of friends on a recent weekday as a MyGofer employee delivers a Hartz dog toy through the car window. Plautz said he placed the order online at home after reading about MyGofer on the Web.

Retail consultant Mara Devitt is skeptical that the idea will stick because shoppers can already order essentially the same products at Sears.com and pick them up at the store. She asks: Why spend the money on creating a whole new retail concept?

“The idea is valid, and that’s why they’re testing it,” said Devitt, a partner at Chicago-based McMillan Doolittle. “But getting people to change their behavior is very tough.”

For further information, visit: http://www.chicagotribune.com/business/chi-fri-notebook-retail-may29,0,6688468.story?track=rss