Where Else Can Retailers Cut Their Costs?

May 22, 2009

U.S. retailers, which have banked heavily on cost cuts to guard margins in the recession, may be running out of ways to trim expenses further — putting future profits in jeopardy, unless consumers open their wallets soon.

“No company on the face of the earth can cost-cut its way to sustained success … You need to have sales,” Home Depot Inc Chief Financial Officer Carol Tome said in an interview this week.
From slashing jobs to shuttering stores, from maintaining leaner inventories to negotiating for lower rents, retailers seem to have done it all to preserve profits or mitigate losses in a dismal sales climate.

Some have outlined plans to postpone expansion, reduce advertising and wind down secondary brands, while a few others have gone a step further and found more creative ways to cut costs.

Home improvement chain Home Depot has made significant cost savings by using less energy in its stores. Some companies that deliver office products to retailers have started using new technology in their trucks to ensure higher fuel efficiency.

But the cost cuts can only go so far, as retailers see sales slammed by the recession.

“Retailers are very closely looking at costs now and I think today they are ahead of the curve … I think that the costs will be out of companies … I don’t think revenues are going to come back as quickly,” said William Susman, president and chief operating officer of retail investment bank Financo.

One way retailers are cutting costs is by streamlining their supply chains and purchasing.
Womens’ apparel retailer AnnTaylor Stores Corp said it has gone from about 100 apparel vendors at the end of 2008 to about 75 in the first quarter and will continue to try to cut down on vendors for its Ann Taylor and Ann Taylor LOFT stores.

Both analysts and investors laud the cost-cutting efforts, as they think retailers are facing the question of survival more than anything else right now.

“The retailers who haven’t done this (cut costs) … some of them who have not successfully been able to offset sales declines … have not survived,” Colin McGranahan, an analyst at Sanford C. Bernstein, said.

“We have seen Circuit City, Linens ‘n’ Things, Mervyns go out of business and many retailers that are going bankrupt.”

The companies that have responded well — those which have cut costs and have better consumer propositions — will emerge winners at the other side of this economy, McGranahan said.

“Retailers need to adapt to the environment. They need to bring their costs down because the customer is not buying as much,” Financo’s Susman said, adding: “When the market rebounds, they should also be poised for much greater profitability.”

So, how much more can they can slash and burn? Not much, most agree.

“You can only trim so much. If you go into one of the LOFT stores — there’s not that much clothing on the racks, there’s not that many racks to begin with, and there’s not that many associates working in the stores. You can tell they’ve cut back,” Wall Street Strategies analyst Brian Sozzi said.

“So how much fat do you have left to cut? And the first round of store cuts for them — that was low-hanging fruit … But what about the rest of the stores?” Sozzi said.

“I’m very curious to see how the second half plays out for these guys (retailers), because at some point, you have to make a bet on inventory; and if demand’s not there, we could be talking about earnings misses in the fourth quarter like we saw last year,” he said.

Bernstein’s McGranahan named Best Buy Co Inc, Staples Inc and Home Depot as good examples of companies which have cut costs in an aggressive but intelligent fashion.

Although most experts see sense in cost-cutting efforts at retailers, many warned the moves should be executed with caution.

“They have got to be careful how much they will cut of their staffing levels … If people can’t get help in stores, that is a recipe for retail disaster,” said Britt Beemer, founder of America’s Research Group, which polls consumers on spending behavior.

Beemer’s concerns aren’t unwarranted.

Denise C, a 27-year old from Queens shopping in midtown Manhattan, walked out of a couple of apparel stores because she was disappointed with the quality of in-store service.
“People just don’t really seem to care anymore” she said.

For further information, visit: http://www.guardian.co.uk/business/feedarticle/8521426

How Limited Brands Is Saving Their Money

March 7, 2009

Limited Brands Inc., the Columbus retail giant, said Tuesday that it will save $775,000 a year by using new long-life energy-saving lighting in its Central Ohio distribution centers.

The more efficient configuration includes use of 2- and 3-foot fluorescent tubes and other products that the GE Consumer & Industrial lighting institute at the East Cleveland Nela Park facility recommended.

The lamps Limited Brands is using operate on lower wattage than lights it used in the past but still offer strong illumination at lower operating cost, said Mary Beth Gotti, manager of the lighting institute.

The plan also employs motion-sensor technology that turns on lights in work areas only when employees move into those sections of warehouses to find and retrieve merchandise. The company also included skylights in the high-ceilinged facilities to improve lighting and cut power costs during daylight hours.

A GE spokesman said the retro-fit of new lamps and fittings in Limited Brands’ 3.5 million square feet of floor space will lower energy bills by $650,000 a year. The retail company operates five Columbus-area distribution facilities.

The remaining savings are projected to result from the reduced maintenance costs, principally from having to replace the lamps less frequently. The tubes offer a 24,000-hour rated life if started every 12 hours, Gotti said.

In contrast, so-called “long life” incandescent bulbs rated at 60 watts last about 2,000 hours. The equivalent illumination can come from lower-energy-consuming 13-watt compact fluorescent lights. But they usually require replacement about every 6,000 hours of illumination, while using less energy than incandescent bulbs.

The new versions of fluorescent tubes give users two economic advantages: a 50 percent cut in lighting bills and fewer trips that maintenance workers must make up ladders to change burned-out units.

The warehouses receive merchandise from manufacturers around the world, store it and then ship boxes and pallets to stores. Limited Brands spokeswoman Robin Hoffman said the warehouses “are brighter and more pleasant than they were before.”

The company also has replaced older, less-efficient lamps in some 700 stores with more efficient lighting. Limited’s retail efforts alone have reduced stores’ electricity consumption by 50 million kilowatt hours annually.

“It does save us money, but a big part of this comes from our sustainability initiative,” which commits the company to reducing waste, Hoffman said.

Many companies that employ large-scale indoor work and storage spaces have found that fitting facilities with new lighting can pay off quickly. Studies from the U.S. Department of Energy have shown homes and businesses can generate enough savings to cover capital costs within two years. Gotti said the Columbus facilities may be able to pay off its expense with a year’s worth of savings.

For further information, visit: http://www.cleveland.com/business/index.ssf/2009/06/limited_brands_saves_energy_by.html

Dress Barn and Tween Unite To Battle Out The Recession

March 7, 2009

Dress Barn Inc. is acquiring New Albany apparel retailer Tween Brands Inc. in a stock-swap transaction, the companies announced Thursday.

Suffern, N.Y.-based Dress Barn said the deal, expected to close in October, will give Tween shareholders about 16 percent of Dress Barn stock. Based on terms of the transaction, the company is paying about $157 million for Tween shares and paying off the retailer’s outstanding bank debt. Tween in regulatory filings reported an outstanding balance of more than $166 million on its credit facility, but company officials valued the deal at roughly $220 million. A representative wasn’t immediately available to explain the discrepancy.

Tween, which runs more than 900 stores under the Justice and Limited Too nameplates, will become a subsidiary of the more than 1,500-store Dress Barn chain.

Tween CEO Michael Rayden, in a conference call Thursday, said the company is in a stronger financial position under Dress Barn than as a standalone business, particularly in regards to access to capital. And with much of the financial duties shifting to Dress Barn, he said, the Tween team can focus on merchandising and marketing.

Rayden will continue to manage Tween but report to Dress Barn CEO David Jaffe.

Jaffe called the transaction “strategically compelling” for his company and said providing trendy merchandise at a value price is a formula his company is well-acquainted with.

For Dress Barn, the Tween acquisition is a move to diversify its business, which operates under the Dressbarn and Maurices nameplates. The company has about a dozen stores in Central Ohio, with Dressbarn targeting women in their 40s and Maurices aiming at women in their 20s.

“Those are my girls’ moms,” Rayden said, referencing Tween’s core customer base of girls age 7-14.

He said the chains will have cross-promotional opportunities once customer databases are shared.

Jaffe said Tween will continue to be headquartered in New Albany, but that some cost reductions will come from eliminating duplicate public company expenses. Both he and Rayden declined to share specifics, but it could mean more job cuts for Tween, which already has cut 235 jobs in the past year as it transitioned from its onetime flagship Limited Too stores to its smaller – but lower-priced – Justice brand.

Rayden said between 30 and 40 stores still have the Limited Too branding and will not be converted until lease negotiations finish.

Jaffe said Dress Barn is confident in Rayden and his long-term strategy and admitted that it was the transition to the lower-priced Justice brand that initially piqued the company’s interested in acquiring Tween.

“The business is well-positioned,” he said. “This is a unique niche. They have no direct competition.”

Rayden said the company was not pursuing a sale, but when approached by Dress Barn agreed that a deal made sense. Tween has struggled amid a pullback in consumer spending that helped push sales at company-owned stores open at least a year down 12 percent in its last fiscal year.

Tween lost $17 million on $995 million in revenue in its fiscal year ended Jan. 31 and last month reported a $1.4 million fiscal first-quarter loss.

The combined company would have annual sales of about $2.4 billion and operate 2,465 stores.

The boards of both Dress Barn and Tween have approved the deal, which requires Tween shareholders’ approval.

For further information, visit: http://www.bizjournals.com/columbus/stories/2009/06/22/daily30.html?s=industry

EDI Tips: General Guidelines

February 2, 2009

At Roundhouse, we know that one of the most frustrating things about doing EDI with your retailers is being hit with chargebacks. We also know that sometimes your retailers change their rules before you know it and you receive a surprise invoice for chargebacks. That’s why we provide you with Tips to Avoid Chargebacks – so you can avoid those annoying chargeback invoices.

Carton Accuracy: Make sure the warehouse packs exactly what is on the packing slip into each carton. Deviations between the packing slip and the carton contents will cost you.

On-time ASN Notification: Roundhouse clients (or their warehouse) must fax the bill of lading to Roundhouse on or before the day of shipping – preferably after the pick up has been arranged but before shipping so that the ASN (Advance Ship Notice) is received at the retailer on time. Refer to each retailer’s routing guide for retailer-specific requirements.

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Tips: Burlington Coat Factory: Routing and Scheduling Guidelines

December 18, 2008

Burlington Coat Factory is working with the Purchase Order dates exactly as they are shown in their EDI PO transmission as well as on the “paper” Purchase Order (also accessed in Gateway). The 2 dates on the Purchase Order are:
• Do Not Deliver Before
• Do Not Deliver After (more…)

Bed, Bath, & Beyond - New Store Opening – #1285, Hot Springs, AZ

December 11, 2008

New Store Opening – #1285, Hot Springs, AZ

Ensure all merchandise for this store is available for the requested ship date and ship the order complete. Confirm all ship dates 48 hours prior to shipping by referencing the New Store Shipping Schedule found at: http://www.vendor.bedbath.com/. Click on the “Locations/Openings” tab, then open the spreadsheet titled “View or Save New Store Ship Dates (Excel format).”
Collect Ship Date: 02/23/09
Prepaid Ship Date: 03/04/09
Truckload Request Date: 02/23/09