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J.C. Penney Landing in Manhattan

July 20, 2009

Could the real miracle now be on Manhattan’s 33rd Street?

Plano-based J.C. Penney thinks so, as it’s gearing up for the July 31 official opening of its first Manhattan store, just a block from Macy’s towering flagship in Herald Square.

The new store is key to Penney’s campaign to boost sales by shedding its reputation for dowdiness. That effort in recent years has included adding exclusive affordable collections from designer Nicole Miller, home furnishings from home maven Chris Madden and trendy in-store Sephora cosmetics shops.

Penney expects the store to be its largest sales generator. It believes even New York fashionistas are looking for affordable options as the recession maintains its grip. But Wall Street is taking note of the changing Manhattan retail landscape and will watch who shops at Penney and whether they are defecting from rivals like Macy’s. That Herald Square fixture since 1902 was made world famous by the annual Thanksgiving Day parade and the Christmas movie “Miracle on 34th Street.”

“Penney’s has been around for a long time, but it hasn’t had the visibility of its competitors,” said Faith Hope Consolo, chairman of real estate firm Prudential Douglas Elliman’s retail leasing sales division.

Consolo said higher-priced Macy’s and even the neighborhood’s Victoria’s Secret store, have “reason to be concerned” because Penney is likely to draw a full cross-section of the 250,000 shoppers who store officials say visit the area daily.

Penney, which usually sticks to staid radio and print ads to promote store openings, seems to be having fun ruffling feathers in the historic retail Mecca.

“We hear Herald Square needed a good department store,” one bus shelter proclaims. And another: “The real miracle is now on 33rd Street.”

But Macy’s spokesman Jim Sluzewski declined to comment, pointing out only that the 2.2 million-square-foot flagship is the world’s largest store and one of New York’s biggest tourist attractions. That compares with the much smaller Penney store, with about 150,000 square feet.

Sales at Plano, Texas-based Penney, which has 1,000 stores across the U.S., have stalled and profits dropped since the recession began in late 2007 and shoppers started cutting back on discretionary items like fashion. But competitors like Macy’s have suffered more, slashing its work force and closing stores. Penney’s has only slowed store expansion and cut inventory.

The average 7.8 percent sales decline since February at Penney stores open at least a year compares with 7 percent at Kohl’s Corp. and 9 percent at Macy’s.

Competitively priced trendy merchandise has been Penney’s strong suit in the recession, said Chief Marketing Officer Mike Boylson, while mid-priced basics and big-ticket items like furniture and jewelry have been weak.

Penney already operates stores in the Bronx, Staten Island and Queens, but Boylson believes the Manhattan store “is going to have a halo effect on the entire brand.”

When Penney’s opened a temporary store in Times Square in spring 2006, sales immediately rose in its borough locations and Jersey City and stayed higher until the recession began, Boylson said.

Given the recession – and how expensive it is to live in Manhattan – Boylson believes customers will appreciate Penney’s lower prices, like dresses that top at about $90.

For further information, visit: http://www.klewtv.com/news/business/51223737.html

CIT: A Big Impact On The Garment Industry?

July 20, 2009

The garment industry is tied in knots over reports that CIT Group Inc. could file for bankruptcy.

Scores of Los Angeles businesses in the apparel industry rely on CIT for upfront financing, which provides them with cash until retailers pay their bills.

Now that the New York commercial lender is on the brink of bankruptcy, local business owners are wondering how they’ll get by. Many are scampering for alternatives to keep business moving.

It isn’t that easy.

CIT spent years snapping up competition, which limits businesses’ options. Compounding the problem, many smaller lending operations rely on CIT to vet borrowers. These firms’ abilities to insure transactions would be hampered if CIT goes down.

“It’s devastating,” said Steve Barraza, owner of Tianello, a Los Angeles women’s wear company. “There’s almost nowhere to run. If we have another week or two like this, I expect you’ll see a lot of businesses hitting the dirt.”

CIT is a major provider of factoring services, which supply quick cash for businesses such as those in the apparel industry, where upfront costs for material and labor are significant.

Barraza, who does 60% of his business through CIT, said the finance company’s troubles mean that other lenders know they have retailers by the throat. They can tack on extra fees and raise rates because there are few alternatives.

“They got us in a pinch,” Barraza said. “Everybody’s scrambling for a factor and they know it. Without CIT around, there’s no reason for them to be competitive with their rates.”

The factoring industry charges financing rates of 20% or more.

Here’s how it works: An apparel business will get an order from a retailer for, say, $100,000, but the retailer does not pay in advance. Instead, a factor comes in and gives up to $80,000 to the apparel manufacturer so it can continue to pay workers and buy material. The factor also takes the hit if the retailer doesn’t pay.

Under the arrangement, the retailer pays the factor, which holds on to the remaining money. The factor pockets fees and rates, which — all told — hover around 2%. Like a bank, the factor keeps the rest of the funds, which the manufacturer can withdraw or leave with the factor so it can mature with interest.

The arrangement is especially appealing to small and medium-size companies because factoring firms can be easier to deal with than banks, businesses say. Banks typically request a library’s worth of documentation to get a short-term loan — especially in the current economy.

Without the access to cash that factoring firms provide, the cogs of the apparel business seize up. “The industry is really fluid,” said Michael Rosen, president of Michael Stars, a women’s wear company based in Hawthorne. “Cash is the lifeblood of every company.”

Factoring firms also research retailers and tell manufacturers whether the retailer has the ability to pay them back on time. Such information is essential to any transaction, Rosen said, and can be particularly difficult to unearth on small specialty stores, which buy most of Michael Stars’ merchandise.

CIT did that digging for about 60% of Michael Stars’ sales, said Rosen, who worked as a CIT account executive for eight years. Rosen said he might take on some of the credit management himself if CIT collapses. “The future of factoring is very much in question,” he said. “They’ve been the major player for a long time. It’s hard to believe that another company will fill CIT’s shoes.”

Continental Business Credit Inc. is a factoring firm for smaller manufacturers. Vince Lionetti, a partner at Continental, said businesses usually come to his firm before moving on to a bigger one such as CIT.

Rather than seeing CIT’s fall from grace as a benefit to Continental, Lionetti said it puts his firm at a disadvantage. Continental “heavily relies” on CIT to operate, using its vast research information database when insuring businesses.

“CIT has the pulse on the apparel industry,” Lionetti said. “If they fall into bankruptcy, it puts a dent into our ability to do business like we did in prior years.”

Other factoring firms, such as New York-based Rosenthal & Rosenthal Inc. and Milberg Factors Inc., will be inundated with new opportunities, said Jeff Van Sinderen, a retail analyst with B. Riley & Co., a Los Angeles investment firm.

“There are a lot of businesses looking for factors right now,” he said, “many who will have disastrous cash flow issues if CIT goes under.”

David Reza, senior vice president and partner at Milberg, said that the number of business inquiries had spiked “several-fold” in the last week but that the company is not taking any pleasure in CIT’s misfortune.

Lonnie Kane, president of women’s sportswear business Karen Kane Inc., said the Vernon manufacturer has 98% of its business with CIT.

About two weeks ago, Kane, a 35-year veteran of the retail business, saw a problem developing and drew down a significant piece of his $10 million in financing.

“I’m an old dog and I’ve had to learn new tricks,” he said.

Kane believes that even if CIT files for bankruptcy, the factoring business will be sold off or emerge again.

“They’ll be back one way or another,” he said. “They’re too big of a part of the industry.”

For more information, visit: http://www.latimes.com/business/la-fi-cit18-2009jul18,1,529867.story

Stocks Still Rise After June Sales

July 10, 2009

Retailers with a value message showed signs of strength on Thursday even though overall June sales were a bit of a disappointment.

Sales at stores open at least a year, or same-store sales, fell 4.9 percent in June according to the Thomson Reuters index. But a handful of companies posted stronger sales, including TJX Cos Inc, which runs discount-oriented chains such as T.J. Maxx.

The Standard & Poor’s retail index is already up 11 percent this year and rose less than 1 percent on Thursday, while the S&P 500 has fallen nearly 3 percent in 2009.

Have investors made all of the money they can betting on retail’s rebound following a rough 2008? Is there more room for growth?


“I would say look at value, look at consumables and those are really the two major themes,” said Sarah Henry, a retail analyst at MFC Global Investment Management. “I think there’s some more opportunity there left this year.”

“There are clear market share beneficiaries, the big one this morning, by far, was T.J. Maxx, you can see how powerful it is. And of course yesterday we saw Family Dollar really performing very well in this environment,” Henry said.

Retailers with better balance sheets and cash flow have been able to squeeze some concessions on costs from vendors, a move mentioned by Family Dollar and alluded to by Target Corp, she said.

“There’s a meaningful earnings driver here in companies that are more flexible with their cash flow,” she said, adding that others such as TJX and Wal-Mart Stores Inc could see similar benefits.


“Is this the best time to buy retail stock? Probably not. The consumer remains very weak. There are still limited signals there will be a return to growth,” said Eric Beder, an analyst with Brean Murray Carret, noting that investors need to judge on a company-by-company basis.

Short-term traders have to be particularly careful, he said.

“If you’re trying to trade these names you’ve got to have a really tight trigger finger. If you’re looking for longer plays there are a lot of strong companies trading near their low … they have potential to drive upside when the consumer comes back,” Beder said.

Short-term investors need to look at sectors that provide good value, Beder said, citing Aeropostale Inc and Family Dollar as two stocks that benefit from consumers’ focus on affordable goods.

Longer-term investors need to look at the concept and quality of management, he said, citing Urban Outfitters Inc, Warnaco, True Religion and Guess? Inc as companies with “significant potential growth” once the downturn is over and “lots of cash.”


“People always say if you are looking to buy stocks, if you are an investor in the industry, sometimes the best time to buy is in the worst of times. (You) say, ‘how low can it go?’ Problem is, it could stay still for a long time,” said Al Ferrara, director of the retail practice at BDO Seidman.

“I would be neutral on the retail sector. I wouldn’t be an aggressive buyer. Whatever you have, hold. I wouldn’t be putting more money into the sector now. I don’t think the worst is over for it.”

For further information, visit: http://www.reuters.com/article/pressReleasesMolt/idUSTRE56861K20090709?pageNumber=2&virtualBrandChannel=0

High-End Designers Become Budget-Friendly By Creating “Economy line”

July 10, 2009

It wasn’t all that long ago that luxury retailers were able to float from fiscal year to fiscal year with relative ease, banking on their customers’ costly whims and coasting on their platinum reputations.

But now, by all accounts, those days are over — maybe forever. And high-end brands have to figure out where they fit into the new order of consumerism.

One thing’s for sure: simply slashing prices isn’t an option. “Putting a sale sign on the same old product leaves the customer feeling compromised,” Paul Raffin, CEO of Frette — the Italian linen maker famous for $1,500 sheets — told me in an interview. “Playing it safe is a sure path to failure.”

So what are they doing instead? Well, instead of summering contentedly in St. Tropez this year, luxury executives are hunkered down in their offices, studying, for the first time, strategies better known to mass retail brands. Such as:

Launch an economy line

A diffusion line makes sense for every luxury retailer right now — after all, why should a department store that teams up with a designer reap all the profits from budget-friendly fashion?

Still, there are some companies — most of them with long luxury lineages — for which a lower-priced collection seemed inconceivable, fatal to their cachet. Frette, which has been charging top dollar for their fine bedding since 1860, is one such company.

But this fall, the linen maker will introduce U.S. customers to Edmond Frette, a line of sheets that will start at $500 per set (current prices start at $1500) and will allow customers to buy pieces separately, rather than as a complete set, for the first time. Coach, too, is defying their long history by launching Poppy, a lower-priced line of bright metallic and graphic-emblazoned accessories that start at $48.

Pop up wherever you can

Realtors have been trying for years to coax Hermes to come to the Hamptons — the summer getaway for New York’s well-heeled set. For years, the company resisted.

But with the recession pummeling seaside real estate prices, one broker came up with a new proposal that was music to the company’s ears: a summer rental.

“The answer, in these times, was ‘why not?’” Hermes CEO Bob Chavez told me. “We’ve always shipped an extraordinary amount of product to our retailers in the Hamptons during those months – we have a built-in business there.”

Now through September 20, East Hampton shoppers will be able to buy Hermes items like a $295 scarf or a $530 beach towel at what’s called a pop-up shop — a temporary store format that bigger retailers like Target and Gap have used to create buzz. The East Hampton pop-up will be the first in Hermes’s 160-year history.

Tagging along on the company’s summer vacation is couture brand Temperley London. The company, known for its floaty dresses, will operate a store through December in East Hampton. So will girly designer Cynthia Rowley, who is out on her own on Main Street this year after testing the waters with a section in the Montauk boutique Haven last year.

Stage an Asian invasion

It’s hard to fathom a luxury jeweler opening 30 new stores across the U.S. this year-which is why Cartier is planning to do it in Asia, where it already has 28 boutiques.

Faced with waning sales among their Western clientele, Cartier is trying to make up losses by driving hard and fast into the continent where an appetite for luxury still lingers. “In the United States, sales among our aspirational clients have slowed down,” Cartier CEO Bernard Fornas explained to me in an interview. “But sales in China are up by 50 to 100 percent, year after year. We see Asia as an opportunity to break through the crisis.”

They won’t be alone in the region. Tory Burch recently inked distribution deals in Japan and South Korea, and Jimmy Choo will have opened three stores in Hong Kong by the end of the year. And upscale California boutique Kitson, after enjoying $1.5 million in sales from their first store in Japan, which opened in March, has announced that they’ll open two more in the coming months — and they’re also scouting locations in China, South Korea and Singapore.

“Each day in Asia sees the emergence of a new millionaire,” says Fornas. “Even if this is only 0.1 percent of the population, it’s still an overwhelming reservoir of potential customers.”

Of course, not every high-end designer is taking pages from the mass retail playbook. Some maintain that the safest thing to do is to continue to push aspirational styles that come with four-digit price tags.

Consider Derek Lam, a fashion-set darling. Not only is the company not pulling back–they’re launching their biggest ad campaign to date, with print buys in the August editions of Vogue, Elle and Harper’s Bazaar.

But that doesn’t mean they’re not realistic about their customers’ current finances. “It’s not that we don’t respect the values of the recession,” says Jan Schlottman, CEO of Derek Lam. “We are as scared as everybody else. But we want to say: we know you don’t feel like shopping right now, but we’re here, and we’re going to be here in five years.”

For further information, visit: http://www.walletpop.com/blog/2009/07/10/fancy-brands-look-to-mass-retail-for-lessons-in-survival/

Christopher Banks Profit Plunged

June 27, 2009

Shares of women’s clothing chain Christopher & Banks Corp. surged as high as 14 percent Thursday after first-quarter results exceeded Wall Street expectations, although profits plunged from lower sales.

The Plymouth, Minn., company said profit fell to $1.7 million, or 5 cents a share, from $11.3 million, or 32 cents a share, last year.

Net sales for the quarter ended May 30 fell 23 percent to $120.4 million from $155.4 million a year earlier, while same-store sales tumbled 24 percent as tough economic conditions continued to pressure sales.

The retailer said it expects the second quarter will remain challenging, with sales at stores open at least a year to be similar to the first quarter. The nation’s high unemployment rate and the prolonged housing market downturn have made many consumers reluctant to spend on all but the basic necessities.

Analysts surveyed by Thomson Reuters expected the company to report a loss of 5 cents a share on sales of $121 million.

Although CEO Lorna Nagler expressed disappointment with the company’s revenue growth, she said it was able to deliver positive cash flow and earnings, which represented “a meaningful improvement” from the fourth quarter.

She said the company also has made progress by reducing inventory levels and cutting sales, general and administrative expenses, which were trimmed by $7.5 million.

The company said it expects to be cash flow positive for fiscal 2010, but offered little additional guidance.

Christopher & Banks has 814 retail stores in 46 states. Its shares settled back in midday trading, to $6.03, up 9.6 percent.

For further information, visit: http://finance.yahoo.com/news/Christopher-Banks-1Q-profits-apf-2260413935.html?x=0

The Future Of Online Retailing

June 25, 2009

Everyone knows the economy—online and off—is bad. What no one knows for sure is when the situation will improve.

But things will get better.

eMarketer forecasts that US retail e-commerce sales (excluding travel) will total nearly $132 billion in 2009, down 0.4% from 2008.

But, assuming the recession ends this year, as many economists predict, the forecast indicates that online sales will begin to rebound in 2010 and hit full stride in 2011.

Declining sales growth rates do not tell the whole story.

“Everyone focuses on the downturn in the overall economy, but the recession has only accentuated the gradual decline in online sales growth over the past few years—the decline would likely have occurred even in normal economic times,” says Jeffrey Grau, eMarketer senior analyst and author of the new report, Retail E-Commerce Forecast: Cautious Optimism. “It’s just simple math: The bigger online sales become, the harder it is to maintain high levels of growth.”

Greater spending by incumbent online buyers is the key to continued e-commerce growth.

Some 152 million individuals ages 14 and above will shop online in 2009.

“That means almost nine out of 10 Internet users will browse, research or compare products online this year,” says Mr. Grau. “This rate will grow slightly by 2013, since most Internet users predisposed to online shopping will already be doing it.”

Yet measuring e-commerce’s potential solely in terms of online sales ignores the impact of cross-channel shopping.

“The recession has made online product research an imperative,” says Mr. Grau.

According to PriceGrabber.com, the tough economy is driving consumers online to compare prices, look for retailers that do not charge sales tax or shipping fees, seek discounts and avoid impulse buying.

“Cross-channel shopping tends to fall under the radar because it is harder to measure than e-commerce sales,” says Mr. Grau.

Forrester Research estimated that store sales influenced by online research are higher than retail e-commerce sales. For 2009, Forrester projected cross-channel sales of $758.8 billion—about three times higher than online sales of $235.4 billion.

“Retailers still have plenty of work ahead to weave their channels into a single, unified presence,” says Mr. Grau. “If enough succeed, it could contribute to building greater consumer confidence in e-commerce.”

For further information, visit: http://www.emarketer.com/Article.aspx?R=1007142

A Better Retail Experience For Winn-Dixie Customers

June 25, 2009

To ensure it stocks the right products in its stores and can authorize customers’ payments, Winn-Dixie must process thousands of real-time transactions every day. These transactions are underpinned by the company’s mainframe and server environment, which is also critical to the product pricing process.

To ensure its systems can meet the service level agreements demanded by the business, Winn-Dixie has deployed Workload Automation and Dynamic and Virtual Systems Management solutions from CA. These solutions provide Winn-Dixie with a centralized and real-time view of thousands of IT jobs and have helped to speed up the resolution of mainframe issues by 100 percent.

Winn-Dixie has been able to reduce business downtime, which means it can ensure that products are priced accurately, store stock levels are maintained and customer payments authorized. All these factors help to improve the retail experience and contribute to Winn-Dixie’s competitive advantage.

Business: Creating a better retail experience for customers

Winn-Dixie operates more than 500 stores across Florida, Alabama, Louisiana, Georgia Mississippi in the USA. Its stores stock grocery, meat, seafood, produce, deli, bakery, floral, health and beauty, and other general merchandise items.

Since emerging from Chapter 11 at the end of 2006, the company is focused on rebuilding trust in its brand, investing in its stores and generating profitable sales. The company’s ultimate goal is to be a leading neighbourhood grocer in every market that it serves. achieve this objective and compete with other supermarket chains, Winn-Dixie needs able to provide customers with great products and great service in a fast, friendly and fresh environment. The company has already embarked on a major store-remodelling program also investing in its corporate brands program, with the target of having at least 1,000 new product types on store shelves by the end of FY2008.

Challenge: Maintaining the right level of stock at the right price

To ensure both its own private-label products and national brands are constantly available stores, Winn-Dixie operates six distribution centres as well as three manufacturing plants. The distribution centres are at the hub of the company’s supply chain and each year ship millions of products to Winn-Dixie’s stores, which also encompass more than 450 pharmacies and liquor outlets. Daily sales breakdowns provided to the company’s management team as well as stock reports help to determine which products should be shipped from the distribution centre to each. This information is captured and processed by the company’s IT infrastructure, which also plays a key role in billing, buying, product pricing and authorizing customer payments. Dennis Horne, IT Systems Engineer for Winn-Dixie, comments, “If our IT systems go down, means we can’t update product barcodes, verify customer payments or offer self-checkout facilities. The business is reliant on our ability to process transactions in real-time: if IT stops, our stores stop.”

With IT playing such a critical role in the retail experience, many of Winn-Dixie’s core business processes are subject to stringent service level agreements (SLAs). To ensure these SLAs met, Winn-Dixie’s IT department must be able to ensure the availability and performance core systems, which include an IBM mainframe and more than 200 blade servers. Both the mainframe and server farm process an average of 5,000 jobs per day — these can include paying grocery suppliers, updating product pricing codes, sending stock requirements the distribution centers and collating store sales data. If any of these critical processes interrupted, then there could be a negative impact on Winn-Dixie and its customers.

We need to be able to quickly identify any disruption to our IT systems and their workloads and schedules,” comments Horne. “If a problem on the mainframe or a server goes unnoticed, then it could disrupt an important business process or application and cost the company thousands of dollars.”

To ensure it has sufficient visibility of its core systems, Winn-Dixie has been using the CA Workload Automation solution for five years. CA ESP Workload Automation enables Winn-Dixie to define, monitor, control, manage and integrate the workload of both its mainframe and distributed server environment through a single platform.

The CA solution replaced two disparate and database-driven Workload Automation management tools, which prevented Winn-Dixie from viewing IT jobs centrally and in real time. Now the company can monitor not only the scheduling of internal processes but also external transactions with suppliers and banks. “CA ESP Workload Automation provides us with a single pane of glass and helps us manage IT jobs more efficiently,” comments Horne. “Workload Automation is probably the most critical application for Winn-Dixie and ensures the seamless operation of our stores and supply chain.”

As well as ensuring that pre-defined business processes are executed in line with SLAs, CA ESP Workload Automation also enables Winn-Dixie managers to schedule specific IT jobs, such as creating a stock report for different product lines.

“Using the solution’s Web interface, managers are able to create bespoke reports without having to involve the IT team,” comments Horne. This has not only freed up IT resources but also reduced the time it takes to generate some management reports by as much as half. Mainframe problems resolved 100 percent faster. To further enhance the performance of its mainframe, Winn-Dixie also uses the CA Dynamic and Virtual Systems Management solution. CA-OPS/MVS® Event Management and Automation helps ensure that any mainframe problems are quickly identified and resolved. “Instead of just capturing event messages, the CA solution alerts us to a problem and the remediation required,” comments Horne. “We can also monitor started tasks and identify if a job finishes outside of normal parameters.”

The CA solution has simplified event management to such an extent that Horne estimates a 100 percent improvement in the IT team’s response time to mainframe problems.

Results: An enhanced retail experience for customers

For further information, visit: http://www.logisticsit.com/absolutenm/templates/article-retail.aspx?articleid=4715&zoneid=49

How Is Walmart Keeping Up With Their Consumers?

June 25, 2009

The recession steered a new type of customer to Wal-Mart — deeper in the pockets and suddenly looking for bargains. Now the world’s largest retailer has to figure out how to keep that customer when the economy recovers.

So Wal-Mart is bringing in more brand names, ditching scores of other products and even redesigning hundreds of stores to give them wider aisles, better lighting and better sight lines.

It’s more than just a cosmetic upgrade. That new breed of customer also spends about 40 percent more than the traditional Wal-Mart shopper, and the retailer senses an opportunity to accelerate its growth.

Take Aditya Krishnan, a 42-year-old lawyer from San Jose, Calif. He used to buy only light bulbs at Wal-Mart but now finds himself spending $150 a month there, including buying workout clothes he used to get at Macy’s.

“If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?” Krishnan asked. “I am seeing better brands, and the shopping experience is better” than before.

Wal-Mart says that’s no accident. It’s placing a big bet on the redesign of most of its 3,600 stores, started last fall. This fiscal year, it plans to redo up to 600 at a cost from $1.6 billion to $1.7 billion.

The prototype for the remodeling includes lower shelves to make it easier to see across the store, better lighting and wider aisles. Expanded electronics areas will include interactive displays to test video games and portable gadgets.

The store now carries brands like Danskin and Better Homes and Gardens, and its electronics section now stocks pricier products like Palm Inc.’s well-received new Pre smartphone.

Whether it all works, Wall Street analysts say, depends in part on how quickly the behemoth retailer can remodel and keep shoppers satisfied. Concerns about how Wal-Mart will keep its momentum have sent its stock down 13 percent this year.

The early signs are positive, putting pressure on the rest of the industry. Target Corp., whose sales have been hampered by its emphasis on nonessentials like trendy jeans, is expanding its fresh food offerings. Best Buy Co. is beefing up customer service.

“I believe a lot of what (Wal-Mart) is doing is working,” said Joseph Feldman, a retail analyst at Telsey Advisory Group. “They are a threat to everyone.”

Other discounters, including TJX Cos. Inc., which sells name-brand fashions and home furnishings, Costco Wholesale Corp. and BJ’s Wholesale Club Inc., are focusing on how to hold on to new customers lured by low prices during the recession.

But Wal-Mart, which only three years ago struggled with cluttered stores, long lines, stiff towels and unattractive clothing, has a bigger hurdle to climb. And it has to move fast to win over people who still have negative feelings about shopping there.

“The service still needs to be improved, and the stores are a little sloppy,” said Daniel Chou, 35, of Warren, N.J., who was at a local Wal-Mart to pick up a bungee cord but who says he rarely shops there.

Stock in Wal-Mart and a few other discounters such as Costco Wholesale Corp. have fallen this year as investors turn to beaten-down shares of more upscale companies like Macy’s Inc. and Williams Sonoma Inc., which investors believe don’t have much further to fall.

Wal-Mart, which topped $400 billion in sales last year, attracts more than 140 million customers per week. But to get them to buy more than just groceries, which account for about half of annual sales, it’s paring its product lineup and making room for better brands.

Consultant Burt P. Flickinger III estimates the remodeled stores are carrying 10 to 15 percent less inventory, particularly getting rid of no-name labels.

The shift risks turning off longtime customers who are looking for only the cheapest products. It’s happened before: The company had to dump Metro 7, its in-house clothing line launched in 2005, because it turned out to be too trendy for its general clientele.

Wal-Mart executives say 17 percent of the chain’s traffic growth in February came from new customers, and they’re spending 40 percent more per trip. More than half of those shoppers living in households that take in more than $50,000 a year.

While that may not be considered affluent, it’s a big departure from Wal-Mart’s core customers, of whom one in five does not have a bank account or has limited access to financial services.

To keep prices low while offering better products, Wal-Mart is slashing its own costs in little ways. The Angus ribeye steak being sold at Sam’s Club at 25 percent below competitors’ prices is paid for in part by a switch to shorter straws at its cafe, saving $52,000 a year, says spokeswoman Susan Koehler.

A recently converted customer is Judy Safern, a 42-year-old public relations executive from Dallas who used to buy her children’s clothing at Galleria mall and groceries at Tom Thumb supermarket.

She now says she hasn’t been to the mall in a year and figures she saves several hundred dollars a month by buying most clothing and food at Wal-Mart. “I basically buy everything there,” she said.

For further information, visit: http://www.chicagotribune.com/business/nationworld/wire/sns-ap-us-new-frugality-upgrading-wal-mart,0,6108830.story

Retailers Are Being Squeezed

June 25, 2009

A year ago, high gasoline prices shocked shoppers out of stores. But retail imploded last fall when the stock market crashed. Merchants have been in a skintight squeeze ever since.

By stashing money into mattresses for months, consumers have taken a mountain-size chunk out of the retail economy, which accounts for two-thirds of economic activity in this country.

The ripple effects of this new frugality are abundant, from rising vacancies in malls and shopping centers to turmoil at the biggest local retail outfits:

Privately owned Boscov’s Department Store L.L.C., of Reading, declared bankruptcy in August. It reemerged around Christmas with fewer stores, fewer employees, and a return of retired leader Albert Boscov to the chief executive officer’s job to keep the 39-store chain on course for survival.

Publicly traded Charming Shoppes Inc., of Bensalem, ousted its chief executive, closed stores, and is trying to maneuver out of the red zone (negative profits) with new managers and new fashions for its plus-size and discount women’s apparel stores.

Destination Maternity Corp., of Philadelphia, is pruning its store network, has renamed some of its shops, and has laid off headquarters staff as part of a restructuring aimed at simplifying and cutting expenses at the publicly traded company.

Even Wall Street darling Urban Outfitters Inc., of Philadelphia, which seemed recession-proof just a year ago, has seen sales slide at its upscale Anthropologie and Free People stores, despite doing better overall than the competition.

This new, in-reverse world of retailing follows decades during which companies grew huge on Americans’ insatiable buying. Shoppers gorged on credit – the same kind of easy borrowing that helped retailers get big loans to buy competitors and add stores.

“This whole recession has caused people to pause and reevaluate their values,” said Natalie W. Nixon, professor of fashion-industry management at Philadelphia University.

And with far fewer customers now, many companies are shedding unprofitable stores, laying off employees, and selling assets to generate cash as profits and sales have plummeted.

“That kind of scaling back, that trimming down that individuals are having to do, is a microcosmic reflection of what these corporations are needing to do,” Nixon said.

Companies have canceled new store openings, renegotiated rents, and slashed inventory.

The contraction could be prolonged if, as some analysts say they believe, consumers are shifting permanently toward higher saving rates.

“We’re still going to see some stores going out of business,” said Stephen J. Hoch, director of the Jay H. Baker Retailing Initiative at the Wharton School of the University of Pennsylvania. “It’s amazing that everybody just kept opening up more and more stores and more people didn’t start having problems even when things were OK.”

Things in retail were shaky even before a sledgehammer fell on the world’s piggy banks. Bloomingdale’s alumnus and longtime retail executive Glen T. Senk, now chief executive of Urban Outfitters, says as much.

“I feel like the industry was ill well before the current economic environment,” said Senk, whose $1.8 billion company is based at Philadelphia’s Navy Yard.

There had come to be too many stores, too many new shopping centers, and too many Internet venues, and retailers were fighting to hold on to their customers.

“Look at Talbots, Ann Taylor, Chico’s, and Liz Claiborne,” Senk said. “These brands have been struggling for years. The economy has just exacerbated their struggles.”

Even department stores and malls had lost loads of shoppers to big-box retailers and huge, outdoor shopping centers.

And yet, Senk said, few could imagine the scope of the economic crisis that has unfolded.

“I don’t think anyone understood the enormity of the situation or the confluence of events,” he said.

A local company that had feverishly expanded for years – Charming Shoppes – has undergone intense upheaval over the last year.

As many plus-size and value-oriented customers stopped shopping at its Lane Bryant, Fashion Bug, and Catherine’s stores, the $2.4 billion company’s profits and stock price were tumbling in 2007-08. Activist investors pointed the finger at management.

Last spring, they won two seats on the board, and longtime chief executive Dorrit Bern was ousted soon after. The company has set about selling some unprofitable divisions that had been acquired under Bern, who had steered the company through exponential sales growth.

In recent months, new brand-division leaders have come on board, and in April the company hired a new chief executive, James P. Fogarty.

Fogarty is a turnaround veteran from Alvarez & Marsal Holdings L.L.C., where for years he was dispatched to consumer companies either in bankruptcy or in distress and helped make them healthy again.

“The company has already done a lot of tough stuff,” Fogarty said of Charming Shoppes. He left the New York turnaround firm to run the retailer.

Although the company has ample credit and cash to fund its operations, Fogarty said it had a way to go in restoring profitability.

“We need to sell more per square foot, and we need to continue to work on our operating margins in the business,” he said.

The new leaders are making changes to the company’s stores, he said, hoping to attract shoppers by offering more focused assortments.

The company has halted many new-store openings and shuttered existing stores. It is also aggressively negotiating rent breaks from mall and shopping center owners.

“We’ve done a lot of work on rent reductions,” Fogarty said, “like every other retailer in America.”

In March 2008, the same hedge fund that rattled cages at Charming Shoppes gained a board seat at Destination Maternity, which is headquartered at Fifth and Spring Garden Streets in Philadelphia.

Several months later, in July 2008, the $548 million maternity-apparel retailer announced a restructuring plan that included headquarters layoffs and the renaming of a number of its stores.

The company now operates stores under the names Pea in the Pod, Motherhood Maternity, and Destination Maternity, and also produces clothing lines for all three.

Former chief operating officer Edward Krell, who in September was promoted to chief executive and in December announced a corporate name change away from Mothers Work Inc., said the plan to “tighten up the belt” and simplify the company had been in the works for a while.

But officials put it into play as the retail market began to deteriorate acutely last summer.

“When there’s a tough economy, it makes it easier for you to say, ‘Hey, now is the time,’ ” Krell said. “Necessity is the mother of invention a little bit, and sometimes that’s what kind of pushes you over.”

“We’re not where we want to be in terms of profitability,” Krell said. The company recently launched an expansion into India and the Middle East. “But we think we’ve put the things in place to have nice growth long term.”

At Boscov’s, the goal in recent months has been repair and reconstruction of the region’s only remaining family-owned department store chain.

After having taken on big loans to open nearly a dozen new stores, the nearly century-old retailer declared Chapter 11 bankruptcy in August. A drop in customer sales, partly caused by the economy, had left the debt-soaked company in the danger zone with its lenders.

Drained of cash, Boscov’s had stopped paying its suppliers, and store shelves were going empty as vendors suspended merchandise shipments.

In December, the $1 billion company came out of bankruptcy thanks to its 79-year-old former leader. Albert Boscov assembled financing from private investors, state officials, and a number of towns in Pennsylvania and South Jersey that wanted to keep Boscov’s alive.

The chain shed 10 stores during bankruptcy. And Boscov and his team have spent the last six months scavenging for merchandise at discounts and passing it along to customers. That has required mending fences with vendors who lost money in the bankruptcy. “We had to convince a lot of people that we were really sorry,” Boscov said during a March interview at Deptford Mall. “In the 45, 50 years I ran it, we never hurt anyone.”

In recent weeks, consumer confidence has shown signs of rising, and the latest job-loss figures were less steep than they had been earlier, although still high, suggesting an easing of the recession.

But retailers remain cautious and conservative.

“I know that a year from now we’ll be looking at a much better economy than we are now,” Krell said. “What I’m not sure is how will it look three months from now and six months from now. And we’re hopeful. But at the same time, we’re managing ourselves very tightly.”

For further information, visit: http://www.philly.com/philly/business/top100/20090622_Retailers_squeezed_by_new_frugality.html?viewAll=y

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