The Power of Retail

Sears is working hard to change its image and has teamed up with MTV to create a new back-to-school movie and will be adding to its line of street clothing and accessories that are designed by LL Cool J. The company has been redoing its image for quite some time now, trying to change people from thinking that all it sold was hardware, but sales have not been all that great and the so the company is trying to woo the young and the urban hip with this new line of clothing and branding.

According to Sears CMO, Richard Gerstein, “While mom may decide what the acceptable place is to shop, the kids are deciding what clothes they want and what places have it. If we come out of our season with much more relevance with this group, and improving our sales and profitability with this group, we think it’s a big win.” No one is sure whether these new initiatives will turn the tide for the company and rejuvenate its image and it will be interesting to watch.

…Some industry observers said they don’t believe Sears has the credibility to compete in the increasingly crowded teen market. Nor are they sure whether this latest effort will yield more success than previous initiatives aimed at bringing back shoppers.

“Trying to be everything to everybody is difficult because consumers have so many choices,” said Morningstar analyst Kim Picciola. “If they can manage to reinvent themselves, I think it will be a big win for them. But I think that’s going to be a challenge in this current environment.”

Popularity: 26% [?]

Steve & Barry’s clothing company will likely be filing for bankruptcy this week itself. The company has been trying to raise finances in the past few weeks but has not been able to do so and will not have to sell its assets. The company has been discussing with Sears regarding a partial sale or a bail out. If the stores close, it will be a huge blow to the hundreds of mall owners who paid the company to move into empty spaces in their properties. If all of their 275 stores close, it will be the end of all 17,000 employees as well.

Steve & Barry’s has an annual turnover of $1.1 billion, but has been severely affected by its policy of keeping a razor thin profit margins. The company also makes a practice of opening stores in run-down and distressed locations on getting special payouts from the landlords, which has become unsustainable as the economy has weakened. Besides selling sports logo products, the company has become famous for its tie up with Sarah Jessica Parker for her Bitten line of clothing.

Popularity: 25% [?]

Walmart is no longer Wal-Mart! Yes, that’s right, the hyphen is gone, as is the star in the middle and it has been replaced by an organic looking flower at the end instead. Walmart has changed its logo several times before as well, and the last time was in 1992. This change was long overdue, since it had started looking very dated. The new logo will appear on stores by the fall, but is already coming in new print advertisements and TV commercials so consumers are getting quite familiar with it already.

Popularity: 11% [?]

Furniture and home giant Ikea is keen to focus on developing markets such as Russia, China and Eastern Europe after the cut down in spending in some of its major markets. At the opening of its 35th store in the US, located in Brooklyn, NYC, Anders Dahlvig the company’s chief executive stated that the housing downturn in the US had led to the slowdown in its global sales and did not expect a recovery for at least two years. He added that growth in many European countries was slowing down and that “A lot of things are going in the wrong direction.”

Besides the US, countries like the UK and Germany have been badly affected and even strong markets such as Spain have been effected with the downturn. The company’s outlets in Spain and Portugal had a record turnover of GBP1.19 billion this year, an increase of 42% over last years figures. So far the company has 11 stores in Spain and will be opening additional stores in Jerez, Granada, La Coruna, Valladolid and Madrid, aiming for a total of 40 stores by 2020. In total Ikea has 279 stores in 36 countries and hopes to reach 300 by the year end.

Popularity: 13% [?]

Sales for the month of May rose higher than forecasted levels showing that consumers did have more cash in their wallets thanks to the US government’s rebate checks that had been distributed. According to the US Commerce Department, there was an increase in retail sales that was more than double of what was expected by economists on Wall Street. On average sales rose 1.2% as compared to the 0.7 % forecasted by economists, even considering the higher prices for gasoline. One of the only sectors that did not see an increase was the automobile sector.

Popularity: 44% [?]

Staples recently announced that it will be offering a small selection of DVD movie rentals starting in June at its US stores. According to the Staples sspokeswoman, “A new in-store ‘no-return’ DVD rental service, called Flexplay, will let customers rent the latest movie titles without having to return them to the store.” The system is perfect for business travelers as well as small business owners. The Flexplay system will let you view a fresh selection of movies anytime and anywhere. The original DVD gets erased 48 hours after opening it and can be recycled with other plastics.

According to its website, Flexplay Technologies Inc. of Atlanta is a developer and a supplier of limited-life optical media technology; Flexplay time-limited DVDs offer unlimited, perfect quality DVD playback in any standard DVD player, but only within a pre-set viewing window that begins when the use opens the sealed Flexplay DVD package.

Popularity: 59% [?]

The slow economy, sky-rocketing gas prices and a tough job market is making things especially hard for retailers this summer. There is a sudden trend for spate of sales across retailers luring in shoppers who avoided the stores in the coldest May in six years. With suddenly increasing temperatures, the demand for fans, air conditioners, summer apparel, and cold drink has shot up according to industry consultant Planalytics, that helps retailers predict and manage the weather’s impact on sales.

According to Scott Bernhardt, CEO of Planalytics, “You had a tough spring and then suddenly a shock to the system; people were rushing out to buy these things.” The company has estimated that sales for weather specific items such as air conditioners increased by 20%, bottled water by 4%, swimwear by 6%, sandals by 9%, as compared to the same week in 2007. The highest gains took place in the Northeast.

Besides the sudden heat wave, generous economy stimulus checks given by the government, the cash registers at many retailers will be ringing and happy this summer, although consumers will start tightening their wallet again.

With most checks hitting shoppers’ hands in July, Retail Forward projects 6% year-over-year sales growth for the upcoming third quarter, half of which the company is attributing to the stimulus checks. But gimmicks like government checks are only designed to ease short-term pain, not fundamentally change the market. Beneath the uplifting near-term trends, there are plenty of signs of consumers’ cutting back.

A Lehman Brothers report issued Monday says that while 2008 may not bring a recession as traditionally defined–two straight quarters of negative gross domestic product growth–the National Bureau of Economic Research is primed to call a recession based on “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”

Popularity: 28% [?]

Gap is looking to reduce the amount of space it leases in some malls, as an effort to cut back on its rental expenses. The company has had declining revenues for three of the last four quarters. According to Glenn Murphy, CEO of Gap, the retailer is considering the 40 million sq ft that it leases as an asset rather than a cost, stating that “How are we going to monetize it and maximize it to make sure we can get the P&L (profit and loss) benefit by doing the work that needs to be done on this 40 million square feet?”

The company is likely to reduce the size of its stores so that it can save its rent, and will also combine some of its stores for kids and babies into the original Gap store for adults. Admitting that the company “got carried away because we were doing so well”, Murphy said that they necessarily did not need such large stores. He added that the benefits of the reduction in real estate space will not come into effect till 2009.

Popularity: 23% [?]

Retail developers are changing the way they have done business lately. With the weak US economy, which has made developers wary of starting new projects, developers are instead tweaking existing projects to create new retail formats. As one executive calls it, it is the “intensification” or “densification” of shopping centers that are already present as a way to turn the tide away from an over-malled country.

Developers are looking for new formats and underutilized space that they can use to create something different. According to the chairman and CEO of the country’s second largest developer, General Growth Properties, John Bucksbaum, “Intensifying the use of property is certainly the major innovation.” One of the malls being redevolped by the company in Holladay, Utah is getting offices and residential growth as part of being de-malled. The re-done mall will open in 2010, as a mixed use format with shops, restaurants, cafes, grocery stores, condos, townhouses, cinemas, offices, riverside trails as well as a public plaza.

“You need to give people more choices,” said Scott Schroeder, vice president of marketing and communications for Developers Diversified Realty. “Nobody wants to make eight stops to get what they need.” He noted that the performance of certain specialty retailers and smaller “junior” anchors was an ongoing concern for the industry. “The more we can create a hub that combines value and fashion, the more appeal we have and the more customers we will retain.”

Popularity: 21% [?]

Barnes & Noble is making a serious plans to take over Borders bookstore, after the latter announced in March 2008 that it would be putting itself for sale. In a statement issues by Borders, the company stated that it was “in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date.” The major source of competition for booksellers has been discounters such as Wal-Mart and Amazon lately.

Analysts surveyed by Thomson Financial expected a profit of 5 cents per share on revenues of $1.17 billion. The estimates typically exclude one-time items. The company reported that same-store sales, or sales at stores open at least a year, declined 1.5 percent in the period.

Popularity: 78% [?]