Archive for February, 2015

Is Chico’s going private?

Rumors that the private-equity firm Sycamore Partners will take Chico’s private have sent its stock soaring. Meanwhile, the question posed on RetailWire is whether this move will be good for Chico’s business. I have mixed feelings on the topic:

Sycamore has already assembled a collection of mall-based specialty apparel chains. (The article mentions Aeropostale and Talbots, but there are also investments in Hot Topic and the Coldwater Creek brand assets.) These are not the strongest brands in the business, and even Chico’s is struggling right now. Either Sycamore believes in the segment, or they bought the brands at a sufficient discount to make some money on a future sale.

Going private can be liberating for a company no longer under the microscope for its quarterly results, but the question in Chico’s case is whether Sycamore is already highly leveraged and how it will affect the company’s operations. It would make sense for Sycamore to find some back-office economies among all the brands and chains it now operates.

Can Radio Shack survive its latest incarnation?

Radio Shack recently announced that it is entering Chapter 11 bankruptcy, closing thousands of locations, and re-engineering most of the others to include Sprint cell phone stores. I’m skeptical (per this RetailWire comment) about the brand’s future regardless:

A recent article about Radio Shack pointed out that it is vastly overstored, citing an example of six stores in a five-mile radius in one of its markets. Leaving up to 2400 out of 4000 locations in place doesn’t address that problem by itself.

The bigger question is whether a Sprint “inpost” is going to draw traffic effectively enough to salvage the brand. (And Sprint itself is not among the strongest cellular brands anyway.) Once a customer has finished buying or servicing a cell phone, is there anything else inside Radio Shack that he or she will want to buy?

Radio Shack’s perceived brand irrelevance to most shoppers isn’t going to solved overnight by this new direction…if it can be fixed at all.

What’s holding back omnichannel?

“Omnichannel” is more than a buzzword — it’s a real way to drive business by integrating your retail channels in a seamless way. But most stores have a lot of catching up to do, compared to Macy’s — the subject of a recent RetailWire discussion and these comments from me:

Omnichannel is a reality whether retailers are ready for it or not. The “early adapters” on the retail side (such as Macy’s) are raising the bar so rapidly for functions like BOPIS and ship-from-store that their competitors are scrambling to catch up. (And not always smoothly.) Macy’s in particular continues to expand in this area, having just announced some restructuring of store functions and manpower planning to leverage its lead even faster.

It’s not so much about whether consumers are shopping and paying for goods using mobile devices instead of PC’s (although that will continue to grow). It’s more important for retailers to break down the organizational silos that prevent the brick-and-mortar merchants and operations management from functioning smoothly alongside their e-commerce partners.

JCPenney brings back the catalogue…with a twist

JCPenney recently announced a catalogue focused on home goods, after several years out of the catalogue business. (Of course, this was a huge “heritage” business for JCP, with a nationwide infrastructure to support it.) Although I’ve been critical of a lot of JCP’s recent “turn back the clock” tactics, I think this is a positive move. Here’s my recent comment from RetailWire:

This makes sense for JCP as a way to focus more attention on its home store, and as part of an integrated omnichannel strategy. There is no reason why a well-focused catalog shouldn’t drive both online and brick-and-mortar sales. And JCP is counting on the revival of its home store to help drive its sales recovery plan during the next few years. So I’d give this a thumbs-up as a relatively low-risk tactic.

Macy’s plans an off-pricer?

Macy’s announced in January several initiatives tied to stronger underpinnings for its omnichannel efforts. Surprisingly, it also announced possible plans for an off-price division, like TJMaxx or Nordstrom Rack. My comment (at RetailWire) follows:

Brand positioning will be critical to the success of this new venture, because the space is already getting crowded. If Macy’s uses the Bloomingdale’s brand to follow the lead of Off 5th and Rack stores, it has a chance to leverage a well-established brand. On the other hand, attaching the “Macy’s” label to an off-price store may just cannibalize a very promotional business with a huge existing footprint. And I’m not sure the third way—developing a new brand—would be a smart choice at all.

Target ends its Canada misadventure

Most RetailWire panelists were surprised last month at the Target annoucement that it is pulling out of Canada…less than two years after opening. I commented that the speed of the decision is a refreshing return to form for Target:

There are well-documented execution issues—pricing, supply chain management and so forth—that don’t need to be rehashed at this point. The biggest takeaway is the speed with which Mr. Cornell pulled the plug on the misfire. Where Target used to be known for a culture of “Speed is Life,” this was replaced over time by a more cautious approach to the business. It’s arguable that the size of the investment deserved more time for a turnaround, but the prospects were so dim (no profit until 2021) that Mr. Cornell’s decision represents a wake-up call to his own organization and to the investor community.

Toys “R” Us: The big box store is still ailing

Here’s a recent post from RetailWire about Toys “R” Us, following the release of its (disappointing) holiday sales. The question is whether this is symptomatic of big box stores generally, or issues unique to TRU. Here’s my point of view:

The struggles at Toys “R” Us point out that the big box store concept is not out of the woods yet. (Best Buy’s improving numbers are the exception to the rule.) Many of the “transformational” steps being taken at TRU strike me as “Retail 101”: Managing pricing, costs, inventory and the in-store experience are all fundamental to any successful retailer.

If Toys “R” Us gets these basics right, it is still facing some significant headwinds. The competition isn’t getting any easier, from Amazon to Target, who made toys the centerpiece of its holiday campaign this year. Meanwhile, sales continue to migrate to e-commerce and omnichannel retailers while TRU deals with too many brick-and-mortar locations.