Archive for the 'Investor Relations' Category

Sears opens appliance/mattress stores

RetailWire panelists discussed Sears’ plans to open stores specializing in nothing but major appliances and mattresses. While this may have been a solid strategy 20 years ago, count me as a skeptic given Sears’ issues today:

It’s hard to picture anything solving the Sears problem at this point. The company just announced the closure of a mall anchor here in Milwaukee (after closing another anchor over a year ago), leaving it with just one full-line store here. I’m sure the story is being duplicated around the country, at the same time that Sears has been closing (not opening) appliance-only franchise stores.

Sears’ legitimate franchise in appliances is evaporating as it continues to shrink its footprint and sell off its key brand (like Kenmore). The appliance space is crowded with competitors, now including major investments by Amazon and JCPenney. And who needs another place to buy mattresses, especially given the growth of online sales?

Does Gordmans have a future as an off-pricer?

Stage Stores bought the Gordmans Midwest-based chain out of bankruptcy earlier this year, and announced plans to convert it from a promotional department store to an off-pricer. I commented on a RetailWire panel discussion about the game plan along with Stage Stores’ decision to maintain multiple nameplates:

From my recollection shoppoing a few Gordmans stores in the past, they were a Kohl’s wannabe without the geographic footprint to be sustainable. Now they are aiming to be a TJ Maxx wannabe but will still be saddled with the same problems. It’s tough to enter an increasingly crowded sector without the physical footprint or the buying power to compete against TJX, Ross Store and now Backstage.

Stage Stores is trying to maintain multiple concepts and brands (Peebles, Goodys, Bealls and now Gordman). Why not operate one concept under one brand-name umbrella? It’s the “Bon Ton syndrome” where none of the individual brand names is strong enough to overcome the lack of scale.

Changing of the guard at J. Crew

The decision by longtime J. Crew CEO Mickey Drexler to step aside was widely reported yesterday. (I recently discussed the departure of the company’s creative director.) Drexler is being replaced by James Brett, current president of the West Elm lifestyle brand. RetailWire panelists discussed what to anticipate at J. Crew, and I wrote the following:

First, keep in mind that Mickey Drexler is not exactly riding into the sunset: He retains his chairman title and a significant ownership in the company. So it remains to be seen whether Mr. Brett has the freedom to reshape the company as much as it needs. It’s not always easy for somebody with Mr. Drexler’s track record to walk away.

As to the reshaping, I expect to see a few things happen: First, a faster expansion of the Madewell business. Second, a course correction for the J. Crew brand itself, perhaps back to its legacy positioning as a more affordable (but still aspirational) alternative to Ralph Lauren. (Right now it’s nowhere close to a clear point of view.) And, third, expanding the J. Crew brand (once it is fixed) into new categories, just as Mr. Brett has done by treating West Elm as a lifestyle business.

Is omnichannel really less cost-effective?

CNBC recently ran a story (linked below) about the relative costs of brick-and-mortar, e-commerce and omnichannel retail. Their results were surprising and I expressed my skepticism on a recent RetailWire post:

I was skeptical about the analysis when I saw it reported on CNBC last week. Does the study factor in the efficiencies that might be achieved by leveraging physical stores’ payrolls and inventory levels? Does it continue to look at the silos of brick-and-mortar and e-commerce as separate expense centers? Are some retailers with negotiating leverage with the big freight carriers able to achieve cost efficiencies through ship-from store and also save operating expense in their e-commerce distribution centers?

I’m also skeptical as a longtime (1982-2006) employee of Kohl’s, which is pushing its omnichannel initiatives hard. Kohl’s has always managed its expenses carefully, even in down times, and I doubt they would be pursuing omnichannel aggressively if it were truly an SG&A-buster.

http://www.cnbc.com/2017/04/19/think-running-retail-stores-is-more-expensive-than-selling-online-think-again.html

Are “same store sales” still meaningful?

In a recent RetailWire discussion, panelists commented on an article about same-store sales. The issue is whether this metric means anything in today’s world of “omnichannel” and stores closures. Here’s my perspective:

The article brings up a key point about the impact of omnichannel on same-store sales metrics. If a customer uses BOPIS (buy online, pick up in store), does the sales credit belong to the company’s e-commerce site or to the store that fulfilled the order? Is it a fair metric when store A might have the merchandise in stock and location B might not? And, bottom line, does it or should it matter to a true omnichannel retailer?

There is another issue casting a shadow on the validity of same-store sales: The increasing speed of store closures. At one point “comp sales” was a valuable tool as a lot of retailers were in a go-go expansion mode, but just the opposite is the case now. As companies close overlapping locations, the remaining stores may benefit from a spike in same-store sales without actually reflecting on the health of the business.

What to do about all that excess space?

U.S. retail has historically been “over-stored” but never more so than right now, with an escalating wave of brick-and-mortar closures. The question for mall developers (addressed in the following RetailWire comment) is: What to do about it?

The U.S. has for many years had far more retail square footage than any other country: 25 to 50 sq. ft per capita (depending on how you measure it) compared to 2.5 sq. ft. per capita in Europe. It’s apples and oranges but it still illustrates that the “overspace” problem in the U.S. existed long before e-commerce put additional pressure on all that space.

The residential real estate market deleveraged after the Great Recession but retail real estate is unwinding at a slower pace. And all that footage in shopping centers is not going to be gobbled up by traditional department stores or mall-based retailers, who already have too much space. The challenge is how quickly the space can be redeployed for food, drug and discount retailers who might actually need the added locations.

And a few more comments from a more recent post:

There is still room for traditional department stores as mall anchors, but they need to be relevant to the consumer as well as consistent with the profile of the overall tenant mix. But the old paradigm of two traditional stores, Sears and Penney just doesn’t cut it anymore, and is undergoing well-deserved “creative destruction.”

Part of the challenge for the anchors that remain is to spend some money on new paint, floor treatments and lighting! Even at a showplace mall like University Town Center in La Jolla, where Nordstrom is relocating to a brand-new building this fall, Macy’s in particular stands out as a bad example of lack of capital spending. You can only go so far blaming the “death of bricks and mortar” on e-commerce if you’re not willing to keep your house in order.

JCP: Too early to declare victory

JCP’s CEO recently declared that its (slight) 2016 profit repreesented an historic turnaround. Most RetailWire panelists agreed with my contrary view:

It’s admirable that JCP has stopped bleeding cash but its net earnings in 2016 were just over $1 million (not the EBITDA number, which was higher). So it’s premature to declare an historic victory in light of store closings and soft sales. The slippage in gross margin in 2016 is another area of concern, because competition won’t be any easier in 2017.

With those reservations in mind, Mr. Ellison has had his eye on the ball ever since assuming the CEO chair and continues to focus on the right things — data science, expense controls, driving sales opportunities and weeding out unproductive locations.