Nice to See - and Good for Retail

Pier 1 Imports enjoys solid Q1

June 20, 2013 | By Vivian Gomez

FORT WORTH, Texas — Pier 1 Imports saw “significant” growth in sales and profit for the 15th consecutive quarter.

The company reported net income of $20.3 million for the first quarter ended June 1, a 14% increase from $17.8 million for the first quarter last year. Total sales for the first quarter were $395 million, a 9.3% increase from $361 million in the prior year quarter. The company’s comparable store sales increased nearly 6% during the first quarter compared to last year’s comparable store sales gain of 7.2%. Comparable store sales results for the quarter were primarily attributable to increases in store traffic and higher average ticket.
The company’s gross profit for the quarter improved to $167.6 million, or 42.4% of sales, from $150.3 million, or 41.6% of sales in the first quarter of last year. Gross profit primarily benefitted from the leveraging of store occupancy costs.

“The continued improvement of our gross profit speaks to the success of our merchandising strategies, both in-store and online, and reflects strong full-price selling during the period,” said president and CEO Alex W. Smith. “We also leveraged expenses, enabling us to deliver operating margins of 8.4% and earnings per share growth of 19%.”

Smith added that he is pleased with the company’s ongoing progress it is making toward building out its multichannel functionality. The company’s planned rollout of its new point-of-sale system is on track for completion later this summer, at which time it will be able to begin integrating its stores and e-commerce businesses. 

Great Partnership or DejaVu All Over Again?

Best Buy to debut Windows Store

June 13, 2013

www.retailingtoday.com

REDMOND, Wash. — Best Buy has landed a partnership with Microsoft Corp. that will allow the retailer to offer a Windows Store at 500 of its locations in the U.S. and more than 100 Future Shop locations in Canada.
The comprehensive store-within-a-store will range in size from 1,500 sq. ft. to 2,200 sq. ft. Consumers will be able to see, try, compare and, of course, purchase Microsoft products and accessories, including Windows-based tablets and PCs, Windows Phones, Microsoft Office and Xbox. Each store will feature a space highlighting a variety of Windows scenarios across devices; a showcase section with the latest Windows-based PC form factors such as ultrabooks, convertibles, detachables and all-in-ones, including portable devices and a standalone area featuring Microsoft Surface.

“The Windows Store offers a large-scale, hands-on customer experience that will show customers how Windows and Microsoft devices and services can make it easier for them to work and play,” said Tami Reller, CMO and CFO of the Windows division at Microsoft. “We’re pleased to partner with Best Buy in bringing the latest technologies to consumers at scale in a unique environment where they can explore how Microsoft products fit together across entertainment, travel, music and other scenarios.”
As a result of the partnership, more than 1,200 Best Buy Microsoft-trained salespeople will be brought in to support the Microsoft specialists already working across Best Buy locations.
“Best Buy’s chief goal is to serve our customers as only we can, whether they come to us online or in stores. The Windows Store creates the kind of retail destination we all want to shop in, combining great selection, the latest technology, the best service and the lowest prices,” said Jason Bonfig, VP of computing for Best Buy. “What our customers will see in these 600 stores is something totally new and fully in line with our determination to transform Best Buy.”
The retailer will also court online shoppers with the Windows Store via a dedicated e-commerce site, which will provide updates on store locations, promotions and other information, including joint marketing efforts throughout the year. Best Buy will roll out the Windows Store between late June and September.

J.C.Penney: Dear Activists, Thank You For This Mess

 

When Myron (Mike) Ullman III returned to the helm of J.C.Penney on April 8, I knew that the near term outlook would be very murky.
The just released preliminary 1Q13 figures certainly support our concern. Sales slumped an estimated 16.4% over the preceding year’s first quarter. That is a decrease of $517 million. Comparable store sales fell 16.6%. This first quarter decrease is in addition to the $4.3 billion in sales the company lost last year.  Some of the current decrease has been attributed to construction of the home department in 505 stores.
These figures were released on a preliminary basis in order to facilitate communication with investors surrounding the proposed senior secured loan financing transaction.  The company also announced that on May 4, 2013 it had about $821 million in cash and cash equivalent and total debt of $3.818 billion. The debt includes amounts outstanding on the revolving credit facility of $850 million, long term debt of $2.868 billion and capital leases and notes payable of $100 million. I estimate that the company burned about $900 million cash in the first quarter. The full sales and earnings report for 1Q13 will be released after 4 p.m. on Thursday, May 16, 2013.
The shadow of Ron Johnson hovers over the company. As the home department drags on sales, one wonders about certain classifications in home that were completely ignored and have to be revived.  Surely the Martha Stewart trial diverted attention, but the fact that the home businesses had already lost momentum could be seen on the shelves of J.C.Penney.  In the past, there always was strong color coordination for the home – a fact I admired when the company was headquartered in New York many years ago.  J.C.Penney home products represented excellent quality and extraordinary value, especially the J.C.Penney towel.
Today, this needs rebuilding. The merchandise on the shelves now is non-absorbent Indian goods rather than merchandise from Turkey or the United States. Fashion coordinates for the bedroom were always exciting but have been displaced by irrelevant merchandise. The home was a product and merchandising strength for the company; it created traffic. I am sure that it will be rebuilt under Ullman.
Looking ahead, I believe that the second quarter will not have the merchandise needed to generate strong sales through promotions. I think the first signs of a turnaround in sales will be seen in the third quarter of this year, and that the Christmas season will see a strong pickup of sales. This year the calendar is against every retailer’s results since Christmas falls on a Wednesday  and there is one less week in the period. This will result in a late shopping season for many customers. In addition, profits will be hurt because the extra week in 2012 leveraged expenses by at least 1 ½ % which will be hard to make up this year.
J.C.Penney has strong support among its vendors. They feel the management team that Mike Ullman is forming will be creative and will produce satisfactory results. Even Warren Buffett said so on CNBC!  Buffett’s Fruit of the Loom Company owns the Vanity Fair lingerie brand which is sold in J.C.Penney. It is important for the future of J.C.Penney that the legacy vendors come back and support management’s effort to revive the company after 17 month of irrational and disruptive activity. Some brands like Joe Fresh and Izod will certainly remain in some stores in the future, but other brands that were brought in during the Johnson regime will have to prove themselves as valued team players.
One wonders about the Board of Directors, that, until recently was a paragon of inaction. Maybe they were cowed by Bill Ackman and Steven Roth, the two activists.  Maybe the two activists are waiting for the stock to recover before they leave the board. They have not been helpful in creating a dynamic growth company—just the opposite–they brought about the disaster that Mike Ullman now has to fix.

Study: Americans engaging in retail therapy | RetailingToday.com

Study: Americans engaging in retail therapy | RetailingToday.com

Or is RadioShack There Already?

Is RadioShack Destined for Irrelevancy?

Will Deener

wwrdeener@aol.com

Published: 12 August 2012 09:11 PM

I did something the other day that I’m reasonably sure most of you haven’t done in a long time, perhaps in years.

I visited a RadioShack store.

Not only that, I even purchased a packet of AAA batteries. I didn’t need the batteries, but the sales clerk seemed so melancholy and yet eager to help me — the lone

customer in the store — that making a small purchase seemed the least I could do.

My visit to RadioShack was a sort of fact-finding mission — as in what the hell happened here? A few days before my visit I had read with interest the company’s

dismal second-quarter earnings release.

RadioShack Corp. is pumping red like a ruptured artery. The Fort Worth-based electronics retailer posted a loss of $21 million in the quarter, compared with a profit of

about $25 million in the same quarter last year, and this was on top of an $8 million loss in the first quarter.

And if that weren’t bad enough, it announced it was suspending its dividend payout. Not surprisingly, the stock was clocked, closing down 30 percent in one day.

RadioShack shareholders have lost about 80 percent of their investment over the past year as this old retailing warhorse seems destined for irrelevancy, if not outright

bankruptcy.

This pains me because one of my fondest memories as a young boy was my father taking me to RadioShack and buying me a remote-controlled car — the best of

times.

Iconic companies

In recent years, several iconic American companies seem to have lost their way, including Sears Holdings Corp., Eastman Kodak Co. and now RadioShack. A retail

analyst I contacted before my visit to RadioShack told me the flaw that these companies all share is that they adapted too slowly to their competitors and to a

changing retail environment.

Sears underestimated its competitors and from at least 2007 to 2009 drastically reduced spending on upgrading its stores. They look tired, they look old, and most of

them are in shabby malls. People stopped going.

“If you leave your stores like that for a few years, Target is going to come in and say ‘I can pick off a really dirty-looking Sears,’” said Paul Swinand, a retail analyst at

Morningstar. “And it did.”

Kodak, which is in bankruptcy protection, foolishly resisted the move to digital cameras long after it was obvious to everyone that film was becoming irrelevant.

“Kodak tried everything it could to keep film relevant, but the writing was on the wall with digital cameras and digital phones,” said Michael Lewis, a retail analyst for

The Motley Fool. “There was no reason for people to buy film, and yet Kodak made no effort to get into the digital business until it was too late.”

Kodak shares now trade around 30 cents — what a monument to stubbornness.

As for RadioShack, when I strolled through the aisles of that store on my recent visit, I couldn’t help but think how spot on was Lewis’ description of the company.

“RadioShack sells things that we don’t buy at RadioShack anymore,” he said.

How true. I could have purchased the batteries at Wal-Mart or Tom Thumb, and any electronic gadgets, such as a universal remote, could have been bought on

Amazon.com or Wal-Mart cheaper and more conveniently.

 

To its credit, the company tried about two years ago to stop the bleeding by offering to sell a few Apple products, such as the iPhone and iPad. In fact, the stock got a

nice pop when this was announced, but a Forbes magazine headline captured this strategy just perfectly: “RadioShack’s iPhone Strategy Is Working Well: What a

Disaster.”

The problem is that profit margins on iPhones are razor-thin, which erodes the bottom line. Additionally, Lewis said that customers looking to buy Apple products

simply don’t think of RadioShack as the place to do it.

“A customer’s first thought is that ‘I will go to an Apple store, or I will order it online,’” Lewis said. “It feels good to be in an Apple store, but RadioShack is a depressing

place to be.”

Well, I don’t know that I agree with that, but my experience in the store was something short of exciting. As I was about to leave, I asked the sales clerk if his store

sold iPads.

“Yes sir, we do,” he said, pointing to a poster of an iPad hanging on the wall.

“Well, OK, can I see it?” I asked. He responded: “We don’t actually have them in this store. I would have to call another store and get one.”

That’s OK, I said. Maybe I’ll come back later. But I worry that RadioShack, which has been around for more than 90 years, may not be there.

The Lesson is - Customers Want a "Deal"

JCP teaches a ‘fair and square’ lesson on pricing
 July 27, 2012 | By Gail Hoffer
"We thought simplifying 590 unique sale events into three types of pricing would be easier, but it turns out that customers and others found the pricing a little confusing," he said. "Now we're going from 590 to 3 to 1: The first price is the right price."

We don't think customers are confused - we think they want to feel like they got a "deal".  EDL pricing makes them wonder "how much lower could they go?".  What most customers do is delay purchasing at EDL until they compare the EDL price with sale prices elsewhere.  It means more work for the customer and when they find the same item elsewhere and validate JCP's price - they buy where they are - rather than return to JCP.

Is New Footprint Making the Difference?

Report: Tesco could exit U.S. if Fresh & Easy doesn’t improve

July 2, 2012 | By Marianne Wilson

NEW YORK — U.K. retailing giant Tesco PLC could give up its American supermarket venture, Fresh & Easy Neighborhood Market, if the chain continues to disappoint and not make a profit, according to various news reports.
In remarks at the company’s annual meeting on Friday, Tesco CEO Philip Clarke said: “If we see there is no chance of success, we’ll do as we’ve just done in Japan,” referring to Tesco’s deal this month to exit that market.
At the same time, however, Clarke sounded an upbeat note about the U.S. venture’s prospects, RetailWeek reported. “Fresh & Easy is improving as a business and I can assure you that it is receiving close attention from the executive team,” he said. “We believe there is great value in the business and, if we get it right, an excellent stream of growth in future years.”
Clarke has refused to bow to shareholder pressure to set a target date for when Fresh & Easy, which launched in 2007, would finally begin to make a profit.

F&E's small urban stores for higher density markets may be making the difference...