Fun Fact of the Day: Knopf Name CFO of Kraft Heinz Co

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Fun fact of the day: The Kraft Heinz Co. is a $100B market cap co. that generates more than $26B in annual revenue by selling iconic brands like Heinz Ketchup, Velveeta Cheese and Kraft Macaroni. Starting in Oct, Kraft Heinz’s finances will be overseen by a 29-year-old.
The company announced on Friday that David Knopf will be the new CFO of Kraft Heinz. Knopf has been working since 2015 at Kraft Heinz, where his responsibilities included overseeing the Planters Nuts brand and heading global budget and business planning, as well as zero-based budgeting and financial strategic planning as a VP.
What are your thoughts on age vs tenure?

Fun Fact of the Day: Bahama Bucks

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Fun fact of the day: Bahama Buck’s is a privately held franchise specializing in shaved ice and other frozen non-alcoholic beverages. The company is headquartered in Lubbock, Texas. It was founded in 1990 by the current president and brand owner, Blake Buchanan.

He started with 1 ice shaver and the hope of a college job that didn’t involve mowing grass or flipping burgers. Constructing the original store by hand, he enlisted volunteer help from 3 generations of his family, staffed it with friends and college students, and opened the doors.

The tropical sensation caught on, and with the help of his wife, Kippi (cool name!), and his friend, Eric Lee (now CFO), the summer job turned into a full-time vocation.

As of March 2017, Bahama Buck’s operates 100 stores (located in California, Arizona, Nevada, Utah, New Mexico, Texas, Alabama, Georgia, Florida, Missouri, Oklahoma, and Puerto Rico) with over 100 additional stores in the works. Except for stores operated by Buchanan all stores are franchised.

Have you ever been? :)

Utah Performs Well in Economic Report to the Governor

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Every year, a new economic report is presented to the Governor of Utah. This past year, there were many amazing feats.

Utah led the nation in job growth for 7 months and ranked 2nd the remaining 5 months. Here are other top-level statistics from the report:

  • Technology – Utah lived up to the nickname “Silicon Slopes” with impressive 7.7% growth in the information sector.
  • Construction – Permit-authorized construction reached its highest level in 8 years with major projects downtown and at the nexus of Utah’s 2 largest counties.
  • Leisure and hospitality – Utah’s leisure and hospitality industry added 7,900 jobs. Park City’s expansion created the largest ski resort in the country. This, combined with Utah’s “Mighty Five” national parks, prompted Fodor’s Travel to name Utah the top travel destination of the year.
  • Exports – Utah’s merchandise exports continued to diversify with 4% year-over growth in non-gold exports. Utah exports support more than 50,000 jobs.
  • Financial activities – Major employers like Goldman Sachs added a total of 2,600 jobs in the financial activities sector helping Utah earn a reputation as “Wall Street of the West.”
  • Income – Median household income is growing at 2.6% in Utah, compared to 1.0% nationally.

https://www.linkedin.com/pulse/utah-performs-well-economic-report-governor-alexander-ricketts

http://www.business.utah.edu/news/utah-economy-expected-to-continue-to-prosper-in-2016/

http://gardner.utah.edu/wp-content/uploads/2015/08/2015_erg.pdf

UPS, FedEx And The Holiday Season Risks

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The e-commerce industry has really picked up in the past few years. With increasing internet connectivity and many new companies entering the space, online sales are at an all-time high. In 2013, almost 41% of the world’s internet users purchased products online. The size of the market is increasing every year in double digits and could continue to do so for the foreseeable future. To put this into perspective, the current size of the e-commerce industry is $1.6 trillion (which represents growth of about 20.4% year-over-year) and accounts for only 6.6% of total retail sales worldwide ($24 trillion). With the emergence of cost-effective smartphones, and cheaper, more widespread internet access, the potential for growth in the sector remains immense.

A positive effect of the e-commerce boom is that ancillary industries such as the courier services and delivery sectors, should see corresponding growth. Package volumes could increase consistently year-over-year, especially during the holiday season spanning November through December. Intuitively, higher package volumes should mean higher revenues for courier companies such as FedEx and UPS . However, this may not necessarily be true if delivery companies fail to cope with heavy increases in volumes, which could result in major setbacks. Accordingly, while the holiday season represents a big opportunity for the courier companies, it also represents a substantial risk.

In 2013, UPS and FedEx underestimated the volumes to be expected during the holiday season, and as a result both companies were somewhat underprepared. Heavy snowfall and harsh winter conditions slowed them down further. Since then, both companies have carried out a wide variety of changes across the board. The companies have invested heavily in technology to increase delivery efficiency, while upgrading their sorting facilities. Several hubs across the globe have been renovated to ensure the highest productivity. UPS and FedEx have also decided to hire a larger number of seasonal workers – drivers, sorters and other support positions – during peak periods to enable smooth functioning.

In response to these challenges, UPS has invested heavily in its technology. The company recently acquired Chicago-based Coyote Logistics for $1.8 billion. Coyote Logistics will provide UPS with the technology to ensure that there are no empty spaces on the company’s delivery trucks. This will allow the space on trucks to be utilized in the most efficient manner. The company has also increased the number of trucks equipped with the ORION technology in the U.S. ORION helps drivers find the fastest and most fuel-efficient ways to deliver packages. Almost 70% of the company’s trucks in the U.S. are now equipped with the technology. Apart from this, UPS has also invested heavily in Europe, increasing the number of trucks available while upgrading its sorting and automation facilities.

Earlier in the year, both FedEx and UPS introduced dimensional weight pricing, which essentially takes into account both weight and volume (length, breadth and height) of a package. This practice ensures that customers optimize their packaging in an attempt to save costs. Recently, UPS also decided to introduce a surcharge on large packages. Both changes in pricing policies should allow trucks to be filled to their highest capacities, allowing larger volumes to be moved.

A problem that both companies are facing is the difficulty in predicting e-commerce trends during the holiday season. In Q4 2014, UPS invested more than was required for the period, which had an impact on the company’s financials. While both companies stand to benefit greatly from the increased volumes, FedEx and UPS need to find the right balance to be able to make the most of the e-commerce boom.

http://www.forbes.com/sites/greatspeculations/2015/11/20/ups-fedex-and-the-holiday-season-risks/?utm_source=followingweekly&utm_medium=email&utm_campaign=20151123

Walmart Promises Not To Run Out Of Top Items Like TVs This Black Friday

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With Black Friday a mere two weeks away, Walmart has announced its game plan for the most anticipated shopping day of the year.

The world’s biggest retailer has mined sales data from years past and stocked its stores with extra inventory on hot items.

Walmart wants to ensure that the intrepid bargain-hunters who line up for doorbuster deals hours before its 6 p.m. Thanksgiving Day opening don’t leave disappointed.

“Walmart will never be the retailer that broadcasts a great price on Black Friday and then ends up only having a few in stock,” said chief merchandising officer Steve Bratspies. “We bought deep on televisions, toys and more to ensure hundreds of customers in a store – not tens of customers – get the gift they want.”

Walmart will have more than 1 million TVs, 15 million movies and 10 million pajamas in stock for its Black Friday sale.

Among its best deals, per its Black Friday ad released on Thursday: a Roku 32” Class Smart HDTV for $125, popular wearable fitness tracker the Fitbit Flex Wristband for $59, and video game console package deals including a PlayStation 4 Uncharted bundle for $299.

The big-box retailer is bringing back its one-hour guarantee on a handful of its most-coveted products, including Beats Studio Headphones ($169) and a 16GB iPad Air 2 Gold ($399). Even if a store runs out, as long as a shopper buys the item between 6pm and 7pm on Thanksgiving Day, Walmart guarantees they’ll receive it by Christmas.

The Bentonville, Ark-based chain will be making most of its deals available on Walmart.com at 12:01 a.m. PST on Thanksgiving Day, meaning online shoppers can get a jump on their holiday lists before the turkey is even in the oven.

http://www.forbes.com/sites/clareoconnor/2015/11/12/walmart-promises-not-to-run-out-of-top-items-like-tvs-this-black-friday/

REI Stores Will Be Closed On Black Friday And Encourage Customers To Get Outside Instead

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REI – a privately held niche retailer that primarily sells outdoor recreation gear, sporting goods and apparel – announced this week that they will be closed on Black Friday this year and instead encourage their customers to “opt out” of shopping and instead spend time outside.

In an email sent to their customers, REI stated the following:

This Black Friday the co-op is doing something different. We’re closing all 143 of our stores. Instead of reporting to work, we’re paying our employees to do what we love most—be outside. We want you to be the first to hear—not just what we’re doing, but why. We’re passionate about bringing you great gear, but we’re even more passionate about the experiences it unlocks for all of us. Perhaps John Muir said it best back in 1901: “thousands of tired, nerve-shaken, over-civilized people are beginning to find out that going to the mountains is going home.” We think Black Friday is the perfect day to remind people of this essential truth. And don’t worry, you’ll still enjoy great deals on great gear all holiday season long. But on this one day, we’re going to #OptOutside and we want you to join us. While the rest of the world is fighting it out in the aisles, we hope to see you in the great outdoors. Visit optoutside.rei.com and you’ll discover great ways to #OptOutside from coast to coast. Let’s get out there, REI.”

Shoppers are encouraged to opt out of Black Friday and instead get outside by niche retailer REI. Their message to #OptOutside was announced on Monday, October 26, 2015. (Matt Peyton/AP Images for REI)

Additionally, REI President and CEO Jerry Stritzke shares the following on the #OptOutside website from REI – which also includes a countdown clock leading up to this big day.

For 76 years, our co-op has been dedicated to one thing and one thing only: a life outdoors. We believe that being outside makes our lives better. And Black Friday is the perfect time to remind ourselves of this essential truth. We’re a different kind of company—and while the rest of the world is fighting it out in the aisles, we’ll be spending our day a little differently. We’re choosing to opt outside, and want you to come with us,” Stritzke shared on the REI website.

With many stores planning to open as early as Thanksgiving – including Walmart, Target TGT +0.00%, Best Buy BBY +0.00% and Kohl KSS +0.00% – and countless others opening early and staying open late on Black Friday, it comes as a bit of a surprise that REI is planning to instead close their stores. Then again, this could be among the smartest marketing moves we see among retailers this holiday season. Driving attention to their stores and rallying customers to bring attention to their #OptOutside message may just be the right combination for REI to gain holiday sales success – despite their closed stores on Black Friday. One customer who feels this way is Colorado based Heather Stinnett, who was excited to see REI announce their plans for Black Friday in an email she received this past Monday.

I love the idea that REI is closing their doors on Black Friday when everyone else seems to be opening early or worse, opening on Thanksgiving. It speaks volumes about their brand integrity, which is something I’ve always valued as a consumer. And while I hadn’t necessarily planned to shop at REI this holiday season, their message to #OptOutside has motivated me to not only get outside on Black Friday, but also to support REI this holiday season as a customer,” Stinnett stated.

Stinnett and other customers will have to wait to shop online at REI.com, as well, on Black Friday. Their bold move to close their stores also includes freezing online orders until Saturday. Additionally, only a handful of employees will be working on Black Friday while the other 12,000 plus get a paid day off… on one condition, that is. And that’s to get outside.

As always, only time will tell if this marketing move lives up to it’s expectations… but I can assure you one thing. This niche retailer of 143 stores just launched themselves some fantastic attention leading up to the busiest shopping season – not just day – of the year.

http://www.forbes.com/sites/nicoleleinbachreyhle/2015/10/27/rei-stores-will-be-closed-on-black-friday-and-encourage-customers-to-get-outside-instead/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20151027

As Walmart Forecast Dips, Is It Also Losing The Low-Price Battle To Amazon?

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Walmart shocked Wall Street on Wednesday when its CFO announced a dour earnings forecast not just for this fiscal year, but the next two.

The disappointing forecast — the result, said CEO Doug McMillon, of multi-billion-dollar investments in e-commerce technology and an hourly worker wage boost to $10 — saw the stock sink 10%. In one morning, the Bentonville, Ark.-based retail giant lost well over $20 billion in market value.

The jury is still out on whether this stock plunge, Walmart’s biggest one-day drop since 1988, is an overreaction on the part of investors. McMillon is selling the news as part of a “three-year growth plan” that’ll see the chain better able to compete online with the likes of Amazon.com AMZN +3.03%

They certainly have plenty of ground to gain. As Forbes contributor Walter Loeb noted, less than 3% of Walmart’s total sales today come from e-commerce. Macy M +2.00%, by way of comparison, makes 8% of its revenues from online shopping.

Still, Walmart’s greatest value proposition has always been its low price guarantee. All the technological bells and whistles in the world won’t endear Walmart to its shoppers if they aren’t making good on that promise online as well as in-store.

Data recently released by retail analytics firm Boomerang Commerce suggests that in one hotly contested category, Walmart is losing ground.

Boomerang analyzed 1,200 consumer electronics items across 490 brands over the same two-day period to see how Walmart, Target TGT -1.33%, Best Buy, and much-hyped new market entrant Jet.com were competing with Amazon on price and assortment.

Walmart was Amazon’s closest competitor in terms of assortment, boasting a 32.9% overlap with Amazon’s consumer electronics products. Best Buy and Jet overlapped by 29.5% and 16.4% respectively.

Where Walmart lost out was pricing. Its ‘most popular’ (or ‘head’, in retail jargon) electronics cost on average 8.3% more than Amazon’s. Jet.com was able to more closely match Amazon on price, with only a 1.4% premium. Jeff Bezos’ online titan discounts its gadgets aggressively, with an average of 66% off list prices, Boomerang found.

Walmart’s discounts averaged 22%, beating Target, which offered 15% off on average in this category.

The big-box behemoth did beat out Amazon on its assortment of products from the top five most popular consumer electronics brands across these e-commerce sites. Walmart and Best Buy had the most items on offer by Sony, Samsung, Fujifilm, Asus and Dell.

As Walmart invests $1.1 billion in e-commerce, its assortment and pricing may well grow more competitive. The company is also making a bet on curbside pickup, allowing shoppers to order their groceries online and collect them from the store parking lot. Right now, not even Amazon can compete with that convenience, at least in the bulk of the country. Its same-day grocery delivery service AmazonFresh is so far available only in a handful of urban markets.

http://www.forbes.com/sites/clareoconnor/2015/10/15/as-walmart-forecast-dips-is-it-also-losing-the-low-price-battle-to-amazon/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20151015

Wasatch Touring Site Visit (EOIC)

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On Wednesday, October 7, 2015, the Eccles Outdoor Industry Club visited Wasatch Touring in Salt Lake City, Utah. Riley Cutler gave us the site tour and told us all about the operations. One interesting fact is that small outdoor retail stores actually get new products in their doors quicker than larger outdoor retail stores, like Dicks Sporting Goods or REI. The reason for this is because Wasatch Touring can test out a small quantity of new products, without having to buy a large bulk of the product. Therefore, Wasatch is always up-to-date with products, well in advance of the product’s official release year.

http://www.wasatchtouring.com/

Waltman||Co Microfiber Ties

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A pure white, smooth, 100% silk tie. Narrow and skinny to be “in” for the day. Backside has microfiber material to clean your glasses, phones, and tablets. The best attribute you might ask? Well, it has to be the length! 63″ to be exact. Perfect if you are 6’7.5″ in height. It is almost impossible to find extra-long ties, plus have it be skinny, in today’s market. Waltman||Co has combined all the must haves in one product. Brilliant.

http://www.waltmanco.com/

UofU Career Fair 2015

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Career fairs are so much fun. A multitude of desks, filled with endless swag, including branded frisbees, chargers, pencils, pens, notebooks…the list goes on and on. Oh, and not to mention the opportunities to work with high-quality companies. It is always important to have your 30-second pitch down, or in my case, that one question I always ask employers (I will not reveal my secret “sauce” here). Overall, fairs help you learn what a company is and what job posts they have available to your liking. I know you all are wondering, what was my favorite memorabilia that I snatched? The answer: Walgreens Co. playing cards!

 

Walmart Bets On Curbside Grocery Pickup In Bid To Beat Out Amazon, Target

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On Tuesday, Walmart announced the launch of a grocery pick-up service in eight new markets including Atlanta, Tucson and Salt Lake City.

Shoppers in these as well as five test markets will be able to order their groceries online on Walmart.com, then drive to their local Walmart store to pick up their order in a designated space reserved for the service.

“With 70% of the U.S. population living within 5 miles of an existing Walmart store, this is an idea that simply makes sense for us,” wrote the retail giant’s head of e-commerce Michael Bender in a blog post.

“We have the locations already in place, and with our website and mobile app expertise, we’re able to combine those things in a way that helps our customers save time and still take advantage of our everyday low prices.”

The move comes as Walmart competitors including Amazon.com AMZN -8.87% and Target TGT +0.00% test out e-commerce grocery initiatives of their own.

Amazon is testing its subscription AmazonFresh grocery delivery service in urban markets including Seattle, Brooklyn and Philadelphia.

Target, meanwhile, has been rolling out local pickup outside stores in San Francisco, New York and New Jersey in conjunction with startup Curbside.  The Palo Alto-based company, which has raised $34.5 million to date, allows shoppers to buy goods from any nearby Target store online and then collect them without leaving their cars.

Curbside has also inked a deal with Best Buy BBY +1.25% in Bay Area markets, allowing customers to buy their gadgets via their phones and pick them up promptly from the parking lot.

Walmart will add new towns and cities to its grocery pickup rollout in the coming weeks, said e-commerce chief Bender.

“This new, easy shopping experience is an innovation that’s helpful for anyone with a busy schedule – particularly moms with small children,” he wrote in his blog post. “They can shop online and choose the pickup time that works for them, and they never have to unbuckle anyone’s seat belt.”

http://www.forbes.com/sites/clareoconnor/2015/09/29/walmart-bets-on-curbside-grocery-pickup-in-bid-to-beat-out-amazon-target/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20150929

Neiman Marcus Shoppers Flock Online, Nordstrom Also Flying High

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When fellow Forbes contributor Walter Loeb told me he’d read that high-end retailer Neiman Marcus is reporting more than 25 percent of its revenue comes directly from online sales, I said the reporter must’ve garbled the information. That’s such a high percentage of sales it strains credibility. After all, online sales represent approximately 7.2% of total retail sales in the United States (source: Census Bureau, Department of Commerce).

Granted, apparel holds the largest share (according to eMarketer, in 2015 17.2% of total eCommerce sales will be generated by apparel), but 17% of 7% is still a pretty small number. How could it be?

Turns out I was wrong. Retail trade publication Internet Retailer also offered up the 25% number as cited by Neiman’s Chief Operating Officer Don Grimes on the company’s Q4 2015 earnings call. Couple that statistic with an increase in sales at stores open longer than a year of more than 2%, and it gets clear why the retailer is filing for an IPO. Those are some serious increases across the board.

To ground this data in reality, I took a look at Neiman competitor Nordstrom JWN +0.00%, data. It turns out that eCommerce accounts for 19% of that company’s total sales. Compare that with mass merchant retailers Walmart and Target TGT +0.00%. According to Fortune magazine, each generates about 3% of its total sales online. Granted Walmart and Target sell products other than apparel, but the order of magnitude different is somewhat shocking.

For retailers like Nordstrom and Neiman, “omni-channel” has become a reality. While they’re still spending a bundle on great-looking stores, they’ve got to figure out a way to manage their inventory in a new world. After all, you don’t necessarily want to keep safety stock for on-line sales…and you have to seriously consider that you’re likely going to go out of stock on something. The only way to satisfy the customer is to get that inventory from one of your stores.

The art of managing this inventory is the core of the next retail frontier. I knew that. I’ve heard this consistently from retailers and the technology vendors that serve them.

The part that’s surprised me is the retailers who have to traverse that frontier first. Neiman’s on its way, and if it gets omni-channel right, its IPO could be a real barn burner.

 

http://www.forbes.com/sites/paularosenblum/2015/09/28/neiman-marcus-shoppers-flock-online-nordstrom-also-flying-high/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20150928

Lassonde Student Entrepreneur Conference 2015

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The Student Entrepreneur Conference (SEC) is held each year at eBay in Draper, Utah. The 2015 SEC had an innovation tournament, networking sessions, and a keynote speaker. The speaker this year was Travis Cook from SolutionStream.

I helped put on the innovation tournament and participated in it as well. The first session we formed teams and generated ideas about how to solve the problem of the traditional alarm clock. The second session we started building our prototype, “HappyWake,” and performing iterations. The last session we perfected our prototype, and formulated a 2 minute speech, to be presented in front of the audience.

In the end, we won $100 and took home our “Functionality” trophies. During our tournament, my team specifically focused on the problem, how to solve the problem, and what was realistic. (The picture above displays our final prototype; a robot that throws balls on the sleeper’s head, and tickles them to wake them up in the morning!)

 

Volkswagen’s CEO Has Resigned, But That Doesn’t Solve Its Problems

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Volkswagen’s CEO, Professor Martin Winterkorn, has done the decent thing and fallen on his sword. This is his resignation announcement, posted on the company’s website:

“I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.

As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.

Volkswagen needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation.

I have always been driven by my desire to serve this company, especially our customers and employees. Volkswagen has been, is and will always be my life.

The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.”

 It was hard to see how he could remain in post. Within a day of the US Environmental Protection Agency’s announcement on Monday September 21st that Volkswagen had rigged emissions tests on approximately half a million diesel automobiles sold in the US, Volkswagen’s share price had dropped by over 30%, wiping $27bn off its market cap. On Tuesday September 22nd, after giving a 6.5bn Euro profits warning that was quickly dismissed by analysts as vastly over-optimistic, Volkswagen admitted that 11m cars worldwide were fitted with the “cheat” software. The German newspaper Die Welt speculated that the costs of customer redress, regulatory fines and lawsuits might be sufficient to bankrupt Volkswagen (my translation, original in German):

The scandal has reached a dimension that could threaten the existence of what is currently the largest automaker in the world. The billions of costs and penalties that await the company, could crush even the best-capitalized corporation.

Volkswagen’s Executive Committee accepted Prof. Winterkorn’s resignation and indicated that other heads will roll too. And then they said this:

The Executive Committee have decided that the company will voluntarily submit a complaint to the State Prosecutors’ office in Brunswick. In the view of the Executive Committee criminal proceedings may be relevant due to the irregularities. The investigations of the State Prosecutor will be supported in all form from the side of Volkswagen.

According to the UK’s Telegraph newspaper, while the Executive Committee was meeting, the public prosecutor’s office in Brunswick announced “a preliminary investigation of unnamed employees at Volkswagen in connection with the allegations of diesel emissions manipulation”. It seems the Executive Committee, anxious to prove their goodwill, will voluntarily cooperate with this investigation. Something tells me a few Volkswagen middle managers are about to have the book thrown at them.

Prof. Winterkorn’s resignation is the latest in a spate of high-profile CEO resignations. Earlier this year, Toshiba’s CEO, Hisao Tanaka, resigned when the company’s six-year accounting fraud was exposed.  And the CEO of United Airlines, Jeff Smisek, resigned on September 8th over a federal investigation into whether the airline had traded favors with the chairman of the Port Authority of Newark and New Jersey.

But not many have been so prompt. In fact most embattled CEOs try to hang on. Being pushed, rather than falling, is the order of the day. Some even manage to stay put. Here’s a sample:

  • BP’s Tony Hayward resigned after three months of such inept handling of the political fallout from the Deepwater Horizon oil spill in 2007 that he was described as the “most hated man in the US” (in an interesting twist, Fortune reports that Volkswagen has just hired the legal team that handled the Deepwater Horizon lawsuits)
  • Barclays’ Bob Diamond famously refused to resign after the bank was fined over $450m by regulators on both sides of the Atlantic for rigging benchmark rates: he was eventually forced out by public outrage
  • Deutsche Bank’s Anshu Jain suddenly resigned in June 2015 to everyone’s consternation, only two weeks after being given full responsibility for devising and implementing a new strategy to restore the ailing behemoth’s fortunes: but not long afterwards, the German regulator BAFIN issued a damning report which held Jain personally responsible for the bank’s numerous regulatory failures
  •  It took UBS’s CEO, Oswald Grübel, over two weeks to resign after the rogue trader incident that nearly destroyed the bank in 2011
  • Maria das Gracas Foster finally got round to resigning as CEO of Petrobras in February 2015 after over thirty executives were arrested on corruption charges
  • Stuart Gulliver remains at the helm at HSBC despite the bank’s indictment for sanctions breaking and money laundering
  • António Horta Osório still runs Lloyds Bank despite a string of regulatory fines for offenses committed on his watch.

Prof. Winterkorn is to be commended for his prompt action.  If only other CEOs were so willing to accept responsibility. Sadly, far too many prefer to delegate blame to their juniors.

But there is a wider issue here. Prof. Winterkorn may not have personally been involved in the test rigging, or even known about it, but in the rarefied world of multinational corporate CEOs, ignorance is no defense. That such corrupt practices took root and became widespread indicates weak corporate governance and executive incompetence. When this happens in a bank, we say it is “too big to manage” and call for it to be broken up. But “too big to manage” is not simply a phenomenon of the financial sector. Very large corporations such as Volkswagen are also next to impossible to manage. And they are also too big to fail. The US bailed out General Motors in the 2008 financial crisis because of the consequences for its massive workforce if it were allowed to fail. The same is true of Volkswagen.

Prof. Winterkorn presided over the massive expansion of Volkswagen, priding himself on the fact that it had become the largest vehicle manufacturer in the world. Pride goes before a fall, they say. Nowhere is that more true than at Volkswagen. Prof. Winterkorn’s pride has caused not only his own fall, but also possibly that of the bloated corporation he created. And who knows what the economic consequences will be. I fear that it will not be Prof. Winterkorn who will pay for his folly, but Volkswagen’s employees, shareholders and customers, and ultimately the people of Germany.

http://www.forbes.com/sites/francescoppola/2015/09/23/volkswagens-ceo-has-resigned-but-that-doesnt-solve-its-problems/2/

Macy’s, Inc. to Hire 85,000 Seasonal Associates in 2015

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Macy’s, Inc. today said it plans to hire seasonal associates for approximately 85,000 positions at its Macy’s and Bloomingdale’s stores, call centers, distribution centers and online fulfillment centers nationwide for the 2015 Christmas and holiday season. The company’s 2015 seasonal hiring plan is essentially flat to last year.

“Macy’s and Bloomingdale’s customers have come to appreciate the higher level of our staffing and service throughout the Christmas and holiday shopping season, and our associates love the employment and income-earning opportunities at this very special time of the year,” said Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer. “We first offer our current associates the opportunity to work extra hours over the holidays, then supplement our ongoing workforce with seasonal hires. This enhanced staffing allows us to provide additional help to customers, whether they are shopping in stores or online.”

Seasonal associates at Macy’s and Bloomingdale’s serve customers on the selling floor, work in store operations positions, interact with customers via call centers, and staff the distribution and fulfillment centers that coordinate shipments to stores and directly to customers who buy online or via mobile. Macy’s, Inc. is one of America’s largest online retailers.

Macy’s, Inc.’s 2015 seasonal hiring plan includes the following:

  • Approximately 12,000 of the 85,000 total seasonal positions will be based in direct-to-consumer fulfillment facilities that support sales generated by the company’s omnichannel business strategy. These positions are located in megacenters in Goodyear, AZ; Cheshire, CT; Tulsa, OK; Portland, TN, and Martinsburg, WV, and well as in product-specific fulfillment centers in Sacramento, CA, Stone Mountain, GA, Secaucus, NJ, and Joppa, MD.
  • About 1,600 associates will be hired to interact with customers via telephone, email and online chat at customer service centers in Mason, Ohio; Clearwater, FL; Tempe, AZ; and St. Louis, MO.
  • More than 1,000 persons will be hired across the country to support the 88th annual Macy’s Thanksgiving Day Parade, Santalands and other iconic holiday events.

“These seasonal positions represent much-needed jobs for America, and they fill an important niche in the employment spectrum. Especially at the holidays, we employ students working during break to help pay tuition, retirees seeking to remain active and individuals from many walks of life wanting to supplement their income. We are proud to offer them this opportunity to work in a fun, fast-paced and respectful environment,” Lundgren said.

Most seasonal positions are part-time, often with flexibility to fit the availability of the individuals hired. Many positions require the applicant to work evenings, weekends or overnight. In some cases, temporary seasonal associates are offered open year-round positions based on their skills and performance over the holiday season.

Applications for seasonal positions at Macy’s and Bloomingdale’s are being accepted at www.macysJOBS.com and www.bloomingdalesJOBS.com. Candidates who submit applications online will receive a response via email. Hiring for store sales positions will begin in mid-October. The company has already begun hiring for sales support positions, such as in distribution centers, call centers and store receiving.

“We have many examples of associates who started with us in temporary seasonal positions and stayed to enjoy a long and fulfilling career with our company. Seasonal employment is often an opportunity to get to know potential future employees and to identify talent that we can recruit as needs arise,” Lundgren said. “The holidays are a magical time of year, and helping customers select gifts from Macy’s and Bloomingdale’s is a special experience that generations of associates have enjoyed and found rewarding.”

Macy’s, Inc. employs about 166,900 associates on a year-round basis.

http://pressroom.macysinc.com/press.aspx?catid=0&pcatid=0&mkid=360&pid=17200

Toys ‘R’ Us Hiring Fewer Seasonal Workers, Target And Walmart Holding Steady. Will Service Suffer?

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The all-important holiday season is bearing down upon us. In just 10 short weeks, people all around the United States will be sitting around their Thanksgiving tables, in their living rooms watching football, scrolling through their tablets for bargains or waiting on lines at physical stores to buy the deals of the day.

In preparation for that holiday season, retailers traditionally staff up. They bring in seasonal workers to accommodate the rush, help with customers and re-stock shelves. This tends to happen over the month of October, so retailers have support to receive new merchandise, prepare signage and shelves, and be ready to help customers.

This morning, RetailWire published a piece on planned temporary staffing levels (Full disclosure: I am a RetailWire “brain trust” panelist, which means I contribute to its commentary often).

In the piece, we learned that Target is keeping temporary staffing levels consistent with last year – hiring 70,000 seasonal employees. For its part, Toys ‘R’ Us is actually reducing temporary staff from last year’s level, from 45,000 in 2014 to 40,000 this year.

Separately, it was reported that Walmart will keep seasonal hiring consistent with last year’s numbers as well – staying constant at 60,000 temporary workers.

All the companies mentioned in the piece said they were going to give their permanent workers more hours to take up the slack as well as giving more hours to the workers they do hire.

So this begs the question: will service levels remain the same, improve, or decline? I believe we’ll see a mixed bag. There are some real plusses to managing the workforce this way, and a couple of definite minuses.

First let’s look at the plusses.

Retailers are more willing to increase base pay of their existing workers than ever before. In fact, my company has data (free registration required) that indicates those whose year-over-year comparable sales – a key retail metric – outperform their peers have increased the ratio of payroll to sales in their companies. That means their payroll is growing at a faster rate than their sales are, and it drives even larger increases in sales.

What they’re not so willing to do is train them. In the same report I cited above, we found that 42% of retailers spend less than 10 hours PER YEAR training new in-store employees. The figure is even sadder for existing in-store employees – 59% of retailers spend less than 10 hours per year training them.

In that context, it makes sense to hire fewer new associates, especially if they’re not going to stay around. Better to save those few hours of payroll for other things.

Theoretically, service levels should remain the same. Knowledgeable store employees can provide far better service than those we’ve come to think of as “warm bodies” on the selling floor.

If those are the plusses, what are the minuses? Quite simply, it’s all about burnout.

Not all tasks in stores are about helping customers. Especially around the holiday season, there’s a tremendous amount of work that can only be called “thankless.” The commonly used term for the task is “recovery.” That’s what happens at the end of the selling day, after the doors have closed. At that time all the items that have been moved hither and yon around the store, onto floors and into dressing rooms and who knows where else have to be returned to their rightful locations. Customers expect to see clean, orderly stores when they arrive. The only time to make that happen is after hours.

Smart retailers will give the majority of these tasks to their seasonal workforce, but people are also needed to direct and supervise them. If those same workers have been working hard all day taking care of customers and doing cursory clean-up on the floor, they’re going to be tired. And that’s the risk retailers are running.

Tired workers are cranky workers. And cranky workers generally don’t provide the kind of service shoppers expect.

I don’t agree with the retail observer in RetailWire who said “Changes to the way consumers shop are making it possible for stores to meet increased demand with fewer extra workers.” In fact, I think just the opposite is true: changes to the education level of consumers make it impossible for retailers to meet demand without a strong staff of educated workers.

Retailers are taking the gamble that a well-trained workforce is better than a poorly trained one. They hope that just like workers are willing to take Thanksgiving Day shifts, staff might appreciate the extra money from longer hours in the run-up to the Christmas holiday. Will they succeed? A season is not the same as a day.

It’s a strategy that’s not without risk…and the sheer volume of consumer shopping choices raises the stakes. We’ll have to wait and see what we hear from exit interviews and how chain sales results pan out.

http://www.forbes.com/sites/paularosenblum/2015/09/17/toys-r-us-hiring-fewer-seasonal-workers-target-and-walmart-holding-steady-will-service-suffer/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20150917

Why Donald Trump is Wrong About Macy’s CEO Pay

Donald Trump, president and chief executive officer of Trump Organization Inc. and 2016 Republican presidential candidate, during an interview on Bloomberg Television's "With All Due Respect" at the Trump Bar of the Trump Tower in New York, U.S., on Wednesday, Aug. 26, 2015. Trump said that he agrees the carried interest tax "loophole" should be eliminated and that it is "tremendous burden" on country's finances. Photographer: Michael Nagle/Bloomberg via Getty Images

The Donald has a new target.

Move over Fox News host Megyn Kelly: Donald Trump has a new target.

Macy’s M -1.19% CEO Terry Lundgren is the GOP presidential front-runner’s new punching bag.

In an interview over the weekend with CBS’s “Face the Nation” host John Dickerson, the Trump was asked about CEO pay – which Dickerson said is, on average, 350 times larger than the average worker’s compensation – and how that plays into inequality.

Trump responded by pointing out that CEOs stack their boards with allies that won’t stand in the way of high pay. He specifically called out one company: department store operator Macy’s. He went on to say that CEOs are making “enormous amounts of money and it is a complete joke.” A Macy’s representative wasn’t immediately available to comment on Trump’s statements.

It isn’t exactly a surprise that Lundgren generated Trump’s ire. Macy’s enraged Trump earlier this year when it announced it would phase out its Trump line of menswear after the Republican presidential candidate made derogatory comments about Mexican immigrants.

Trump’s attacks on Lundgren’s compensation, however, are completely unfounded.

Most of the compensation that Macy’s grants senior management is performance based and that means the company’s board, no matter how friendly it is to Lundgren, doesn’t have a direct hand in how much the executives are compensated.

For Lundgren, 87% of total direct compensation is through incentives that are tied to changes in stock price and other pre-determined performance objectives. The targets focus on sales, earnings before interest and taxes, and cash flow (roughly half is tied to Macy’s earnings performance).

Lundgren, CEO at Macy’s for 12 years, is certainly well paid. His total compensation totaled $16.5 million in fiscal 2014. But just $1.6 million of that was in salary (roughly flat with the prior two years). Most of the compensation was tied to stock and option awards.

Macy’s has performed very well under his watch, generating consistent gains in sales and profits. The top line has increased from $25 billion in 2010 to $28.1 billion last year, while adjusted earnings grew from $2.39 billion to $2.89 billion over the same period.

Macy’s stock has also performed well over the past several years, vastly outperforming the benchmark Standard & Poor’s 500 index, and the S&P retail index. A $100 investment in Macy’s at the end of January 2010 would be worth north of $400 five years later (including the reinvestment of dividends). Over that same period, the S&P 500 and retail index only grew to around $200 each.

To be fair, Macy’s is currently underperforming: Shares are off about 12% so far this year, lagging the S&P 500. Macy’s generated headlines recently when it announced plans to close 40 stores. But that more muted performance won’t be reflected into executive compensation until next year.

http://fortune.com/2015/09/14/trump-macys-ceo-pay/

Thursday Boot Company

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My MBA classmate brought to my attention this company out of New York City. I took a look at their website and watched their Kickstarter video. They took a workman’s boot and mixed it with a trendy, fashionable boot. What they came up with is a niche in a market. A space where others have not been, at this point in time. Entrepreneurship is intriguing and I hope this company makes it far in business.

http://thursdayboots.com/

Jos. A Bank Scaled Nack on the Main Reason People Shop There, and Sales Are Tanking

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Jos. A Bank has been scaling back on its massive discounts, and now sales are tanking.

The retailer’s “buy-one, get-several-free” deals on men’s suits, sport coats, sweaters, and more helped make Jos. A Bank a household name.

But Men’s Wearhouse, which acquired Jos. A Bank last year, recently began phasing out the promotions, saying they were no longer sustainable.

Jos. A Bank’s same-store sales fell 9.4% in the second quarter, compared to a 1% increase a year earlier.

Analysts say fewer promotions are largely to blame for the drop.

Jos. A Bank’s promotions ran so frequently that they became the butt of late-night TV jokes. But customers came to expect the deals, according to Neil Saunders, CEO of Conlumino, a retail-consulting firm.

“Moderating promotional activity is extremely difficult for Jos A. Bank, which has come to rely on highly generous offers (such as buy one, get three free) in order to drive customer traffic and [spending],” Saunders wrote in a recent research note.

The fact that Jos. A Bank has to rely on such drastic measures to attract customers is a clear sign that the brand is in need of a refresh, Saunders wrote.

To improve its appeal, Men’s Wearhouse has been introducing new clothing and shoes that are designed to attract younger customers to Jos. A Bank stores.

“It’s this focus on newness that will give us the best shot at winning a larger share of closet with existing customers and expanding our reach to new and younger customers,” Men’s Wearhouse CEO Doug Ewert said on an earnings call Wednesday.

“Bottom line: We need to give customers new reasons to shop at Joseph Bank and [give] our stores more ammunition to grow their business.”

Saunders says younger customers won’t save Jos. A Bank, however.

“Introducing Men’s Wearhouse product into Jos A. Bank stores is not the solution, especially as the audience for the latter is older and more conservative than the former,” he wrote.

Saunders said Jos. A Bank “will remain problematic” for Men’s Wearhouse going forward.

But Jos. A Bank won’t be returning to the “buy-one, get-seven-free” model any time soon.

“We know most men don’t want to buy suits four at a time,” Ewert said on the call Wednesday. “These promotional offers are not working for our customers, and they are not working for us.”

http://www.businessinsider.com/jos-a-bank-scaled-back-on-the-main-reason-people-shop-there-and-sales-are-tanking-2015-9

Investors Fret as Macy’s Launches Growth Ventures

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Macy’s is one of Cincinnati’s hardest-hit stocks after a month of market volatility, with shares down a bruising 20% from the all-time high it hit in mid-July.

The tumble snaps an almost seven-year winning streak as the Cincinnati-based retailer deftly navigated the Great Recession and its lingering aftermath that dragged down so many competitors.

But 2015 has proved to be choppy for Macy’s as it explored opportunities to take its growth to new heights.

Early this year, Macy’s bought a beauty and spa retailer. Then in May it announced the launch of an off-price concept called Macy’s Backstage. Last month it announced a joint venture to expand e-commerce into China.

Despite all the new initiatives, Macy’s delivered back-to-back first and second quarterly profit results that disappointed Wall Street. Also, during a summer that made Macy’s sweat, an activist investor loudly suggested the retailer consider selling or spinning off its real estate assets.

“Growing sales is where it all starts — if you can’t increase the top line, ultimately you won’t grow profits,” said Terry Kelly, principal with Bartlett & Co.

Last week, Macy’s opened the first four off-price stores in New York City. The retailer says it will open another two this year, then ramp up the number of stores in 2016.

Macy’s Backstage is shaping up to be a command performance as analysts eagerly await results.

What appears to have shaken investors is its growth prospects, which Macy’s started 2015 planning to address head-on.

In February, executives talked about the beginning of a “third phase” for Macy’s as it disclosed annual results for the 2014 fiscal year that ended Jan. 31.

The first two phases were: first, in 2005 when Macy’s doubled in size after buying out its largest rival, May Department Stores and second, in 2008 when Macy’s refined its integration strategy to boost stores performance and profitability.

Until this year, Macy’s had outperformed by maximizing its profitability, if not its sales. In 2014, Macy’s netted a $1.5 billion profit on $28.1 billion in sales, compared with the $995 million profit in 2007 when it did $27 billion in sales.

Macy’s latest venture to grow its overall sales, Macy’s Backstage, moves the retailer into off-price retailing, a faster-growing category populated by the likes of TJ Maxx and Ross Stores. Analysts note Macy’s rival Nordstrom has found renewed growth with its off-price chain, Nordstrom Rack, which has become a $3.2 billion chain itself.

Analysts say Macy’s Backstage could help groom the next generation of Macy’s shoppers with an appealing mix of less expensive merchandise. But the trick will be to not unwittingly encourage existing Macy’s customers to trade down.

“It’s a no-brainer for them: off-price is the fastest growing segment of the apparel industry, they need to be in,” said Howard Davidowitz, chairman of New York retail consulting firm Davidowitz & Associates. “TJ Maxx is the most successful apparel retailer of the last decade bar none.”

Davidowitz said off-price concepts have been the growth engines of rivals Saks and Nordstrom.

While Macy’s is getting into the segment later than the rivals, Davidowitz noted Macy’s existing network of suppliers should make it easier for the company to negotiate special lines of apparel for Backstage.

Meanwhile, Macy’s is also pursuing expansion of the Bluemercury specialty beauty and spa chain it bought in February for $200 million. The retailer says it will open another 10 free-standing stores by the end of the year, which will expand the total store count to 76. Macy’s will also open four Bluemercury stores within Macy’s locations by the busy holiday season as well as cross-sell its merchandise on macys.com.

Even as Macy’s presses ahead with constructing off-price and beauty stores, the retailer disclosed in August it is also hired real estate advisers to “intensely study its real estate portfolio to determine where opportunities exist.”

The examination came a month after a new Macy’s investor, hedge fund manager Jeffrey Smith, loudly suggested the retailer split off its real estate holdings into a separate company and then rent its properties from the new business. Smith’s Starboard Value bought 2.9 million shares or 0.8% of Macy’s in the spring, government disclosures show.

The theory behind such a move is it would be a bonanza gain for Macy’s shareholders and the retailer would free up money that’s tied up in real estate. Macy’s officials have resisted the move, saying there are advantages to owning stores and that each store is different.

But last month, the company also announced a deal to redevelop its Brooklyn store and sell half of its floors for $270 million to an office developer.

Macy’s sagging quarterly results and stock performance ironically come as the U.S. economy appears to be picking up steam.

Growing jobs and lower gas prices mean more discretionary income for American shoppers, normally a strong sign for consumer stocks such as Macy’s.

Still, Andy Stout, managing director of investments at Simply Money in Symmes Township, noted a hefty chunk of the strong 3.7% increase in U.S. gross domestic product came from inventory building — businesses restocking their warehouses in anticipation of more consumer spending.

“People don’t believe gas prices are going to stay down yet. They’re not spending their gas dividend,” Stout said. “Prices are going to have to stay down for a few more months before people change their habits.”

http://www.usatoday.com/story/money/business/2015/09/06/investors-fret-macys-launches-growth-ventures/71816760/

Will Backstage Save Macy’s?

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Macy’s M -1.51% debuted its new discount concept called Backstage last week, offering up a sneak peak of the department store chain’s off-price format. Is this a case of too little too late, or the end of the era?

Perhaps a little of both.

Macy’s Backstage is a discount outlet much like Nordstrom’s JWN -1.39%Rack, Off Fifth by Saks Fifth Ave and Neiman Marcus’ Last Call. It’s positioned to compete with off-price chains Kohl’s KSS -2.00%, Marshall’s and T.J. Maxx , retailers that continue to claim a growing portion of shopper’s apparel and home dollars.

It’s an edited down selection of apparel discounted from Macy’s department stores with the addition of some new names and merchandise. There are shopping carts and big dressing rooms with charging stations, something that should appeal to  younger shoppers, the very ones Macy’s has been courting with its marketing and mobile programs.

Making Macy’s cool with Millennials has been a difficult task for the retailer, something management openly acknowledges. Off-price retailers are popular with younger, value-oriented shoppers. They like a bargain and enjoy the treasure hunt-like experience.

Many have asked what took Macy’s so long to come up with the concept. Backstage could very well be too late, as fellow Forbes contributor Barbara Thau has pointed out.

But it also could be the idea that finally saves Macy’s from a doomed future as a mid-priced department store tied to the dying mid-priced mall.

At 30,000 sq. feet, the store is small enough to put in modern shopping centers alongside The Rack, Off Fifth and Marshall’s. It frees the retailer from the regional mall, and puts it right in the parking lot where its shoppers spend much of their time.

Macy’s has spent too much time trying to be upscale, and outside of the first few floors of the Herald Square flagship store in Manhattan, it’s an attempt that is sorely misplaced. Neiman Marcus and Nordstrom are better luxury retailers and the Macy’s-owned Bloomingdales banner is better suited to the task.

So why did it take Macy’s so long to come up with the concept? In many ways, management had a lot on its plate — absorbing acquisitions and creating the first truly national department store brand. So much of Macy’s operations were outdated that getting its existing house in order has been the priority.

And in that regard, Macy’s has done remarkably well, but improved performance-based store remodels, new brands and mobile marketing campaigns is nearing its end. Macy’s needs something more dramatic.

Hello Backstage.

Macy’s is testing these stores in the New York Metro area, not necessarily the best test for what plays in the rest of the country. It will have six in total there by the end of the year. But I suspect Macy’s has a pretty good idea as to how well these will translate to other markets. It’s already a time tested and very successful retail concept. One that should provide Macy’s with a formula that could save it from an otherwise dismal future tied to large, mall-based stores.

http://www.forbes.com/sites/lauraheller/2015/08/31/will-backstage-save-macys/

Back To School Roundup: Amazon Beats Walmart On Deals, With Target More Pricey

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The beginning of September is a frenzied time in retail aisles, with the last of the back-to-school deals fighting for space with Halloween costumes and — soon enough — holiday paraphernalia.

Each year, more parents turn to online shopping for their last-minute needs for the new school year, looking for great deals and fast shipping on stationery, clothes, shoes and electronics.

This year, e-commerce consultancy Profitero examined online prices for a white paper on shopping trends and found that Amazon beat out two if its biggest competitors, Walmart and Target TGT +2.60%, for back-to-school deals.

Profitero examined 3,849 of the exact same products with identical brands and barcodes across Amazon, Walmart and Target’s e-commerce sites on the same date (August 18th, around the annual peak for these purchases).

The company found that Amazon’s prices were a fraction lower — 1% — than Walmart’s. Target’s prices, meanwhile, were 25% higher then Walmart’s overall.

Profitero’s analysis found that 91% of the top-selling office supplies on these e-commerce sites were eligible for Amazon’s Prime membership program, which includes free shipping for a $99 annual fee.

Of the best-sellers across all three sites, shoppers chose household-name brands to fill their kids’ pencil cases: Scotch, Expo and Sharpie were the top-selling office products.

In the computer and accessories category, Amazon’s electronics ranked #1; Profitero found that the e-tailer’s Amazon Fire tablets have been hugely popular this back-to-school season. PC company Asus and gadget favoriteApple AAPL +4.46% rounded out the top three.

As for kids’ apparel, a brand the fashion-forward love to hate was the best-seller for both boys’ and girls’ shoes: Crocs.

The hardy plastic clogs have had something of a resurgence since little Prince George was photographed wearing them in June. Look for the company to feature on back-to-school shopping lists for years to come.

http://www.forbes.com/sites/clareoconnor/2015/09/02/back-to-school-roundup-amazon-beat-walmart-on-deals-with-target-more-pricey/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20150902

Walmart Pledges $25MM On Katrina Anniversary But The Region Needs Stores

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The anniversary of Hurricane Katrina is cause for reflection. The disaster — both the natural and man-made ones — continues to impact the gulf coast. Charitable efforts continue — Walmart recently made a large monetary pledge — but the real charity may be opening stores in areas sill under-served by retail and in desperate need of goods and services.

As Hurricane Katrina approached the gulf coast, retailers were among the earliest making preparations and strategizing relief. Walmart arrived in the effected area before FEMA, and it wasn’t alone. Notably, Home Depot and Lowe’s arrived with building materials, generators, and other items critical to first survival, and later rebuilding. Electronics stores and auto supply outlets made equipment available and all worked tirelessly to ensure the safety of their employees.

But it was Walmart in particular, that got called out for the efficiency and speed with which supplies made it to effected areas. The retailer had established an emergency operations center at its Bentonville, Arkansas headquarters and used it to plan relief efforts.

Retailers during Katrina functioned far more efficiently than municipalities. They had stores and employees to protect and took precautions that preserved their investments. Then they went further.

Many companies empowered local employees to otherwise unusual things. CVS permitted a loss prevention coordinator to set up a mobile pharmacy to serve evacuees from New Orleans and filled roughly 20,000 prescriptions from a temporary site inside the Houston Astrodome, according to Loss Prevention Magazine.

There have been social media posts regarding these retail efforts as people note the 10 year anniversary of Katrina, all thankful and grateful to these companies for either treating them right as employees or for the much needed goods supplied.

In all, Walmart raised $20 million in cash, donated 1,500 truckloads of merchandise and enough food for 100,000 meals, the Wall Street Journalreported in 2005. It also promised a job to all of its displaced workers.

While Walmart wasn’t alone in these efforts, its size, advanced technologyand data centers allowed to respond faster and bigger than any other retailer. It’s also worth noting that Walmart was quick to respond to the World Trade Center disaster on 9/11. One reporter friend recently recalled the sight of Walmart trucks heading into New York City as the bridges and tunnels were clogged with those heading out. Walmart had no stores there at the time, it still doesn’t, but it sent supplies in to help relief workers.

Retail trade associations have been deeply involved in emergency response efforts. The Retail Industry Leaders Association and the National Retail Federation have members that sit on the Department of Homeland Security’s council. And it’s not just about disaster response, but company’s advanced data collection and analytics capabilities often put its predictive and planning capabilities ahead of the government’s.

For all these successes, there have been quite a few ways in which retail has failed in the aftermath of Katrina. Notably, many of these stores never re-opened in some of the most devastated areas. There are good business reasons for this of course, the lower population can’t support big box stores and operating at a loss as a customer service isn’t much of an option. Big businesses aren’t charities, but can be charitable.

Walmart last week pledged $25 million over five years to support organizations in disaster recovery and resiliency efforts worldwide. Part of this money is earmarked for grants to select local nonprofits in the U.S. Gulf Coast region.

Here’s a thought: What about pledging to open locations or aid small independent retailers in doing so?

New Orleans has recovered much in these 10 years, but it’s still very much  work in progress. The poorest areas like the hard-hit Lower Ninth Ward are still suffering and the lack of retail has hindered the rebuild and return of residents.

What if national retail chains opened some of the newly developed small format stores in these underpopulated areas? What if grants were made available to small businesses? Could a company the size of Walmart or Target let an independent operator tap into its purchasing power or distribution system, to get goods to markets too small to warrant a bigger box?

I don’t have the answer to these questions, but it’s hard to imagine that an organization big enough to achieve first responder status in a national emergency couldn’t figure out how to seed a different kind of recovery, the kind that brings people back, feeds, clothes and nurtures them with the goods and services that only retail can provide.

http://www.forbes.com/sites/lauraheller/2015/08/30/walmart-pledges-25mm-on-katrina-anniversary-but-the-region-needs-stores/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20150830

Macy’s Launches Personal Stylist Shopping Service

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The retail giant is set to launch its new stylist service My Stylist@Macy’s this fall, complete with complimentary personal shopping and the ability to make in-store appointments online.

In a company release Wednesday (Aug. 26), Macy’s said its free service will be available at 135 select stores nationwide, with the goal of helping shoppers find the perfect items for themselves, as well as guiding customers in selecting gifts for family and friends.

“We are ecstatic to bring this unique shopping experience to our customers,” Susan Bertelsen, Macy’s group vice president of My Stylist@Macy’s and Wedding & Gift Registry, said in a company statement. “Macy’s prides itself on offering the best range of fashion and accessories, as well as gifts for loved ones. With My Stylist@Macy’s, we will bring this expertise to the customer on a more personal level, and help ensure that they walk away with exactly what they need, from every day to life’s biggest moments.”

The launch of My Stylist@Macy’s is the company’s latest move to continue enhancing the shopping experiences of its in-store consumers while also fighting against the aggressive push many of its eCommerce rivals are making into the retail sector.

Last week the retailer announced plans to upgrade its fitting rooms in select stores with high-tech gadgets in order to build upon one of the few advantages brick-and-mortar retailers have over their eCommerce-only counterparts.

Macy’s digitally revamped dressing rooms will use technology such as smartphones and tablets to enhance the customers’ experiences.

According to Bloomberg, Macy’s is piloting these new fitting rooms in the women’s swimsuit and athletic department at a store in Manhattan Beach, California, where customers can browse products displayed on mannequins and use a Macy’s app on their mobile device to have a particular item delivered to a dressing room in their selected size.

Once in the fitting room, customers can request additional sizes and other items using the same mobile app. The goal is to have customers spending more time trying on clothes and less time rummaging through racks.

Boosting the in-store customer shopping experience with new technologies and services may be Macy’s best bet in its ongoing competition with eCommerce giant Amazon.

A recent prediction from analysts at financial services firm Cowen foresees Amazon becoming the No. 1 U.S. apparel retailer by 2017, “comfortably passing” Macy’s for the top spot.

The team of Cowen analysts, led by John Blackledge, said it estimated Amazon’s U.S. retail apparel gross merchandise value will rise from $16 billion in 2015 to $52 billion in 2020, with the company’s U.S. market share increasing to 14 percent, up from 5 percent.

http://www.pymnts.com/news/2015/macys-launches-personal-stylist-shopping-service/#.VeM9B_ZVikp

Gap to End ‘On-Call’ Shifts For Workers

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Apparel retailer Gap Inc said it would end on-call shifts at all of its stores and improve scheduling policies to provide employees with at least 10-14 days’ notice.

The decision follows an inquiry by New York State attorney general Eric Schneiderman’s office into the legality of on-call shifts at 13 retailers, including Gap, Target Corp, JC Penney Co Inc, Abercrombie & Fitch Co and TJX Cos Inc.

On-call shifts require workers to be on call for shifts that may be canceled with little notice. The system allows retailers to adjust staffing based on store traffic forecasts made by scheduling software. Companies can then reduce over-staffing and under-staffing.

Each of Gap’s five brands were aligned to phase out on-call shifts by the end of September and had committed to phase in the new schedules by early 2016, Gap spokeswoman Laura Wilkinson said in an email.

When Schneiderman began the inquiry in April he said on-call shifts might violate New York law which calls for employees to be paid for at least four hours at the basic minimum hourly wage for any scheduled shift they report for.

“I commend Gap for taking an important step to make their employees’ schedules fairer and more predictable,” Schneiderman said in a statement on Wednesday, which made no further comment on the findings of the inquiry. (on.ny.gov/1LBM75a)

Abercrombie & Fitch said this month that it would end the practice for all workers paid by the hour, while lingerie retailer Victoria’s Secret, owned by L Brands Inc said in June it would end on-call shifts for workers.

http://uk.reuters.com/article/2015/08/26/gap-workers-idUKL4N1115MN20150826

Macy’s Forms Joint Venture to Test E-Commerce in China

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Macy’s, Inc. has announced it has formed a joint venture with Hong Kong-based Fung Retailing Limited to explore retailing in China.

The joint venture, which is 65 percent owned by Macy’s, will start with an e-commerce pilot. For Macy’s, the joint venture is expected to develop significant new lessons on customer preferences and buying patterns in China.

Under the joint venture, Macy’s plans to begin selling in China in late 2015 through an e-commerce presence on Alibaba Group’s Tmall Global, a marketplace that connects overseas branded retailers to Chinese consumers. To be based in Hong Kong and called Macy’s China Limited, the joint venture will curate a Macy’s online merchandise assortment especially for Chinese customers and fulfill Tmall Global orders from Hong Kong through local logistics channels, including LF Logistics, an affiliate of Fung Retailing.

“By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales said Terry J. Lundgren, chairman and chief executive officer of Macy’s, Inc. “We have been closely following the development of the Chinese marketplace for many years and have learned that success requires that we have the right partners to help us navigate the unique needs and characteristics of consumers in China.”

“We believe that, through the joint venture, Macy’s online presence on Tmall Global will give us insight that will serve us well in evaluating future international initiatives,” added Peter Sachse, Macy’s, Inc. chief innovation and business development officer.

“The potential for growth is significant,” said Sabrina Fung, Fung Retailing’s executive director. “While the Chinese online consumer is already one of the savviest in the world, there are untapped spaces to fill. There is demand for the quality and variety of power brands and authentic products associated with the world-famous name of Macy’s.”

Macy’s China Limited will be led by Kent Anderson, who will serve as managing director. Anderson is a veteran Macy’s, Inc. executive and long-time president of macys.com. Sabrina Fung will represent Fung Retailing’s interest on the board of the joint venture company.

“As is always the case with Macy’s, we will test and learn as we progress and grow our business in China. We will take one step at a time,” Sachse said. “We intend to be a long-term player in this region of the world, and that requires we understand the customer so we can deliver an online shopping experience that Chinese shoppers will appreciate, value, and love.”

Macy’s began selling overseas into China and about 100 other countries with an edited assortment on macys.com in 2011. These goods are shipped to international customers from the United States. In the upcoming e-commerce test, Macy’s China Limited will ship to Chinese customers from inventories in Hong Kong, which is expected to improve speed, flexibility and pricing for the customer.

No physical Macy’s stores are planned for China at this time, but may be considered in the future based on the company’s experience in its e-commerce pilot.

Macy’s China Limited is expected to invest approximately $25 million in the operations of the joint venture over the next 18 months, of which Macy’s, Inc. will fund 65 percent.

http://www.globaltrademag.com/global-trade-daily/news/macys-forms-joint-venture-to-test-e-commerce-in-china

Stores Are the New Black

The Grove Shopping Mall - Los AngelesTerry Lundgren, CEO of Macy’s, borrowed this quote during his opening remarks at the University of Arizona Global Retailing Conference in Tucson back in April, attributing it to NYU-Stern Marketing Professor Scott Galloway, who also happens to be one of the world’s experts in digital marketing.

Calling stores “the new black” is a nod to that old-fashioned expression referring to something that’s come into style. Simply said, it means they are not only not going to be replaced by e-commerce, they will thrive as the “in vogue” standard-bearer for retailing. In fact, even more dramatic than Galloway’s assertion that stores are now in vogue is his prediction that pure-play e-commerce is actually going away.

Bolder still, at a DLD event in Europe earlier this year, Galloway said, “E-commerce companies are either going to open stores or go out of business.” On the other hand, he also said, “(brick-and-mortar) retailers need to be excellent at digital or they will go out of business.” He went on to say, “I also believe that Amazon cannot survive as a pure-play retailer. Stores are the new black in the world of e-commerce. We’ve discovered these incredibly flexible robust warehouses called stores … retailers are not befuddled prey waiting around to be disrupted. They are in fact growing their e-commerce businesses.”

Wow. Amazon won’t survive as a pure-play? I think I’ve heard that somewhere before!

So, stores are here to stay, and of course I’ve been saying that for years. Forget about the panic among traditional retailers in the early 2000s over the fear of e-commerce decimating brick-and-mortar business. Fifteen years later e-commerce represents a paltry 7 percent of all retail sales, with the remaining 93 percent channeling through stores. However, the smart traditional retailers are changing, and changing in some pretty dramatic ways, if they want to be successful.

12533951The big change is that it’s not about online and off-line any more, it’s digical, (a mash-up of digital and physical), to use Galloway’s term, and yet another word for omnichannel, or allowing customers to shop how, when and where they want. And digital, while rapidly growing, is simply synergistic with physical stores.

Galloway also said that Amazon’s Achilles’ heel is its shipping costs, which are exploding 40 percent per year. “Over the last nine months those costs have gone up actually by more than 40 percent, which is not sustainable, not even for Amazon. It took in shipping fees of $3 billion, but spent $7 billion on transportation costs. Two-thirds of Christmas packages were brought to you free, up from one-third in 12 months. This is a race to the bottom. They’ve forced other retailers into free shipping. Click and collect: Order online, pick up in-store. Pretty boring but it’s a big trend, because it turns out that stores are great flexible warehouses.”

The New Rules Of Retail

“Shopping hasn’t changed. Consumers love shopping in stores, and retailers continue to focus on winning the war on traffic and conversion.” — Margo Georgiadis, president of the Americas for Google.

In fact, as reported many times here, the CEO of Walmart was quoted in The Wall Street Journal a year ago, making a declaration that Jeff Bezos should be very concerned about it at the very least, and shaking in his boots, as it potentially becomes his worst nightmare. The Walmart chief said, “…We don’t have 4,500 stores (referring to their total number in the U.S.), we have 4,500 distribution centers that also (double) as retail stores.”

Bezos should be shaking in those boots and opening physical stores sooner rather than later, because Walmart will crush Amazon once it puts its mind to doing so.

So, a decade after multiple dot-com bubbles have come and gone, the simple truth is that people love to shop in stores, and they’re not going to stop doing so. Furthermore, they can now shop online and pick up their purchases in the store (a.k.a., distribution center).

From “The War Is in the Store” to “The War Is Before the Store”

Regardless of Galloway’s credentials, the fact that Lundgren chose to endorse the statement is of particular significance, given the fact that Macy’s is considered by many experts to be the poster child of “all-line innovation” and omnichannel retailing. Last year, the retailer was the seventh-largest online retailer in the country, after Amazon, Apple, Walmart and others. Yet many people, even those in our industry, consider Macy’s a traditional department store. Macy’s was also named Mobile Retailer of the Year by Mobile Commerce Daily.

Lundgren’s endorsement not only signals his understanding of the store as a more important touchpoint than ever before—as the ultimate experience for customers—but also his recognition that while the “war” for the consumer’s purchase used to be waged primarily in the store, today the war begins on many different fronts just to get them to come to the store, to build traffic. And what used to be called “marketing 101” is now on the steroids of the Internet, smartphones, apps, social networks, big data and whatever new technology that popped up five minutes ago.

So for those of you who are cutting back on store budgets in order to invest in technology because you think that’s what will prepare your business for the next five years, let me tell you it’s not an either/or thing. It’s imperative to do both.

That’s a bummer, right? Spend millions on IT infrastructure and front-end systems and back-end systems, and on top of that, build out spectacular physical stores with analog and digital experiences that will knock customers’ socks off and make them loyal to your brand so that they’ll think of it first?

No fair, you say? Ha! I’m only getting started here.

Macy’s, for example, committed to enormous investments across both the online and offline platforms. It started when the recession hit with a major reorganization, transitioning its buying offices to 60 districts, moving all the merchandising people to New York, to be close to suppliers, and moving its Innovation Lab group to San Francisco, because that was the best place to compete for the Silicon Valley talent. Brilliant, no?

Macy’s invested in no fewer than 11 innovations last year, including Apple Pay, Mobile, Same Day Delivery, iBeacon, Image Search, RFID and more. There will be even more investment this year. They’re building fewer brick-and-mortar stores, and putting 150 percent of the savings into technology. They’ve found that by touching the customer through mobile, desktop and in-store, they can forge a more powerful relationship. The consumer who starts on her phone, then comes to the store, then tries on product, then goes back and looks on the desktop—spends 8 times more than the customer who experiences the brand through only one touchpoint.

Also speaking at the conference in Tuscon, Margo Georgiadis, president of the Americas for Google, and a former retail consultant at McKinsey, said, “Shopping hasn’t changed. Consumers love shopping in stores, and retailers continue to focus on winning the war on traffic and conversion.”

But the battleground is bloody. During the last two months of 2010, according to Google, retail traffic was 39 million in the U.S. Five years later, it was 18 million, almost half. Yet total retail sales grew from $641 billion to $737 billion in that period. So while consumers are making fewer trips to stores, once they get there, they spend more. Conversion rates are higher. Maybe in the past, a shopper would go on one reconnaissance mission for every actual buying trip. Today, lots of that recon work, or research, can be done online, resulting in a consumer who’s more ready to buy when she walks into the store.

People do 3 billion searches every day on Google. A full 20 percent of them, or 600 million, are shopping related. People are essentially walking around with every store, mall and brand in the world sitting comfortably in their pockets 24/7. Most of the buying will still happen in stores, but the shopping, browsing, evaluating and comparing steps are all moving online.

According to Healey Cypher, former head of innovation at eBay, 78 percent of consumers now practice webrooming, preshopping online before visiting the store. EBay’s research found that of consumers who went online pre-store and checked mobile or used some kind of interactive digital in-store, 86 percent of them converted, or bought something. And the lift to spend was a whopping 40 percent.

And the technology tools that retailers are using in-store to engage, delight and surprise consumers, and make the shopping experience neurologically addictive and one that they will seek out again and again, include digital mirrors and robotics to bring product to dressing rooms; interactive screens to see and order product; digital payment to cut down on waiting … and the list goes on and on.

Georgiadis said that to win the war for traffic before they come to the store there are three steps: 1) Own your “tribe” (know your customer) and build the entire value proposition around that customer’s dreams, 2) Commit to all-line—become seamless with respect to channels and touchpoints, and 3) Surprise and delight the customer. Deliver magic moments.

Surprise, Surprise: Millennials and Gen Y Prefer Stores

Clay Cowan, CMO at luxury off-price e-tailer Gilt Groupe, said that contrary to what most people think, online is not the preferred fashion channel for millennials or Gen Y. Their favorite way to shop is in mono-brand stores, where the experience, authenticity and storytelling of a brand come to life. But retailers must beware of this uber-sophisticated group of shoppers: “Gen Y is extremely price conscious. Having weathered a recession, they know how to game the system. They research a ton before they buy, and they’re very savvy.”

Cowan added that retailing has always been a social activity that people do with friends. Now, rather than literally going to stores with friends, the trend is that millennials’ pinning, liking, following, blogging or sharing their finds digitally is opening up all kinds of opportunities for retailers to engage with their consumers, and enabling consumers to engage with others in their networks, before, during and after the store. This is just another punctuation of the fact that the war is before the store.

And of course, adding to the importance of all the aforementioned points is the statistic projected by Forrester Research that by 2020 between 30 and 40 percent of total retail spending will be done by millennials.

A Final Note

At the end of the day, all that has been written about a “new black” is a static new standard or rule. It is all fluid and dynamic. Therefore, strategy and process always need to change because technology and the consumer are always changing.

As Terry Lundgren said: I’ve heard for many years that everyone’s going to kill the department stores, but
I feel better than ever…We’re not slowing down, we’re not stopping, the custom the same thing.”

And the war I’ve been using as a metaphor is also not just one war today. Indeed, the war is on two fronts: the war is before the store, and in the store. Do you think this is making our lives more complex, costly and anxiety ridden? You betcha!! But live with it. There is no option except to embrace all options.

http://therobinreport.com/stores-are-the-new-black/

Macy’s CEO Lundgren on Tight-Fisted Consumers

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There is good news and bad news when it comes to Americans’ balance sheets. The good news is we’re getting healthier because we’re saving more money, and the national savings rate is back up to 5%. That’s also the bad news, because we’re saving our money rather than spending it. That keeps the retail business limited and caps economic growth. We continue to see evidence that while things are getting better, this economy remains fragile as the once red-hot Chinese economy slows, and people here at home worry about their jobs and finding work. I caught up with one of the leaders in retailing, the CEO of Macy’s, to find out what’s happening. And while Terry Lundgren, has yet to see a real pickup in spending, he’s not waiting around for it. Instead, he’s expanding into China and growing his online business, waiting for some of that savings to pour back into the economy. Our interview follows, edited for length and clarity.

Q: What are you seeing right now in terms of the consumer?

A: The consumer is saving more aggressively than they have in the past. He or she is spending in certain categories like housing, home improvement and automobiles. They’re going out to restaurants. But it’s not adding up to dynamic growth for the U.S. GDP. So it’s actually pretty sluggish. And we’re not getting our share. So there’s not a lot of activity on the apparel, accessories, footwear side of the business. We’re benefiting when somebody buys a house — they often will buy furniture and mattresses and things of that nature. But we’re just not seeing them in the rest of the categories (in which) we had hoped they would be spending by now. Tourists are also not here because of the strong dollar making things expensive.

Q: A lot of people are also talking about these off-price competitors —  the cheaper outlet versions. Is that part of the industry taking market share?

A: Yes. The consumer has been trading toward these off-price alternatives, and we’re actually getting into that business at Macy’s for the first time. We’ve had Bloomingdale’s outlet stores in the past. We’re continuing to open more of them. But for the first time, we’re opening Macy’s Backstage Stores so that we can participate in this off-price, in some cases discontinued merchandise, from a prior season offering that some of these other stores are benefiting from.

Q: Gaso prices have been declining, putting more money in pockets. And we’re expecting them to put that money back into the economy. But they’re not. What’s holding people back?

A: People are saving more than they have in the past. And I think some of those big-ticket items are eating up not only their ability to spend, but their time. I do believe that they’ll circle back over time once they’ve got their house, their car, repaired their home, or put in a new patio, etc., and purhase more broadly in the discretionary category. This economy doesn’t work unless consumption is robust in a fairly broad way because it drives GDP growth. It’s two-thirds of the economy and it’s driven by consumption. And so for us to see jobs, and the productivity of those jobs, be robust, it has to be because consumption. But it has not been as strong as we would have expected it to be. Once they start spending again, that will create more jobs and put more money back into the economy.

Q: Do you think they’re worried about their medical care? Is that why they’re saving so much more money?

A: They have been spending more on health care. That’s one of the categories where you’re seeing consumer spending increase. And I suspect that that will continue to happen throughout the balance of the year.

Q: You lowered your guidance for the rest of the year. Are you expecting promotions and expenses to weigh on things going forward?

A: I lowered my sales guides because of our sale of our adjacent property to our Brooklyn store, and … because of the weakness that we’ve had in the first half of the year. I’m making sure we don’t buy inventory for a higher plan than what we can expect to sell through. And so those are the precautions we’re taking as we guide for the second half of the year.

Q: But should we expect some promotions and sales?

A: This last quarter I actually took a major promotion out of the June period, a friends and family event, and frankly, it hurt us. What you’ll see is a very similar calendar at least in the case of Macy’s and Bloomingdale’s in the second half of the season. So yes we’ll be as promotional as we were last year.

Q: Let me turn to the China story. You entered an agreement with Alibaba to bring a Macy’s to China consumers.

A: Yes, the Fung Retailing Group. it’s gonna be 65% owned by Macy’s, 35% owned by Fung Retailing Group. They have a tremendous amount of experience in China. They have 1,000 stores already in China, specialty stores and vast knowledge. And we’re gonna set up a business there that’s going to be an online business working with Alibaba and their online division. And we’ll launch this fall season.

Q: China is the story of the moment for markets and the global economy because people are worried that the economy there is actually slowing. Perhaps this is actually not the time to enter China?

A: I actually think, Maria, this is the best time to enter because if you’re already there and you’ve had the benefit of the last several years of growth, it’s a challenging time for you. I think this is a good time for businesses like mine that were not there, but actually can build from a lower base. And, without any question, that’s where the middle-class consumer of the future is going to reside.

Q: There has been a lot of intervention by the Central Bank there. At one point they closed and stopped trading in Shanghai because they wanted to stop the bleeding. Do you worry that there’s too much government intervention in China?

A: This is a moment in time that there’s a lot of chaos and turmoil. If you were in China as I was three years ago, and attending some of the meetings with the president and other governments leaders, you know that while there’s going to be rocky moments along the way … they really do believe in a 7-year plan. They’re going to make mistakes. We all are. And with a growing economy like they have, we’re complaining about the growth slowing down. But it’s still growing at a rate significantly faster than the U.S. economy.

Q: Let me ask you about brands because that’s one thing that’s very important to the Chinese are logos and brands. But recently people have been saying, “Look, you don’t want to show excess. You don’t wanna wear the logos.” I know Michael Kors and Ralph Lauren are two very popular brands sold at Macy’s. Do you see a weakness there?

A: Whenever you see Ralph Lauren results or Michael Kors’ or Calvin Klein’s results, you can assume that we’re not far off of what it is they’re reporting about their businesses because we’re the largest customer. And when any of these big brands slow down, that affects our business. But I would never count out brands like this. These brands have had such a history of performance not just with us, but around the world.

What we all have to do is excite the customer and find product that they don’t really have, but, in fact, do want. There’s going to be a point in time where they’re going to go to their closet and say, “You know what? I really do need something new here and fresh.”

Q: What’s the catalyst to get things moving again?

A: Customers have to feel better about their financial situation because of the savings rate, which is higher than it has been traditionally. If you go back in time, Americans have had savings rates at the zero level for many years. Now that range is up to about 5%. At some point they’re going to say, “We can afford to splurge again.”

I also think frankly that fashion has to stimulate some of that activity, and we haven’t had a great deal of new fashion cycles that demand to change your wardrobe. And finally, I think you’re starting to see some real growth again.

Q: Where does the growth come from at Macy’s?

A; We’ve made one acquisition in the last 10 years and that was Blue Mercury. We’re opening 10 more of those. We’re the seventh large Internet company in America. And so we clearly have an advantage in the online space in terms of competing with other pure play online retailers.

http://www.usatoday.com/story/money/2015/08/14/macys-ceo-lundgren-consumers-bartiromo-money/31716449/

Here’s Macy’s Plan to Revive its Slumping Sales, Profits

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Macy’s M -0.84% keeps skidding.

The department store chain on Wednesday reported itssecond quarter in a row of declining sales, and blamed everything from a drop in international tourism to shifting consumer spending priorities to a corporate re-organization earlier in the year that continues to distract executives.

Macy’s, which also owns the upscale Bloomingdale’s stores, said comparable sales fell 2.1% in the three months ended August 1- while Wall Street analysts were expecting them to rise 0.4%. And its profit fell 26% to $217 million. The poor showing led the retail to lower its full year forecast halfway into 2015, and now Macy’s expects total sales to slip 1% for the year, rather than increase by that amount.

It’s unusual to see Macy’s on the ropes. Coming out of the recession, it deftly outmaneuvered competitors like J.C. Penney JCP -0.97% and Kohl’s KSS -8.83% of years, thanks to earlier investments in e-commerce and those stores’ merchandising missteps. It also benefited from have a more middle-class customer, less squeezed by the poor economy.

But more recently, Macy’s has been struggling to keep that edge: in a symbolic turn of events, TJX Cos, TJX 1.44% the owner of T.J. Maxx and Marshalls which has been siphoning business from department stores for years, finally surpassed Macy’s in size in 2014. And despite Macy’s digital muscle, analysts still expect Amazon.com to surpass it in 2017 as the #1 seller of apparel in the U.S.

Let’s have a closer look at what ails Macy’s, and at the steps it’s taking to get back on track.

1) Shift in consumer spending away from categories like apparel and home furnishings to travel, entertainment and electronics:

Chief Financial Officer Karen Hoguet said Macy’s again struggled with these consumer spending patterns last quarter, a big problem for a retailer that gets virtually all its business in those categories. Of course that doesn’t explain why Macy’s fell short of expectations, given that it has been calling out these trends for a few quarters now.

“We see opportunities for generating more sales from our customers,” Hoguet told analysts on a conference call. “It is clearly getting harder. As I said, there’s a lot of competition for the dollar in categories other than what we sell.”

2) A drop in international tourism:

Macy’s gets about 5% of its revenue from international tourism, or $1.5 billion a year. The Manhattan flagships (including Bloomingdale’s) and stores in San Francisco and Chicago are a big draw for international tourists. Hoguet said that drop in tourism lowered its comparable sales by a percentage point. She shouldn’t expect any relief anytime soon between the weak euro and the Chinese yuan, which has been devalued for two days in row. That is especially true of Bloomingdale’s, which felt the pain of fewer tourists last quarter than Macy’s did.

3) Increasing competition:

Kohl’s and Penney are back on the upswing (we’ll know more this week whether that has continued, when both retailers reported their second-quarter earnings), and T.J. Maxx continues to grow, squeezing Macy’s in its traditional department store business.

Both Kohl’s and Penney have made huge strides in integrating their stores and e-commerce, narrowing their tech gap with Macy’s. What’s more, both Kohl’s and Penney have been upgrading their own stores brands, which generate half of sales and also are exclusive to them, meaning they have more pricing power and are an attraction when those items are a hit with shoppers. Macy’s gets about 25% of its sales from house brands.

4) Sluggish economy:

Unemployment might be a multi-year lows and the economy humming along, but that’s still not translating into robust business for Macy’s, or retailers in general. Last month, the National Retail Federation lowered its 2015retail spending forecast.

 

So how is Macy’s responding?

1) Expanding outside the United States

Unlike Penney, Kohl’s or Sears, Macy’s has a cachet abroad, and it will try to see if that can translate into a sales bonanza when it opens its first international store in 2018 in the UAE. Macy’s on Wednesday also announced the creation of China Limited, a joint venture with Chinese retailer Fung Retailing Limited to launch an online flagship store on Alibaba’s online shopping mall for brands, Tmall Global. This will be Macy’s second attempt at e-commerce in China.

2) Taking on T.J. Maxx head-on

Next month, Macy’s will open the first of its Backstage outlet/discount stores that are squarely aimed at winning back customers that have defected to rivals like T.J. Maxx, but also to keep pace with competitors like Nordstrom which are aggressively opening their own discount chains.

Macy’s CEO Terry Lundgren admitted in June that he wasopposed for years to the retailer taking the off-price plunge, and it remains to be seen whether the market needs a new entrant, even one with Macy’s pedigree.

3) Beefing up its e-commerce

Looking to remain an e-commerce leader, Macy’s is testing out same-day delivery in more cities now and keeps pushing its other tech initiatives like smart fitting rooms.

4) Expanding its Bluemercury beauty retail chain

Macy’s keep expanding the Bluemercury chain of beauty stores it bought last year, with a view to bringing in new products to its stores (and compete with Penney’s Sephora stores, along with Kohl’s improved beauty sections) but also benefiting from that brand’s popularity. It is adding 10 locations and will reach 76 in all by year-end.

5) Raising money from its real estate

Macy’s is under a ton of pressure from activist shareholders to raise billions of dollars from its real estate, including its iconic Manhattan store. While the company is studying it seriously, it did announce plans to sell its downtown Brooklyn store to real estate developer Tishman Speyer, but lease back a few floors.

With Macy’s core department store business in a long slump, it remains to be seen how much longer the retailer can resist investor entreaties to get cash from more such assets.

http://fortune.com/2015/08/12/macys-sales-decline/

Big Bucks: Retail’s Top Earners

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Retail management may be well-paid, but on average their compensation falls slightly below what top executives earn in other sectors.

Still, the WWD list of Retail’s Top 25 Highest Paid Executives from U.S. publicly traded firms reveals that from a pay perspective, life in the C-suite can be sweet.

The top 25 included chief executive officers, chairmen, presidents, and executive vice presidents who collectively earned $347 million in 2014, with the top 10 earners bringing in nearly $200 million in total. Sixteen of the top 25 executives earned more than $10 million last year. Taking the top spot was Carol Meyrowitz, ceo of The TJX Cos. Inc. with $28.7 million in total 2014 compensation. Brian Cornell, chairman and ceo of Target Corp., took the number-two spot with a close $28.2 million. And L Brands Inc.’s Les Wexner was third with earnings of $24.1 million.

J.C. Penney Co. Inc.’s Marvin Ellison, president and ceo-designee, was next on the list with total compensation of $19.6 million while Wal-Mart’s Gregory Foran, executive vice president, took the number five position with $19.5 million. Pay amounts and titles were for the most recent fiscal year reported to the Securities and Exchange Commission.

On average, the top 25 retail executives earned $13.9 million, which is below the national average of $16.3 million as tallied by the Economic Policy Institute, which notes that since 1978 ceo pay has risen “997 percent, a rise almost double stock market growth.”

Executive pay packages vary between retailers, but generally include equity, base pay and a performance payout. On that last note, shareholder value is the key metric. “Today’s executives are being measured more by the value they create for the company’s owners than by simply getting the job done,” said Tyler Ridgeway, director of human capital resources at Kreischer Miller.

And as economic conditions shift, so do the performance metrics. In a recent report and corporate survey from Meridian Compensation Partners LLC, Jerrold Rosema, consultant at the firm, said 60 percent of companies polled have already “set their annual incentive performance goals higher in 2015 than in 2014, indicating increased expectations as the broader economy continues its recovery.” Given current conditions of overall apparel spending, some companies may even lower performance goals. Either way, though, performance incentives are often much larger than base salaries.

TJX for example, sets a $1.5 million base salary for Meyrowitz — and the rest of the ceo’s $28.7 million pay package is incentive- and equity-based. The retailer also has different performance metrics for each of its retail brands. According to the company’s proxy filing, the long-term cash incentives divisional weighting for Marmaxx is 68.5 percent with a cumulative, three-year performance target of $6.9 billion in adjusted net earnings. The company’s other three brands have weightings of 10.5 percent each. In other words, if the retailer meets the earnings goals over the three-year period, Meyrowitz and the executive team are awarded their incentives.

“Adjusted pre-tax income over a multiyear period was considered by the [executive compensation committee] to be an appropriate metric to use as a basis for plan targets to motivate and reward long-term performance, as it is a core business metric used across our company to plan long-term growth, manage our divisions and evaluate our long-term performance,” TJX said in its proxy statement adding that the divisional weightings and targets “were challenging, but reasonably achievable and that using the weighted combination of performance of our main divisions helps to promote our team-based approach to achieving our goals.”

Another important trend in executive pay includes “say on pay,” which requires companies to allow shareholders to vote on executive compensation. The requirement was passed under the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. Although there’s been little analysis on if or how “say on pay” exactly influences executive pay packages, one thing is clear: few companies fail to pass the measures. According to research from compensation consulting firm Semler Brossy Consulting Group, only about 3 percent of U.S. companies that had votes on “say on pay” failed to pass it.

Other noteworthy issues include the impact of mergers and acquisitions. At Men’s Wearhouse, for example, the compensation committee issued equity awards and a special bonus to executives in the fall of 2014 rather than during the normally scheduled “annual grant process in 2015,” the retailer noted in its proxy.

The company said the “accelerated issuance of equity awards and the special one-time cash bonus” to its top executives was done “in recognition of the outstanding efforts of senior management in connection with the successful conclusion of the Jos. A. Bank transaction.” As a result, Men’s Wearhouse ceo Douglas Ewert watched his total compensation package rise 167 percent.

Bottom line: Retail executive pay winners are those who deliver consistently strong profits as well as those who can navigate a successful merger. Increasing shareholder value is critical, and everything else is just chump change.

executivepay

http://wwd.com/retail-news/trends-analysis/retail-top-earning-executives-10195736/

$20 Million Remodel Coming to South Towne Center

South Towne Center redesign and renovation renderings.

SANDY — Starting next month, one of the south valley’s largest shopping centers will undergo a major renovation.

Managers of South Towne Center announced a $20 million, 18-month redesign project scheduled to get underway in a few weeks.

Beginning in August, the 1.3 million-square-foot shopping center will go through a significant overhaul that will include improvements to landscaping, lighting and the parking lot to accommodate a new off-ramp from northbound I-15 that will exit directly onto mall property, among other upgrades.

“We’re expanding our food court, we’re adding some outdoor seating, adding new entrances, just lightening and brightening everything,” explained Alicia Rutledge, marketing manager for South Towne Center.

The renovation will take place in stages, Rutledge said, and the center will remain open throughout the process. The project is expected to bring in new local and national retailers, and is slated for completion by fall of next year, she added.

Last November, the mall was purchased by a partnership between El Segundo, California-based Pacific Retail Capital Partners, along with Goldman Sachs and Silverpeak Real Estate Partners. Pacific Retail is an owner and manager of regional shopping centers nationwide, including Broadway Mall in Hicksville, New York; Colonie Center in Albany, New York; West Oaks Mall in Houston; Yorktown Center in Lombard, Illinois; and Queen Ka’Ahumanu Center in Kahului, Hawaii.

Located at 10450 S. State, South Towne Center includes a 966,000-square-foot, two-story indoor shopping mall with about 150 stores and restaurants, as well as an adjacent 312,000-square-foot outdoor retail property called Marketplace.

As one of Utah’s largest shopping centers, South Towne is anchored by Macy’s, J.C. Penney, Forever 21 and Dillard’s, while the adjacent Marketplace also includes retailers such as Target and Barnes & Noble.

Over the past few years, the Salt Lake Valley has seen City Creek Center built in downtown Salt Lake City, as well as a major overhaul and expansion of Fashion Place Mall in Murray. In the wake of those developments and in an effort to remain competitive, the company said the new project has been in the works for a while.

“This renovation will create a vibrant, contemporary, outdoor-inspired shopping experience with more entertainment and dining options to serve customers of all ages,” said Gary Karl, Pacific Retail Capital Partners executive vice president. “As South Towne Center enters its 30th year serving the Sandy community, it is the perfect time to enhance the customer experience.“

Though the center’s tenants generally welcome the redesign, some also expressed concerns about the yearslong trend in the declining number of shoppers visiting the property.

“I want to see how the mall is going to bring in more brand-name (tenants) into the mall,” said Tony Luu, owner of Fast Fix Jewelry and Watch Repair. “More (shopper) traffic; that’s what we need.”

Rutledge said management is aware of those concerns and is already in the process of addressing them.

“We’re in negotiations with a lot of different retailers, (and) we have a lot of things in the works,” she said. “We have great plans and a lot of exciting things coming.”

Announcements of new tenants could be on the horizon over the next several months, she said.

The South Towne Center redevelopment is part of The Cairns, Sandy’s 1,100-acre city center “mountain meets urban” project. A cairn is a man-made pile of stones indicating someone is headed in the right direction.

The project from 9000 South to 11400 South and I-15 to near State Street will connect mountain adventures with urban living, explained Sandy communications director Nicole Martin.

The Cairns will feature new apartments and condominiums, restaurants, office space and new retail space, in addition to the multimillion-dollar South Towne Center renovation, she added.

“It plays right into the ‘mountain meets urban’ concept of our overall city center,” Martin said. The environment elevates the mixed-use elements of office, retail and residential with the amenities expected of an active urban lifestyle, she said.

“The mall renovation is huge for Sandy city and for the state of Utah,” Martin said. “They will be creating a shopping experience that is unlike any other here in the state.”

http://www.ksl.com/?nid=148&sid=35413318

Macy’s, Target Ready Fresh Fashion Takes For BTS

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Amid predictions of more confident back-to-school shoppers, both Macy’s and Target are offering peeks at their fall marketing efforts. For Macy’s, the emphasis is on 1970s bohemian looks, denim-on-denim and plenty of “athleisure” offerings. And for Target, it’s chic comfort, served up by some of the web’s hottest young dance phenoms.

The National Retail Federation unveiled its back-to-school spending forecast, which predicts per-family spending will decline to $630.36, including electronics and apparel, down from $669.28 last year. And it forecasts total spending of almost $25 billion. (When back-to-college spending is included, the total is expected to reach $68 billion.)

But the decrease is more a result of last year’s splurges, the Washington D.C.-based trade group says, pointing out that consumer confidence around BTS is high. The survey says that this year, some 76.4% of families with school-age kids say they will change their spending because of the economy. That’s down from 81.1% last year, and the lowest its been in the seven years the group has been tracking it. And in the past 10 years, families have spent an average of 42% more suiting kids up for the new school year.

“Heading into the second half of the year, we are optimistic that economic growth and consumer spending will improve after a shaky first half of the year,” say NRF President and CEO Matthew Shay in its release.

One change, though, is that the survey finds shoppers intend to hold off before getting started, with fewer than one in five starting two months early, and 30.3% planning to shop one or two weeks before the opening bell, up from 25.4% last year.

The NRF also included questions about omnichannel intentions, with 48.4% planning to use ship-to-store offerings, and 92.1% looking for free shipping deals.

And increasingly, kids are calling the shots, with

86.4% of parents saying kids influence 25% or more of back-to-school purchases.

So it makes sense that marketers are increasingly courting the stars that influence kids most. Macy’s, for example, is staging in-store events with teen singer-songwriter Daniel Skye. And it’s also organizing back-to-school shopping parties hosted by celebrity vlogger Lindsey Hughes.

While Target says it won’t unveil its new spot until Aug. 2, it’s already teasing a preview, which includes dancing sensations Maddie Ziegler, Mace Maya and Kida the Great testing out its stretch denim, and promising a Tori Kelly cover of the Jackson Five’s “ABC” as a theme song.

http://www.mediapost.com/publications/article/254035/macys-target-ready-fresh-fashion-takes-for-bts.html

PVH’s Apparel Deal With Trump Ends As Macy’s Cuts Ties With Tycoon

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(Reuters) – PVH Corp <pvh.n> said it would wind down the production of Donald Trump’s menswear after exclusive retail partner Macy’s Inc <m.n> decided to stop selling his products in protest against racist remarks made by the real estate tycoon.

PVH, whose brands include Tommy Hilfiger, Calvin Klein, Van Heusen and Arrow, signed a licensing deal in 2004 for making shirts and neckwear products under the Donald J. Trump brand.

PVH’s agreement with Trump was to end in 2018, the company said on Tuesday.

The Trump Organization was not immediately available for comment.

Donald Trump, in a June 16 speech announcing his Republican candidature for the November elections, described migrants from Mexico to the United States as drug-runners and rapists.

Other companies that have cut ties with Trump include Comcast Corp’s <cmcsa.o> NBCUniversal and Spanish language TV network Univision Communications Inc [UVN.UL].

NBCUniversal said it would not air Trump’s annual Miss USA and Miss Universe pageants.

Trump slapped a $500 million lawsuit on Univision last week for ending its contract to broadcast the Miss USA pageant.

http://www.businessinsider.com/r-pvhs-apparel-deal-with-trump-ends-as-macys-cuts-ties-with-tycoon-2015-7

Gap’s Fashion-Backward Moment

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At 8:50 on a Wednesday morning, nearly two dozen shoppers hovered in front of H&M’s new global flagship store on the corner of West 34th Street and Avenue of the Americas in Manhattan, eager to get inside as soon as the doors were unlocked at 9.

Directly across the street, a Gap store was also preparing to open. A lone woman stood in front. She was handing out fliers for a Cuban restaurant as pedestrians hurried by.

The contrast summed up the state of American retailing. One by one, iconic brands like Gap, J. Crew, American Apparel and Abercrombie & Fitch have reported slumping sales, while chic and cheap foreign fast-fashion brands like H&M, Uniqlo and Zara are opening bustling stores and luring away customers once devoted to a more basic American style.

American midmarket fashion has lost its way, and no other company epitomizes that as much as Gap. The company announced last week that it would close a quarter of its 675 North American stores over the next few years.

But the closures represent the latest in a decade of stumbles for a brand that was once so cool that the actress Sharon Stone wore one of its turtlenecks, with a Valentino skirt, to the 1996 Oscars. In 1998, its “Khaki Swing” television commercial, all smiles and American optimism, aired to 76 million viewers during the final episode of “Seinfeld.” The brand also became seared in popular consciousness that year as the maker of Monica Lewinsky’s infamous stained blue dress.

In a presentation to investors last week, Art Peck, Gap’s chief executive, spoke somewhat poignantly about the brand’s downward trajectory. When Gap’s latest round of store closures is done, its footprint in the United States will fall to just two-fifths of its peak in 2000.

“We had our moments of glory, but they’re not followed with consistent moments of glory,” Mr. Peck told investors at Gap’s corporate headquarters in San Francisco. “None of us are happy with our performance now.”

Once the master of casual, supplying Americans with staple khakis, denims and button-down shirts, the company is finding that its once-stable American customer base has splintered. Luxury is booming; at the other end of the market, discount retailers like T. J. Maxx and Burlington Stores are seeing robust gains. Gap, Abercrombie and their peers are stuck in the middle.

But they have also faltered at a game they once dominated: being the go-to destination for the legions of teenagers and young adults with money in their pockets and time on their hands. That role has fallen to juggernauts like H&M, based in Sweden, and Zara, owned by the Spanish company Inditex, which turn out cheaper versions of runway trends in weeks. H&M’s 368 stores in the United States, set to grow by 65 this year, get a fresh shipment of styles daily. Uniqlo, owned by the Japanese giant Fast Retailing, is most like Gap in that it sells basics. But Uniqlo markets basics at cheaper price points, in dozens of colors in high-tech fabrics, and offers midprice collections by designers and celebrities, including Jil Sander and Pharrell Williams. The company’s footprint here has grown to 42 stores in four years, and more are planned.

In September, yet another foreign fast-fashion brand is set to land on American shores. Primark, based in Dublin, plans to open 20 locations and will sell items for even less than H&M: Its latest catalog features $8 halter neck dresses and $10 bikinis. American retailers still outnumber the upstarts, but they are locked into outdated formulas.

“Back in the ’80s and ’90s, there wasn’t real access to higher-level fashion,” said Kate Davidson Hudson, co-founder and chief executive of Editorialist, an online fashion magazine. “It was the heyday of business casual, and stores did well selling core staples.”

“But now, everybody sees what’s on the runways on social media and on blogs, and everybody’s a critic, and shoppers want it as soon as they see it,” she said. “Brands like Gap just feel very dated.”

Sales at Gap stores open for at least a year, a closely watched figure in the retail industry, have fallen for 13 straight months. The company’s upmarket brand, Banana Republic, has also stumbled, though Gap’s cheaper Old Navy label has done well.

At Abercrombie & Fitch, comparable sales have fallen for three straight years and the brand is in the midst of an overhaul, which includes covering up the hunky shirtless male models who functioned as something of a corporate logo. Last week, the brand confirmed that Katia Kuethe, formerly of Lucky magazine, would be its new creative director. Even J. Crew, long a retail darling with a fiercely loyal following, has suffered from an increasingly stale formula of print, sequins and basics. J. Crew announced early this month that it would eliminate 175 jobs and replace the head of women’s design at its namesake brand.

The two-block stretch of 34th Street between Fifth and Seventh Avenues is a time capsule of retail, anchored on one end by the massive century-old Macy’s Herald Square store and increasingly populated by the foreign chains of the moment — Zara, Uniqlo and three H&M stores, including the airy 63,000-square-foot flagship, which opened last month and is, according to a corporate spokeswoman, the largest H&M in the world.

Sprinkled among them along the crowded sidewalks are older, familiar American mall staples like American Eagle, Banana Republic, Old Navy and others, along with Gap.

At a vibrant, three-story Uniqlo, Dhushyanthy Tharan of Hoboken, N.J., shopping on her 26th birthday for a long-sleeve button-down shirt, said she found the selection to be of higher quality and more stylish than at the Gap. “I love their materials, the cotton and linen, and their style,” she said. “It’s very young.”

“I have checked at American Eagle and the Gap,” she added, “but I never really find anything there.”

One of the people waiting for the H&M doors to open was Tianna Robinson, 30, of Brooklyn, who, unsatisfied with her wardrobe choices that morning, planned to pop in to buy a shirt for a business meeting later in the day.

“I know that no matter what,” she said, “I’ll be able to find a shirt that’s presentable and price-worthy. And it’s cute!”

H&M is her “go-to” store, Ms. Robinson said, but she also likes Zara. “Gap,” she added, “I don’t go to as much, to be honest.”

Mr. Peck and his team seemed to suggest to investors last week that Gap and its sister brands would start to emulate their fast-fashion rivals. Gap’s brands will focus on improving the product, they said, and on speeding up the time it takes to get new styles into stores.

“We are looking at what is starting to trend externally, and feeding that into our process very quickly to testing,” said Jeff Kirwan, Gap’s global brand president. “Then if it tests well, and we feel confident in the early results, we’re going to invest more and move on forward.”

But in reality, it will be difficult for Gap and other American brands to catch up to the likes of Zara, for example, which owns garment factories around the world, giving it a measure of control that permits a quick response to emerging trends. That “vertically integrated” setup lets fast-fashion brands constantly deliver new styles to stores, often in small batches. Fast-fashion retailers have come under increased scrutiny, however, for their heavy reliance on low-wage factory workers, many of whom work in dangerous, grueling conditions, as well as for the environmental toll of throwaway fashion.

Nevertheless, it takes far longer for Gap, which does not own any factories, to source new designs and get fresh styles on its racks. The company hired new design chiefs this year, but in a telling sign of just how much it lags in speed and flexibility, Mr. Peck said that their new products would not show up until next spring, because the brand had already bought the bulk of its stock for the rest of this year.

“Vertically integrating your supply chain can take years to accomplish, and tens of hundreds of millions of dollars to implement the right way,” said Andrew Billings, senior manager of the retail and consumer practice at the New York consulting firm North Highland. “That’s not something that’s going to happen overnight.”

That doesn’t mean the process couldn’t be faster. Even without its own factories, a company like Gap could “work with your design team and reduce the number of sample rounds to make quicker decisions,” Mr. Billings said. “They might be able to turn something over in 15 weeks, which would be drastically faster than your typical fashion calendar, which is more around 45 weeks.”

American brands are also saddled with the remnants of a shopping mall culture that is fast vanishing. Many of Gap’s coming store closures are expected to be at malls that have suffered from declining foot traffic and slumping sales. The national retailers that once anchored those malls, like J. C. Penney and Sears, also are floundering, at the same time as e-commerce is picking up steam.

By contrast, the foreign labels setting up shop in the United States are getting their pick of the best real estate, said William Susman, managing director at Threadstone Partners, a New York consumer and retail advisory firm. And overseas retailers, from the start, are used to operating all of their locations as high-traffic, high-grossing flagship stores, he said.

“The mall doesn’t really exist abroad as it does here. You have High Street locations in Europe whose economics really resemble flagship stores,” Mr. Susman said. “They have a very different real estate strategy.”

But most pressing for declining brands, retail specialists say, is bringing a dose of inspiration to an outdated assortment of clothing. At J. Crew, that means fewer fashion faux pas, like its universally panned “Tilly” cropped sweater that wound up on the sale pile. For Abercrombie, that means less reliance on logos to appeal to a generation now tired of blatant brand marketing. For Gap, that means sprucing up what has become a lineup of bland basics with no discernible point of view.

That hasn’t happened yet. The brand appears to be sticking to its basics strategy, albeit in a dizzying array of choices. Gap offers at least 11 categories of women’s jeans: true skinny, slim straight, girlfriend, authentic boyfriend, sexy boyfriend, always skinny, curvy skinny, real straight, perfect boot, long & lean and legging.

“There’s no creative direction, there’s no creative identity, and the shopper can perceive that,” said Ms. Davidson Hudson, of the Editorialist. “Gap needs to say: Here are the two silhouettes that we think are important this season. These are the two we’re standing behind. Here’s your perfect pair.”

Daniel Kulle, president of H&M in the United States, had similar advice for his American rivals. He said that H&M still saw “a huge opportunity to grow, for the next couple of years,” in the United States.

“If you don’t keep constantly updating your fleet, if you don’t have the right trends and collections season after season, your customers are just going to go somewhere else,” Mr. Kulle said in an interview.

“You have to keep your customers curious,” he said. “Then they have to keep coming into your stores to see what’s new today.”

http://www.nytimes.com/2015/06/21/business/gaps-fashion-backward-moment.html?smid=li-share&_r=0

This Woman Could be the Next CEO of Kohl’s

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Kohl’s Corp. has named chief customer officerMichelle Gass to the newly created principal officer position of chief merchandising and customer officer, filling the long-vacant chief merchandising officer position as Kohl’s begins a search for chief operating officer, another new position.

This positions Gass, who came to Wisconsin-based Kohl’s in 2013 from Starbucks Corp., to potentially succeed CEO, chairman and president Kevin Mansell down the line. Once appointed, the chief operating officer would also be a possible contender for the top job.

This reshuffling at the top is part of the retailer’s ongoing “Greatness Agenda,” a plan to turn around the company’s stagnant same-store sales and reposition Kohl’s to compete against online retailers such as Amazon, as well as select a successor for Mansell.

In her new position, Gass will oversee all of Kohl’s merchandising, planning and allocation, and product development functions. She will also continue leading Kohl’s overall customer engagement strategy, including the company’s marketing, public relations and social media efforts.

In the interim, Mansell has assumed direct oversight of the company’s digital and e-commerce strategies and operations.

Kohl’s previous chief merchandising officer, Donald Brennan, resigned in April 2014. A Wall Street Journal article at the time foreshadowed the management shakeup to come spurred by Brennan’s departure.

The company’s search for a COO will look outside the company. The role will include direct responsibility for the company’s store operations, logistics and supply chain network, information and digital technology, e-commerce strategy and operations, and store construction and design.

“Kohl’s had previously announced an external search for a new chief merchandising officer. However, during the course of this search, it became apparent that Michelle’s passion for merchandising and new brand acquisition made her the perfect leader for our product and merchandising functions,” said Mansell in a press release. “The close connection between our merchandising and customer engagement strategies has been a key driver in the progress we have made in the early stages of our three-year plan with the goal of becoming the most engaging retailer in America.”

Other longtime leaders at the company (NYSE: KSS) Wes McDonald and Richard Schepp have also been promoted to principal officer positions as chief financial officer and chief administrative officer, respectively.

http://www.bizjournals.com/bizwomen/news/latest-news/2015/06/this-woman-could-be-the-next-ceo-of-kohls.html?ana=lnk

Penney’s Comeback Plan: Home, Shoes, and Omnichannel

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While JC Penney is hardly anyone’s idea of a brand ninja, its new CEO says the company’s comeback is all about its associates’ “warrior spirit.”

And in order to meet its financial goal of $1.2 billion in earnings for fiscal 2017, Marvin Ellison, the retailer’s president and CEO-designee, says the company will focus on three essential areas: Reconstructing its battered home-decor business; building the successful “core” categories, including shoes, handbags, accessories, jewelry and Sephora units; and catching up with other retailers in the race to provide consumers with true omnichannel offerings.

“We are behind in omnichannel,” he conceded to investors at the Piper Jaffray Consumer Conference in New York, which was also webcast. “But there’s tremendous second-mover power. And because we had been a catalog company, other retailers are hurrying to build distribution centers, which we already have in place. We are working to find a seamless connection between dot.com, both mobile and desktop, and leverage those with our physical stores. There is a huge opportunity for us there.”

Building on strengths in its center-store offerings is also critical, says Ellison, who joined Penney last year from the Home Depot. Sephora units continue to do well, and a new line of Liz Claiborne handbags has been especially strong. A revamped women’s shoe department is scheduled to be in place systemwide by the time back-to-school shopping kicks off. “With the exception of Sephora, the company had lost focus on these areas, but they are great for cross-shopping and incremental sales attachment,” he says.

And finally, he added, the company is determined to repair its home department, arguably the biggest and most expensive departmental disaster of the short and ill-fated regime of Ron Johnson, who was ousted as CEO back in 2013. The departments made an abrupt shift from traditional to modern, with new walls that destroyed sight lines.

“Home was the most disappointing,” added Myron E. (Mike) Ullman III, the company’s current CEO. “We spent millions and did worse.”

What’s been key, Ullman says, is reaffirming the brand’s identity as a value retailer. “We had 87 million active customers in 2011, and we have 87 million today. Our customers did not give up on us. They came back. Why not get them to come more often, focusing on their loyalty?”

“While we’re not as far along as we’d like to be, we’ve made good progress,” Ellison says, with home sales showing the third-highest comparable sales gains in its most recent quarter.

While its most recent quarterly reports show the Plano, Tex.-based retailer is gaining traction in its turnaround, not everyone is convinced. In his recent report on the company, Sterne Agee | CRT analyst Charles Grom writes its improved sales and earnings are a positive development. But, “in a tepid retail environment, we wonder if raising annual guidance just 100 days or so into the fiscal year is the prudent course of action, particularly with a critical fourth quarter still months ahead. All told, we remain uninvolved, and still have our doubts about the viability of the company’s long-term goals.”

http://www.mediapost.com/publications/article/251686/penneys-comeback-plan-home-shoes-and-omnichann.html

Walmart Adjusts the Thermostat to Warm Worker Relations

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BENTONVILLE, Ark. — When the weather gets sultry here at company headquarters, Walmart workers everywhere brace for an icy blast.

Because temperatures at Walmart stores across the United States are controlled remotely by the retailer’s centralized systems here, employees stock shelves and tend to customers under conditions that, by many accounts, tend to be on the chilly side from one city to another.

So at an employees’ rally held here on Wednesday ahead of the retail giant’s annual shareholders meeting this week, company executives made one of several concessions by agreeing to raise average store temperatures by 1 degree for the majority of Walmart locations.

From adjusting the air-conditioning to relaxing the dress code and even jazzing up a store’s music, the overtures — however small they seemed — are part of Walmart’s effort to project an image of a more caring employer.

A day earlier, Walmart, the country’s largest private sector employer, said that it would raise the starting hourly wage for more than 100,000 managers in the United States. That was the second wave of wage increases at Walmart this year, after it announced in February that it would raise the pay for a half-million entry-level store workers.

“I love to listen to you, I love hearing what’s working, what isn’t. I want to hear your ideas. I even like to hear your frustrations,” Greg Foran, the head of Walmart’s United States division, told about 3,000 store workers.

“Our job, my job, is to make your life easier,” Mr. Foran said.

Long a target of protests over low wages and rigid work schedules, Walmart is appearing to appease employees in the face of rising competition to hire and retain workers as the job market rebounds. Other retail chains, like Ikea and Gap, have also started to offer higher wages for store employees.

Walmart is also trying to cast off an image as an exploitative employer with an army of minimum-wage workers, some of whom reportedly depend on food stamps or other government aid. Now, after the latest wage increases, all Walmart workers make above the minimum wage, the retailer says.

Walmart also is trying to improve customer service as it struggles with sluggish sales at its supercenters and neighborhood markets.

Sales at stores open for a year or more grew by just 1.1 percent from a year earlier in the first quarter, though its performance over the last few quarters has improved slightly after a period of sales declines.

Not all workers were impressed with the changes. And not all of them were in Bentonville at the company’s invitation.

Cindy Murray was in town with the labor union affiliate, Our Walmart, to speak in support of a resolution the group will be presenting on behalf of an activist investor at Friday’s meeting that calls for giving shareholders the right to nominate board candidates.

Ms. Murray, who said she earned $13.20 as a fitting room clerk at a Walmart store in Laurel, Md., and struggled to pay her medical bills, said the retailer was skirting its workers’ most pressing concerns.

“Anything Walmart does to makes life better for workers is awesome. But these changes are also basic things we need to do our jobs better and sell more,” she said. “Hire more workers and better pay — those are the biggest things. I think they should stop dancing round the boat.”

Kristin Oliver, Walmart’s executive vice president in charge of human resources, acknowledged that workers harbored remaining concerns, and said Walmart was working on more flexible scheduling.

She also said the company hoped that the combination of higher wages and friendlier policies would make its work force less transitory, and more likely to build careers with the retailer.

“What we’ve seen in the last few years is people jumping for small wage increases. People will move from one retailer to another for 25 cents an hour,” Ms. Oliver said. “What we hope is going to happen with the investments we’ve made is to slow that down.”

To entice workers to stay, Walmart on Wednesday announced a number of other changes to its employee policies.

The retailer will ease a much-criticized dress code that had required store workers, even those in physically intensive jobs, to wear shirts, vests and khakis. Now, stockers and other back-of-store workers will be allowed to wear jeans and T-shirts. Service-oriented workers will also be able to expand their choice of pants to black or khaki-colored denim.

On special occasions, like days with sporting events or seasonal holidays, workers will be invited to wear team jerseys, ugly Christmas sweaters or pink shirts to support breast cancer awareness, said Deisha Barnett, a Walmart spokeswoman.

The retailer also said it was bringing back an in-store broadcasting service called Walmart Radio, with a D.J. who broadcasts music to stores, to address numerous complaints from workers about having to listen to the same Justin Bieber and Celine Dion albums all day.

And temperatures at stores in the East and central regions will rise to 75 degrees from 74. (In stores in the West, average temperatures will fall from 76 to 75.)

To acknowledge employees’ complaints, executives at the rally used an imaginary Walmart worker, a puppet they called Willy Sellmore, who offered a surprisingly frank take on the retailer’s policies. When an executive explained that the temperature changes had been discussed for a year, Willy appeared understandably baffled.

“A year? A year? How long does it take to adjust a thermostat?” he said. “This shouldn’t be so hard.”

http://www.nytimes.com/2015/06/04/business/new-walmart-store-policies-aim-at-appeasing-workers.html?smid=li-share&_r=1

Macy’s CEO: New Concept Good Fit For Kenwood Collection

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Macy’s CEO Terry Lundgren said Bluemercury, the retailer’s newly-acquired, beauty and spa concept might be a good fit for Kenwood Collection.

To help Macy’s grow sales, the retailer plans to open 14 new stores by the end of the year. Macy’s bought the 63-store chain in February for $200 million as a potential growth vehicle.

Lundgren said outdoor venues like the mixed-use development in Sycamore Township are the type retail spaces Macy’s has in mind for Bluemercury.

“That’s a good possibility,” Lundgren said, adding Bluemercury’s expansion strategy is to avoid malls but open in outdoor lifestyle centers and upscale neighborhood shopping areas.

Kenwood Collection’s owner Phillips Edison & Co. has signed High-end furniture seller Mitchell Gold and Bob Williams as its first retail tenant for the development that will have 260,000 square feet for retail use. Phillips Edison officials were not immediately available for comment Friday.

Bluemercury will be rolled out in major metropolitan areas – possibly including Cincinnati, Lundgren said. Bluemercury will also add mini departments at its regular department stores and its merchandize will also be added to Macy’s online offerings.

Lundgren expressed great enthusiasm for Bluemercury’s potential, noting cosmetics rival Sephora has more than 1,600 specialty stores nationwide.

Based in Washington, D.C., most Bluemercury locations include in-house spas, while the stores carry well-known, high-end luxury beauty brands, as well as M-61, a proprietary skincare brand. The stores offer personalized assistance from a team of beauty experts with a high level of technical product knowledge.

Lundgren stressed Macy’s is nurturing the Bluemercury concept even as it begins to ramp it up. He noted co-founders Marla and Barry Beck remain in charge of the division and report directly to him.

Lundgren’s comments were during a Friday press conference following Macy’s annual shareholder meeting where he outlined the company’s success and future growth plans.

Macy’s executives have talked more about growing the company’s sales in 2015 after years of steady sales growth that came as the retailer strengthened profitability.

Bluemercury was Macy’s first acquisition in a decade. Early this month, Macy’s also announced it will open four Macy’s Backstage – an off-price concept aimed at competing with Nordstrom Rack and TJ Maxx.

Lundgren said Macy’s will study and fine-tune its off-price stores before expanding the concept elsewhere.

http://www.cincinnati.com/story/money/2015/05/15/macys-ceo-new-concept-good-fit-kenwood-collection/27374995/

Macy’s CEO Clues Us In To What’s Coming Out of a Cool New San Francisco Office

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Cincinnati-based retail giant Macy’s Inc. recently opened a new tech-friendly office space in Silicon Valley, and it’s already producing new technology for the company.

Macy’s CEO Terry Lundgren highlighted the new office location during the company’s annual meeting in Cincinnati on Friday.

“You have to do that if you want to attract the new technology guys and gals who are doing this so well for us,” Lundgren told investors.

The Courier’s sister paper in San Francisco has more details about the office, but Lundgren highlighted a piece of new technology that’s already been produced from it: an app that allows consumers to take photos of products they see out in the world and be directed to that very product, or something similar that Macy’s sells online.

That app was born from what the company calls the Macy’s Idea Lab. Ordinary employees in the San Francisco office will get together in small groups to brainstorm ideas or solve a problem. Those ideas will be pitched to a management “shark tank” and the winners will be sent to a tech team to develop a prototype and then send out to consumers to get feedback.

The image search app was developed based on a question posed to employees: if you had another way of finding a product, what would it be?

“It’s not always perfect either, but it’s out there. It’s done,” Lundgren told reporters after the annual meeting. “We think a lot is going to come out of (that office) in the future.”

Lundgren spent the meeting catching investors up on the company’s recent progress, much of which was discussed during the company’s first quarter earnings call on May 13. The Courier outlined seven initiatives presented during that call that Macy’s Chief Financial Officer Karen Hoguet said will drive much of the company’s growth in the future.

Those include initiatives like the recently announced off-price Macy’s Backstage stores, four of which are being piloted in New York. Lundgren told reporters that he expects rapid expansion of the concept once they get the specifics right at the piloted stores. Macy’s Backstage stores will open in the spring, but any expansion will likely halt around Nov. 1 as the retailer prepares for the holiday season, he said.

“There’s really no limitation to how fast we can grow it, other than the available real estate and the talent,” Lundgren said.

The expansion of the recently acquired high end beauty products and spa services retailer Bluemercury was also on Lundgren’s mind. There are currently 63 Bluemercury stores, with plans on adding an additional 14 this year. Macy’s will add Bluemercury counters at some of its own stores, but Lundgren wouldn’t say which, or when a freestanding Bluemercury would come to Cincinnati.

“We have a lot of excitement at our company and we’re moving very fast and were very focused on multiple efforts and we think we can juggle these balls at the same time,” he said.

http://www.bizjournals.com/cincinnati/news/2015/05/15/macys-ceo-clues-us-in-to-whats-coming-out-of-a.html

Why Don’t Millennials Want to Shop at Macy’s?

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Macy’s has a couple of real problems. It is trying to figure out who its customer is and why they shop in such different ways. The other problem is that they do not understand the millennials, who are now coming of age and have significant spending power. These young people are the future of retailing – and they clearly do not want to shop in department stores.

Millennials feel that shopping in department stores is a chore. It is dull and unexciting. Sadly the stores do not help themselves – the theatre is gone, replaced by sale signs, and there is little encouragement to linger. I think there should be coffee bars in every store – it does not have to be Starbucks, it could be Illy or Senor Valdez—there has to be a place to linger and meet friends. When shopping for apparel, the millennials shop by consensus, and they have to have a place to rest.

While shopping in department stores is boring, cool brands like Nike have found ways to create an engaging experience for young people in their stores. For example, Nike introduced the NAC Club (Nike Athletic Club) in its stores, where actual exercises are done in the store. It may be disruptive, but it is also fun. At one time, Home Depot had kids build a bird feeding station in their stores. It bought teen-agers and their parents into the store–everybody had fun and the proud feeling of building something themselves. Department stores have to challenge themselves to create experiences young people enjoy. Maybe stores should devote an evening to honor a singer, dancer or musician that would encourage more visitors the stores. I am excited to see the development of Macy’s Backstage this coming fall. I believe it is patterned after Nordstrom’s Rack, a successful off-price chain that is rapidly expanding throughout the United States. However, this doesn’t solve the problems the full line store is experiencing.

We are dealing with a period of deflation of apparel – which I think will get worse when Primark enters the US. H&M and Forever 21 are already driving down prices and making life difficult for the teen retailers such as Abercrombie and Aeropostale. This downward price pressure will on get worse as these fast fashion retailers continue their aggressive expansion by taking space in empty stores with their attractive and cheap wares. The constant promotion of apparel in department stores masks the fact that most merchandise is overpriced and has to be on sale to be priced properly. Recently handbags, shoes and accessories were an easy substitute for purchases of dresses and separates. But now those reliable categories are saturated. Too many closets now have too many handbags and shoes.

On Macy’s first quarter earnings conference call, CFO Karen Hoguet, gave a litany of reasons why the company missed their sales targets. They reported a drop of 0.7%; including lease departments the drop was 0.1%. The first reason was the strong dollar, which discouraged foreign visitors to shop aggressively in cities like New York, Chicago, Las Vegas and San Francisco. It appears the Russians are not traveling to the US because of internal political problems, and the Chinese are feeling the impact of an economic slowdown. The European, Japanese Brazilian and other countries already slowed over the last two years. The strength of the US dollar has made it more expensive to visit America for many foreign travelers.

The second reason cited for the sales slowdown was that the company is on a learning curve regarding how to handle the omnichannel environment. That may be tough to explain, but the company announced that some of their better stores will have an assortment of better merchandise – they are trading up. That should be interesting, since it will again require reorientation and infusion of selling staff in order to make the quality customer feel more welcome among the heavily promoted mostly private labels at Macy’s. On the selling floor, Macy’s has been squeezing the lemon dry, now management has to be realistic and retrain their associates to give better, more caring, service.

The third reason given for the missed sales targets was the slowdown of the ports on the West Coast. This affected all retailers. Probably Macy’s a little more, because of the Bloomingdale stores. Mrs. Hoguet said that customers missed the deep discounts on merchandise that came from the Western ports. Bloomingdale’s extended their friends and family off-price event in order to capture these missed sales. I can’t help thinking that maybe less merchandise headed for the markdown racks would be a good thing, but Mrs. Hoguet indicated otherwise blaming less inventory for lower sales.

The fact that General Merchandise, Apparel and Footwear (GAF) sales were lower than expected was cited as a fourth reason for the shortfall. That is a fact, millennials are not buying as much apparel – in fact, this group in general disdains ownership.

Finally, as a fifth factor Mrs. Hoguet cited the weather. Sadly, the year before we also had brutal weather and while I hope, 2015/16 will be better, I am pessimistic that the cycle will turn that quickly. It was a terrible winter, but customers shopped for what they needed – especially mattresses and furniture, and they also purchased active wear. They bought what they needed, having a strong weather driven disincentive to just go shopping.

Macy’s management has excellent merchants. They must open their eyes to the possibilities and opportunities that only a dominant retailer like Macy’s has. They must find new ways to make the customer comfortable and welcome.  In my opinion, going upscale is not the answer for Macy’s. Taking a realistic look at the number of sale events and recognizing that a) most customers no longer believe the sale signs; b) everybody is now invited to every “friend and family” event; and c) couponing will not build a healthy business well positioned for long term growth.  This is what Macy’s really needs to do.

For the record, Macy’s had a disappointing quarter. As a result of the below plan sales, the company exited the quarter with too much inventory (+2.7%).  This makes for a difficult road ahead. Macy’s management believes that it can achieve its earnings projection of $4.70 to $4.80.  I hope so. The trick will be to do so without squeezing the lemon even harder by cutting more staff.

http://www.forbes.com/sites/walterloeb/2015/05/15/why-dont-millennials-want-to-shop-at-macys/

J.C. Penney Looks Like It’s Winning Back Market Share From Macy’s

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The department store reported strong first-quarter results, besting its bigger rival Macy’s and suggesting it is clawing back some of the market share it lost in the last few years.

For the past two years, conventional wisdom was that J.C. Penney’s JCP -7.35% brief and disastrous flirtation with hipness under former Apple executive Ron Johnson had set it back irreversibly against rivals like Macy’s M -0.67% .

But on Wednesday, the department store reported a 3.4% increase in comparable sales for the quarter ending May 2. It easily outperformed Macy’s, which earlier in the day, reported a small quarterly decline.

J.C. Penney’s results suggest that it is winning back some of the business it lost to Macy’s, it bigger and more successful challenger. Macy’s blamed some its problems on the cold winter, although that excuse rang follow because Penney had to deal with the same weather and the two companies co-anchor 400 U.S. malls together.

What’s more, Penney felt so good about its first-quarter numbers that it raised its full year sales outlook. Comparable sales, which exclude newly opened or closed stores, are now expected to be up 4% to 5% rather than an earlier 3-4% range.

Since its failed effort to go upmarket under ex-CEO Johnson in 2012 and 2013, Penney has been fixing its business by bringing back popular in-house brands like St. John’s Bay that offer higher profit margins, fixing its e-commerce business, and tweaking its homes goods selection. In March, Penney sent out a home goods catalog, its first such mailing in years, to promote its new approach to good effect, and said it would send another this fall.

Penney also said it would soon start selling Sephora cosmetics products on its website. The 500 Sephora shops located in Penney stores have been a hit.

The result of the company’s efforts has been a gross profit margin that is on the mend, rising 3.3 points to 36.4 % of sales last quarter. That’s still short of the 39.3% three years ago, before its failed reinvention, but good enough to prompt Penney to also raise its profit margin forecast this year.

“We are focused on taking back market share and restoring the profitability of our business,” Penney CEO Mike Ullman told analysts. “We are switching gears, going on the offensive to gain back share and grow our business profitably.”

Ullman, who was CEO from 2004 to 2011 before being replaced by Johnson, Apple’s retail guru, returned two years ago to put out one of the biggest corporate infernos in retail history. Penney president Marvin Ellison, a former Home Depot executive HD 0.75%, will assume the CEO job in August.

Penney said that comparable sales grew in each region of the country, and that apparel led the charge. In contrast, Macy’s reported its clothing business was challenging.

In the last few years, Macy’s has downplayed the benefit of Penney’s woes, preferring to focus on its various initiatives. Lately, Macy’s has decided to launch a discount store chain this year and is looking at building some retail stores abroad.

But if Macy’s got some lift from Penney’s problems, it follows that it would also feel the effects of Penney’s resurgence.

http://fortune.com/2015/05/13/j-c-penney-market-share-macys/

 

Lower Spending From International Tourists Hurts Macy’s 1Q Sales and Profit

Macy's 1Q

CINCINNATI (AP) — Macy’s is feeling a big chill from international tourists because their money isn’t going as far as it used to.

The strong dollar has crimped spending by overseas visitors at Macy’s stores in big cities like New York, Las Vegas and Chicago. That contributed to a 13 percent decline in profit in the first quarter, the company said Wednesday.

The company said bad winter weather and a slowdown at West Coast ports also hurt sales.

Shares of Macy’s fell 2.5 percent Wednesday even as the company raised its quarterly dividend.

Sales from international tourists account for 5 percent of Macy’s business and fell by a double-digit percentage in the latest quarter, Macy’s Chief Financial Officer Karen Hoguet said on a conference call with analysts. The stronger U.S. dollar made handbags, clothing and other goods more expensive for tourists who were exchanging foreign currency.

“Unfortunately, this impact will likely stay with us at least through the summer vacation period,” Hoguet said.

Macy’s huge flagship stores, such as the iconic store on New York’s 34th Street and the former Marshall Field’s flagship on Chicago’s State Street, attract many tourists. Macy’s also operates luxury seller Bloomingdale’s, which draws wealthy out-of-towners.

The company, which has been a standout in retailing throughout the economic recovery, is the first of the major retailers to report first-quarter results. But the results show the challenges Macy’s and other retailers are facing.

Some factors are temporary. The West Coast port dispute cost Macy’s and other retailers sales when merchandise didn’t arrive on time. Macy’s also said unusually cold weather hurt sales of early spring merchandise.

Macy’s also noted its reorganization of merchandising, planning and marketing caused some temporary disruption as executives in those areas learned new roles.

Macy’s is also still dealing with a slow economic recovery and changing consumer behavior. While gas prices are low and unemployment has dropped, stagnant wages have kept a lid on shopping sprees.

Shoppers also are spending money on other things, like health care, and stores are also dealing with a shift toward online shopping.

But Macy’s says it has many reasons to be encouraged. The company is looking to expand to new areas. It announced earlier in the year that it was buying Blue Mercury, a Washington, D.C.-based beauty retailer.

Macy’s also is getting into the outlet business. Last week, it announced the first four test stores will open this fall in New York City and the surrounding area. The new stores will be called Macy’s Backstage.

“We are moving fast to test, learn and bring the most successful ideas to scale quickly,” said Terry Lundgren, chairman and CEO of Macy’s in a statement.

But Macy’s first-quarter results show it has its work cut out for it.

The company reported first-quarter net income of $193 million, or 56 cents per share.

The results missed Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of 61 cents per share.

Macy’s said revenue at stores open at least a year slipped 0.1 percent in the first quarter. Hoguet told investors the drop in spending from international tourists depressed the figure by a full percentage point.

Macy’s posted revenue of $6.23 billion in the period, also below Wall Street forecasts. Eight analysts surveyed by Zacks expected $6.3 billion.

Macy’s is raising its quarterly dividend to 36 cents from the current 31.25 cents. The new dividend will be payable July 1 to shareholders of record at the close of business on June 15.

The company’s shares fell $1.50, or a little more than 2 percent, to $63.83 Wednesday morning.

http://www.usnews.com/news/business/articles/2015/05/13/macys-misses-street-1q-forecasts

How Macy’s Quietly Created One of America’s Most Diverse Boards

Macy's CEO

 

Less than 1% of the corporate boards of Fortune 500 companies have achieved or surpassed gender parity. Last month, Macy’s became one of them. Here’s how.

Macy’s CEO and Chairman Terry Lundgren likes to fill his board with members who have diverse perspectives. As the head of a major U.S. retailer, he’s adamant that the board reflects his customer base so he can stay attuned to trends in how different people shop.

What Lundgren looks for in board members hardly sounds radical, but the results have been: Half of Macy’s M 0.34% 12 board directors are women. Last month, when he appointed Leslie Hale from RLJ Lodging Trust to the board, Macy’s reached this milestone. Less than 1% of companies in the Fortune 500 have achieved or surpassed gender parity on their boards, according to a recent Fortuneanalysis in collaboration with S&P Capital IQ.

Reaching the 50% mark brings Macy’s into a elite group that includes three other companies as of Fortune’s January analysis: Avon AVP 0.12% , Xerox XRX 2.17% andTravelCenters of America TA -0.06% (which only has four board members in total). These companies have each demonstrated a serious commitment to changing the male-heavy gender dynamics on corporate boards.

It’s worth noting that Macy’s board diversity extends beyond gender as well — two members are African-American, one is Asian-American and another is Hispanic.

Nearly 30% of Fortune 500 firms have just one female director and 23 have none at all.

“We talk a lot about diversity, but the first criteria is that each and every board member has a unique skill set and experience that they can bring to the board,” said Lundgren in an interview with Fortune. “The women have a lot of choices. They could go on any board because they have lots of demand for their skills.”

The women Lundgren is referring to are powerhouse executives like Deirdre Connelly, the former North American president of pharmaceutical company GlaxoSmithKline, Marna Whittington, the former CEO of Allianz Global Investors Capital, and Joyce Roché, the former CEO and president of Girls Incorporated. Yet a common sentiment among executives with fewer women on their boards is that there are just not enough qualified candidates like Connelly, Whittington and Roché out there.

After all, in the Fortune 500, just 25 CEOs and roughly 18% of directors are women. A lot of boards strongly prefer candidates with prior board or CEO experience, making the pool of female candidates appear very small.

Craig Weatherup, a member of Macy’s board and the former CEO of PepsiCo, said Lundgren has fought hard against the notion that every board candidate must fall into this narrow category. As a member of the nominating and corporate governance committee, Weatherup also has worked tirelessly to ensure Macy’s isn’t solely considering candidates whom he refers to as a part of the “old boys club.”

“Boards that aren’t looking for younger, digitally savvy female and ethnic board members are really going to fall behind. It’s a key part of staying relevant in today’s market,” Weatherup said. “I agree that if you’re just looking for a sitting CEO or a recently retired CEO it is almost impossible. But there is no reason why that stat hold be a limiting criteria.”

Annie Young-Scrivner, an EVP at Starbucks and the president of Teavana, is the epitome of the type of appointment Weatherup is talking about. She joined Macy’s board in 2014, and is a 46-year-old Asian American without any prior public board experience. She is mentored by Weatherup, and identifies personally with the roughly 70% of Macy’s customers that are women. As all retailers react to the shift of shoppers who our now shopping online or researching online before heading into stores, Weatherup said it is important to have young, tech-smart board members like Young-Scrivner to advise the board. “I use my iPad and my iPhone, but I am hardly a digital board member,” said Weatherup, who is 69.

“I don’t feel like I am there because I am a woman,” said Young-Scrivner. “I add a point of view that is different than some of the other board members and that strengthens Macy’s as a company.”

The result of Macy’s push to bring on fresh talent is a board of directors that is high-functioning and robust with talent, said several board members. Lundgren, who has been chairman of the board since 2004, has watched four women get elected by the board and re-elected by shareholders.

Having more diverse voices on his board has “without a doubt become a tremendous advantage” as he tries to navigate a rapidly changing retail model, he said. And for now, the company’s financial performance seems to be responding well to its diverse leadership: the retailer announced raised annual profit outlooks just as several of its main competitors are struggling to lure shoppers to its stores.

Macy’s latest appointment of Leslie Hale represents another example of the retailer looking beyond the traditional experiences of board directors to bring in a diverse perspective. Hale, a 42-year-old African American, is the youngest member of Macy’s board and had no prior board experience. Yet Lundgren is interested in Hale because of her financial acumen: At RLJ Lodging, she serves as chief financial officer.

“I was drawn to Macy’s because I could add value both from my professional experience as a public company CFO in the hospitality industry and from my personal experience as a Macy’s shopper with a young family,” said Hale on the recent appointment. “I felt an immediate fit with the board members I met, all of whom had different backgrounds and experiences.”

While Young-Scrivner acknowledged that Lundgren has led by example when searching for diverse board candidates, she added that quality recruiting firms are also essential. Most executive search firms would only speak on background regarding how they recruit for diverse talent, but it’s clear that it takes an increased attention on the issue to bring candidates from different background to light. While companies like Macy’s have made diversity a concrete criteria in their last few board searches, not all companies outline to recruiters that difference is a priority.

“By sitting in the board meetings, it becomes very clear that the Macy’s board is comprised of extraordinary leaders with really diverse backgrounds,” said Deirdre Connelly. “It’s important to highlight that so that other companies can take the same chances on people that perhaps are not CEOs today, but will be CEOs tomorrow.”

 

http://fortune.com/2015/02/18/macys-board-of-directors/

5 Things J.C. Penney Seems to Be Doing Wrong Despite Strong Sales

JCPenney

NEW YORK ( Real Money) — During the last few weeks I have warned on how J.C. Penney’s (JCP – Get Report) holiday quarter was likely to be received by the market — harshly.

With the stock plummeting post-earnings on Thursday, let me provide some deeper insight.

In the retail sector, Jim Cramer’s charitable trust Action Alerts PLUS owns TGT. Read his thoughts on the company’s recent earnings here.

A couple weeks ago, I reached out to J.C. Penney to schedule some time with either: (1) CEO-Designee Marvin Ellison or (2) CFO Ed Record. CEO Mike Ullman never gives interviews.

I figured that after hyping the start of the holiday season immediately following Black Friday, the company would deliver a decent quarter. I believed they would want to get the word out on its strengthening turnaround story.

I also believed that after months of getting to know the inner workings of J.C. Penney — and likely having a business plan in hand — Ellison would be paraded around to media to trumpet the holiday quarter and perhaps share parts of his long-term vision for the department store retailer.

I was politely rebuffed, however, by J.C. Penney (who has always been incredibly helpful with data), with the company simply saying it was “not planning any media interviews” post earnings. “Hmm, isn’t this the same company that gave me a free throw blanket and set forth ambitious long-term guidance at a New York City analyst day in October last year?” I thought.

I then had an inkling the quarter didn’t go exactly as well as J.C. Penney planned from a bottom-line standpoint (picked-up discounts in the stores in January were also a red flag).

But, the executives at the company have nobody to blame for themselves for the market’s swift, corrective action — they set the bullish expectations in the market via a barrage of upbeat commentary. For J.C . Penney to not produce a profit on a strong 4.4% same-store sales increase in its largest volume quarter of the year is mildly disturbing.

I believe it sheds light on a host of fundamental issues that are likely to pressure the stock even more in the near term. They include:

  1. The J.C. Penney of the future laid out on analyst day, one chock full of redesigned fixtures and signage, is not going to be chain-wide anytime soon. That leaves the retailer still in outdated formats in key departments like footwear and women’s handbags. I believe market goers bought into the notion the retailer had the ability to aggressively push forward J.C. Penney 2.0, but those expectations have to be tempered (as they never should have been made in the first place).
  2. J.C. Penney’s debt load is stifling any operating profit the company could eke out. That has me concerned about the bottom line potential in non-holiday periods, at least until J.C. Penney develops the financial firepower to begin bringing down its debt load.
  3. J.C. Penney may not return to its peak profit margins from Mike Ullman’s prior tenure amid investment needs to upgrade online infrastructure and the level of discounting required to sell apparel and home goods in the mall.
  4. J.C. Penney simply needs more product departments selling well, other than home and men’s apparel, to thrive.
  5. The store base has to be reduced further, in spite of the exec team’s assertion that most of its locations are not profit drags. Time to spend the cash and buy out of leases early.

J.C. Penney’s holiday quarter says this: Its long-term profit forecast will have to be reduced and some form of capital raise in 2016 could be realistic. Neither of these things is what investors were prepared to hear.

Dunkin Donuts

I always enjoy talking with Dunkin Donuts (DNKN – Get Report) execs. Doing so gives me a ton of street cred at a family dinner table full of Dunkin Donuts coffee loyalists. But I have been lukewarm on the stock for a while now due to competitive concerns and possible store oversaturation.

In chatting with Dunkin’s CEO on Thursday, however, I left with a greater appreciation on the potential impact of its new K-Cup rollout at grocery stores and retailers beginning mid-year. Keep in mind that Dunkin Donuts in the past just sold K-Cups for Keurig machines in its own restaurants — Starbucks (SBUX) sold 100 million K-Cups alone in December of last year!

Barring a macro disaster, or McDonald’s (MCD) giving away free iced coffee for a month, analysts will be forced to raise their 2015 earnings per share numbers significantly on Dunkin due to the K-Cup rollout. I think you could get a few more points on the stock from here.

http://www.thestreet.com/story/13061787/1/5-things-jc-penney-seems-to-be-doing-wrong-despite-strong-sales.html

 

A Department Store No One Talks About is Beating Wal-Mart, Amazon, and TJ Maxx

Kohl's

Department store chain Kohl’s is women’s favorite place to shop for clothes, according to a new Piper Jaffray report on female shoppers’ spending habits.

Coming in second place behind Kohl’s was Macy’s, followed by JCPenney, Wal-Mart, Amazon, Target, TJ Maxx, Old Navy, Sears, and Levi’s.

Piper Jaffray surveyed more than 1,000 women for the report.

Piper Jaffray survey

Kohl’s has been the first choice among women for the last four surveys.

It was also cited among the top stores where women are beginning to shop, as shown in the chart below.

Piper JaffrayPiper Jaffray

So why is Kohl’s so popular?

The midmarket department store offers deep discounts on national clothing brands such as Nike, Vera Wang, and Izod.

The thrill of finding good deals keeps bargain hunters coming back, according to Pam Goodfellow, an analyst for Prosper Insights & Analytics.

That has hurt competitors such as Wal-Mart, which offers low prices every day.

Nearly 12% of people who buy groceries at Wal-Mart shop most frequently for women’s apparel at Kohl’s, according to a Prosper survey.

“That’s a potential $7 billion walking out of Walmart’s doors and into the open arms of Kohl’s,” Goodfellow writes on Forbes.

Kohl’s reported a profit of $369 million, or $1.83 a share, in the most recent quarter ending January 31, while revenue climbed 3.9%, to $6.34 billion.

The company’s shares have risen more than 33% over the last year. By comparison, Macy’s and Wal-Mart shares have grown by 6% and 10%, respectively, while Sears and JC Penney’s shares have fallen by more than 14%.

Kohl's stock price

 

http://www.businessinsider.com/kohls-is-womens-favorite-place-to-shop-2015-3