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Shopping Centers Today -> August 2007
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Heat wave may slow back-to-school sales
Summer’s heat will stretch into the back-to-school season this year, leaving U.S. retailers with a tougher selling climate than they faced last year, according to Weather Trends International. Last year cooler temperatures swept the nation in mid-August and intensified in September. “Fall apparel retailers and those focusing on back-to-school categories were strong,” said Richard Woolley, Weather Trends’ vice president of operations. “On the other hand, home center sales of larger ticket items such as lumber, generators and other storm-related merchandise were weak as the highly anticipated hurricane season fizzled.” September will be a bigger challenge to retailers selling fall merchandise, because the warm weather will linger, he says.
On a more positive note, retailers will have an opportunity to clear out summer leftovers. At least one or two land-falling hurricanes will afflict the U.S. in September, Woolley predicts, with the most likely targets being the Gulf Coast from Mississippi to the Florida panhandle, and the region along the south Texas coast.
Coles deal is Australia’s largest
Wesfarmers, owner of Australia’s largest hardware store chain, will be buying Australian retail giant Coles Group for A$22 billion ($18.7 billion) in that country’s biggest takeover ever. The acquisition of Coles, which owns 2,900 supermarkets, the Kmart and Target discount chains, the Officeworks office supply chain and some liquor stores, will make Wesfarmers Australia’s biggest retailer and employer. The parties expect to close the deal in October.
The announcement ends a long period of uncertainty about Coles’ future. Last year the company rejected two bids from U.S. investment group Kohlberg Kravis Roberts. KKR renewed its efforts this year, only to withdraw after viewing the company’s books. One private equity group dropped its bid last month, leaving the field open for Wesfarmers. Then Wesfarmers’ own private equity partners, Permira and Pacific Equity, dropped out. A tightening global debt environment is making things harder for private equity firms, observers say. Wesfarmers opted to go it alone, offering A$4 plus 0.2843 of a Wesfarmers share for each Coles share.
The Wesfarmers offer values Coles at 23 times its forecast 2008 earnings. Australia’s Woolworths had been working on a bid of its own for certain parts of the Coles empire, but the Wesfarmers deal put an end to that.
Finish Line becomes more fashionable
The Finish Line is expanding beyond athletic footwear with its planned $1.5 billion purchase of Genesco, a specialty footwear and apparel retailer that operates some 2,000 stores. Finish Line’s roughly 800 stores operate under the Finish Line, Man Alive and Paiva names.
This deal would bring 780 Hat World stores, 148 Johnston & Murphy stores, 760 Journeys stores and others into Finish Line’s portfolio. Genesco already had a significant expansion in mind. As Chairman and CEO Hal N. Pennington said in Genesco’s annual report, “Based on successes with stores in various formats outside traditional shopping malls and with multiple hat stores in certain malls, we now see the potential to open at least 1,300 Journeys and Journeys Kidz stores and up to 1,300 Lids and other hat stores in the U.S.”
Best Buy performs better overseas
Best Buy’s international stores outperformed its U.S. units for the fiscal first quarter (ended June 2). Total revenue for the quarter was $7.9 billion, in line with the Minneapolis-based electronics chain’s expectations, though “more of the revenue growth was driven by our international business than we had planned,” said Robert A. Willett, CEO of Best Buy International, on an earnings call.
Same-store sales at the chain’s 167 Canadian stores rose 12.8 percent, and the 138 Chinese stores posted better-than-expected sales growth. The first unit in China, which opened last year in Shanghai, is projected to finish out the year as one of the chain’s top-performing stores. By comparison, Best Buy’s 892 U.S. stores posted same-store sales growth of 1.7 percent. “In periods such as this,” said Willett, “we see the benefits of an international expansion more clearly.”
Gap card to gather shopper data
Gap Inc.’s new Gap-branded credit card will be different from the private-label cards many other retailers use to build brand loyalty, says Robert K. Passikoff, president of Brand Keys, a New York City-based retail consulting firm. “The new Gap card is designed so that consumers can use it outside the Gap and still earn rewards at Banana Republic and Old Navy — stores where they apparently still shop,” Passikoff said.
“In addition, Visa will provide the Gap with the data generated from spending that does go on, which will allow the Gap to get a better fix on the other stores where its target audience [or] former customers are actually spending their money.”
Wal-Mart details growth plan
In an effort to slow its store growth in the U.S., Wal-Mart is changing some of its rollout strategies. The company says it will stop launching stores during the holiday months from October through February. Store openings are too distracting, and staff must remain focused on fourth-quarter sales, said Vice Chairman John Menzer at an investor conference in June.
He said 80 Wal-Mart stores scheduled to open in January 2009 will wait until later in the year. Menzer also said the company may sit on some sites it bought for new Supercenters for about three to five years, to avoid cannibalizing sales from existing Wal-Mart stores. Wal-Mart will increase the number of in-store MoneyCenters it operates from 225 to 1,000 by the end of next year. These offer check cashing, money order, bill payment and money transfer services to customers “outside mainstream banking.” The company also says it will launch a branded, prepaid Visa credit card.
Theft still high, despite measures
Theft continues to plague retailers, despite programs and technology to combat it. A survey of 137 retailers shows that the level of theft last year was equal to 1.61 percent of retail sales, virtually unchanged from 1.6 percent in 2005.
Retail losses last year totaled about $41.6 billion, nearly half of which was attributable to employee theft, according to the joint survey by the University of Florida and the National Retail Federation. Shoplifters were responsible for roughly a third of the losses, amounting to some $13.3 billion worth, according to the survey. Administrative error and vendor fraud accounted for $5.8 billion and $1.7 billion, respectively.
Rag throws in towel
Rag Shops says it will sell all 61 of its leases. The Hawthorne, N.J.-based specialty crafts retailer has endured some tough competition from the likes of Target and A.C. Moore. The sites, at freestanding, open-air center and mall locations throughout Connecticut, Florida, New Jersey, New York and Pennsylvania, measure between 7,000 and 20,000 square feet. DJM Realty is handling the disposition. Rag Shops, which was founded in 1963, was sold to Florida-based Sun Capital Partners in 2004 for $11.5 million.
7-Eleven expands
Japanese retailer Seven & I Holdings says it will invest ¥300 billion ($2.4 billion) over the next four years to open 1,000 7-Eleven stores in the U.S. and revamp its existing 6,000 stores here. The retailer has not invested in those stores for several years, focusing instead on strengthening its internal systems. Seven & I says it hopes the investment will make it more competitive, including against the U.S. stores that Britain’s Tesco plans to open.
Pier 1 retrenches
Beleaguered home decor chain Pier 1 Imports is retrenching following its first-quarter loss of $56.4 million, which comes on top of a $23.2 million loss a year ago. The company says it plans to close 100 of its 1,000 U.S. stores, up from the 60 closures it had announced previously. The affected stores will include the clearance stores and all 36 Pier 1 Kids units. Pier 1 also says it will abandon its e-commerce and catalog operations.
Sunday’s OK for Louis Vuitton
A French appeals court will allow Louis Vuitton to open its Paris flagship store for business on Sundays. The court ruled that because the store includes an art gallery, it qualifies as a business with a “cultural, recreational or sportive” aspect and therefore may operate on that day. A previous ruling had barred the store, like most other Paris retailers, from operating on Sundays after the French Christian Labor Union filed a complaint.
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