FINANCE

Bebe sees sales drop in Q2; names new CEO

BY Katherine Boccaccio

Brisbane, Calif. — Bebe Stores Inc. reported Thursday that sales for the second quarter plunged 11.7% to $124.6 million, from $141.1 million last year.

Same-store sales plummeted 10.5%, and the women’s apparel retailer now says it expects its second quarter net loss will be larger than previously estimated.

Foot traffic fell 15% in the second quarter, which caused inventory per sq. ft. to jump 27.5%.

In related news, Bebe said it has named Steve Birkhold as its new chief executive in an attempt to turn around its business.

Birkhold, who replaces founder Manny Mashouf, joins Bebe from Lacoste, where he was heading its North American business. The appointment comes three months after Bebe’s board said it had started a search for a new CEO.

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FINANCE

Target misses in December; Costco and TJX shine

BY Katherine Boccaccio

New York — Target Corp. turned in a less than stellar performance in December, recording flat same-store sales. But Costco Wholesale Corp. and TJX shone, exemplifying an up-and-down season in which consumers backed off buying amid concerns about a “fiscal cliff” and the uncertain economic climate.

Target missed Wall Street’s expectations of a modest 0.8% rise in same-store sales. Still, the discount giant said that its fourth quarter earnings should meet or slightly exceed the low end of its forecast. A key aspect of Target’s weakness in December appeared to be weak sell-through of the highly-anticipated Target/Neiman Marcus Holiday Collection. The unique assortment of exclusive and pricy merchandise did not appear to resonate with customers, judging from 50% and even 70% markdowns at some locations.

Sales at Target for the five week period ended Dec. 31, increased 0.8% to $10.2 billion while same store sales were essentially flat, below the company’s guidance which called for an increase in the low single digits. The performance was driven by a low single digit decrease in comparable store transactions, offset by an increase in average transaction size.

“December sales were slightly below our expectations, as strong results late in the month did not completely offset softness in the first three weeks," said Gregg Steinhafel, chairman, president and CEO. "Similar to November, profitability for December benefited from our continued focus on achieving an appropriate balance between price investments and driving sales, combined with thoughtful inventory management. As a result, we expect Target’s fourth quarter 2012 earnings per share will meet or somewhat exceed the low end of our prior guidance."

Target said the strongest category during the month was food, with health and beauty and clothing also doing well.

Costco topped Wall Street expectations with a 9% rise in December same-store sales, beating estimates for a 6.5% increase. Excluding fuel sales and the effects of foreign exchange, the club posted an 8% rise.

The TJX Cos. saw same-store sales increase 6% in December, after an 8% increase last year, “significantly” exceeding the company’s expectations, according to CEO Carol Meyrowitz.

“I am delighted to see that once again, consumers responded extremely well to our exciting selection of branded, giftable merchandise at excellent values, leading to our December comp sales increase of 6%,” she said in a statement. “This comp increase significantly exceeded our expectations and was achieved over an 8% increase last year.”

Family Dollar Stores’ same-store sales rose about 2.5% in December after increasing 6.6% in the preceding quarter.

"The holiday selling season proved to be more challenging than we expected as customers faced increasing financial uncertainty," said CEO Howard Levine. He said customers are focusing “even more on basic needs.”

Among other discount chains:

• Ross rose 6% in December, and lifted its fourth quarter profit view;
• Stein Mart same-store sales grew 5.9%;
• Alco Stores rose 1.1% excluding fuel; and
• Fred’s dropped 4.2%.

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OPERATIONS

Burd resigns as Safeway chairman, CEO

BY Mike Troy

New York — The hunt is on for a new chief executive at Safeway following the resignation of longtime chairman and CEO Steve Burd.

Burd, 62, is scheduled to retire at the company’s annual stockholders meeting on May 14 and will aid in the search of his successor that is said to include internal and external candidates. Burd joined Safeway in October 1992 as president and was appointed CEO in May of the following year.

"I feel this is the right time to move forward with a transition plan," Burd said. "The company is gaining market share with each passing quarter. We have developed the most sophisticated digital marketing platform in retail, we are implementing the most comprehensive and personalized fuel loyalty program, and we will be rolling out a wellness initiative that has the potential to transform the company."

Burd said he wanted more personal time to further pursue his interest in health care.

According to Safeway, under Burd’s leadership the company has become one of the nation’s most recognized leaders in health care. In the last eight years, Safeway has introduced innovative design and practice features into its health plans that helped control cost. As a result, while the average U.S. company experienced an 8% annual growth in employer health care costs from 2005 through 2011, Safeway averaged a 2% annual growth rate for both the employer and employee contributions, according to the company.

While Safeway understandably sang Burd’s praises in announcing his departure, whoever fills his shoes faces an uphill battle. Safeway is a heavily unionized, traditional supermarket retailer with a moderately declining store base that numbers 1,644 units. Its markets share is under assault from all manner of unconventional retailers. Marginally profitable and with long term debt of $6.4 billion, Safeway faces a long list of challenges to improve the profitability of its $43.6 billion operation and reward shareholders who have suffered of late.

The company noted that Burd’s arrival at Safeway coincided with extraordinary growth in new food retail formats, virtually all of which were non-union. Even though these factors put downward pressure on both sales and margins, the combination of strategic initiatives and cost reduction efforts enabled Safeway to outperform the S&P 500 over the last 20 years. However, much of that performance came during the first half of Burd’s career as Safeway’s stock occasionally traded above $60 for a several year period beginning in the late 90s. It’s been all downhill ever since with shares unable to break above $20 since last summer.

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Jan-07-2013 07:29 am

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B.Wenqi says:
Jan-07-2013 07:29 am

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