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Boston Proper biz takes chunk out of Chico’s FAS’s net income

BY CSA STAFF

An increase in third-quarter net sales was not enough to bolster Chico’s FAS’s net income, which took a hit from its Boston Proper business.

The company reported net income of $35.8 million, down 15% from $42 million in the same period a year earlier.

The company reported net sales for the third quarter of $655.6 million, an increase of 3% compared to $636.7 million in last year’s third quarter, primarily reflecting 115 net new stores. Comparable sales for the quarter decreased 1.4% — compared to a 9.9% increase in last year’s third quarter — which, according to the company, reflects the cycling of strong comparable sales last year and the impact of lower traffic.

Pre-tax, non-cash goodwill and trade name impairment charges of $72.5 million resulting from recent sales declines in the Boston Proper catalog business impacted net income results. The company is therefore taking steps to evolve the Boston Proper from a direct-to-consumer only business to an omnichannel enterprise, integrating brick and mortar, catalog and Web platforms.

The company operates 1,470 stores in the U.S. and Canada.

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Pharmacy bolsters Fred’s third-quarter results

BY CSA STAFF

Fred’s credited an 8% lift in pharmacy department sales as a key factor accounting for the company’s third-quarter success.

"The investments in pharmacy growth have been validated by the 8% increase in its total department sales," said Bruce Efird, Fred’s CEO. "Notably, our pharmacy department accounted for more than 40% of total company sales during the quarter. To help build on this momentum, we opened our new specialty pharmacy division, EIRIS Health Services, during the third quarter, which accelerates our entry into the fastest growing area of the pharmacy industry."

For the discount retailer’s third quarter ended Nov. 2, total sales increased 2% to $460.5 million. Comparable store sales for the quarter increased 1.4% compared with a decline of 2.5% in the third quarter last year. Fred’s total sales for the first nine months of fiscal 2013 increased 2% to $1.4 billion. Comparable store sales for the first nine months of 2013 increased 1.1% compared with a decrease of 0.8% in the same period last year.

During the third quarter, Fred’s opened eight new locations and closed four locations. During the first nine months of the year, Fred’s opened 17 new locations, comprising seven new stores and 10 new Xpress pharmacies. Fred’s also closed 21 stores and seven Xpress locations.

In the fourth quarter of 2013, the company expects total sales to increase in the range of 1% to 3%. Comparable store sales are expected to be in the range of flat to up 2% versus a decrease of 2.8% in the comparable 13-week fourth quarter last year.

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Rethinking Innovation

BY CSA STAFF

By Kathy Gersch, executive VP, Kotter International

One thing is certain in the world of retail: the pace of change is accelerating, and competition is fierce. Longstanding retail behemoths are dying, new specialty stores are springing up overnight, and everyone is desperately searching for new ways to stay ahead of the competition while keeping themselves from sinking. People talk about this, but in my opinion, they are missing the true problem.

We’re currently seeing the annual discussion around Thanksgiving and Black Friday schedules — who is opening when, what this means for sales, etc. For instance, for the first time ever, Macy’s is opening on Thanksgiving, and K-Mart, the struggling retail giant, will open at 6 a.m. on Thanksgiving, staying open for 41 hours straight. These moves, their benefits, and their implications, have been debated at length.

While staying open longer may help in the short-term, tactics like this are just Band-Aids for the real problem — retailers need to innovate in ways that will fundamentally improve their customers’ experience and make their brand relevant to shoppers today. To beat the competition in the long term, instead of trying to simply out-discount, out-sell, and out-advertise their competitors, retailers need to focus on out-innovating them. The key to leading the market today is a strong culture of innovation that permeates through the entire organization and focuses where it counts — on the customer.

Where Innovation is Needed
Few retailers have taken innovation past the point-of-sale. Recently, we’ve seen more retailers using mobile tablets instead of traditional cash registers. And while this may be a great idea, I’d argue that it’s not going to be a game changer. Former J.C. Penney CEO Ron Johnson thought so when he unveiled a strategy to eliminate cash registers at Penney’s, but he quickly found out that his company needed a lot more than a revamped checkout experience to turn itself around.

Retailers have been missing the boat. They need to focus beyond the point-of-sale and instead work on revolutionizing the customer experience. Some retailers have already started moving in this direction. Saks Fifth Avenue, for example, launched an iPad app that allows users to fit clothing to their specific body type before purchase. Warby Parker allows customers to try on glasses without leaving their house. And, Hointer, the Seattle-based start-up, is allowing customers to scan clothes they like on the racks, then have those clothes waiting for them in the dressing room. While these ideas are doing more to simplify operations, they are also small steps toward revolutionizing the customer brand experience.

How Innovation is Unleashed
So what should retail do to create a culture of innovation at their company? How does this work? First, and probably most importantly, company leaders must work to engage the organization and get them aligned around the need for new and innovative ideas. All employees must understand and believe – in their hearts — that innovation is paramount to the survival of the brand, and that it’s possible for new ideas to greatly benefit the company. A clear vision must be defined, and communicated, and then reiterated, throughout the organization that moves employees at all levels to action.

In other words, creating a culture of innovation does not simply mean encouraging your executive team to start thinking outside of the box. Instead, leaders must empower employees at all levels, from cashiers to the C-suite, to work outside the box. They must give them permission to try, and stop asking them to increase "X" metric or to boost sales. Instead, leaders must ask employees to think about what their customers really want, or what would happen if the company did things differently. Then, leaders must encourage employees to ask themselves these questions, generating new ideas and approaches to tackle these issues on an ongoing basis. That’s the only way to create a true culture of innovation.

I believe that what the retail industry needs is not just bigger stores, longer hours, or newer payment technology — it needs more ideas that will change the experience customers have while they shop. By turning on the innovation of your employees, you’d be surprised what you can improve in the near and longer term.

Kathy Gersch is an executive VP at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations.


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