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Green is the New Color that Leads to Black Ink

BY Murray Forseter

Kermit the Frog’s signature song, “It’s Not Easy Being Green,” could be the tune most often hummed these days in the corridors and offices of retail companies as executives grapple with the latest mega-trend to hit the industry. Green. Environment. Sustainability. Those words and more are part of a new lexicon retailers and their suppliers must incorporate into their strategies. Merchandising initiatives have received the most public recognition, but the incentive for going green in all facets of operations is equally, if not more, compelling. This issue of Chain Store Age, from technology to real estate to supply chain to store design and construction, is imbued with a verdant hue.

Going green is different from merchandise fads, such as the low-carb food craze. Or the fascination designers have with black, or grey, or pink. As Catherine Fox-Simpson, partner, Retail and Consumer Products Practice, BDO Seidman, Dallas, explains, the capital commitments retailers must make to sustainable building design and fuel-efficiency programs represent a long-term investment far in excess of season-to-season merchandising decisions.

A BDO Seidman August survey of CFOs found that among 140 retailers with sales in excess of $100 million, 44% said their companies increased green investments during the past two years. Fully two-thirds said they are involved in green practices. Of those, 9% are focused exclusively on selling green products; 34% are engaged in internal initiatives such as modifying buildings and operations with solar energy, better insulation, waste-reduction and waste-management plans; 57% are doing both internal and external programs.

Payback on capital green programs is not easily quantified. Tax breaks or tax incentives influenced 15% of the respondents in the BDO Seidman survey. Another 10% mentioned city/state or zoning regulations. More than half of the CFOs acknowledged that image was the major motivator in pursuing environmentally friendly practices—for 54%, “image among consumers” trumped all other considerations. Another 13% cited “image among shareholders.”

But what do consumers feel about actions taken by retailers? To find out, Chain Store Age worked with Leo J. Shapiro & Associates. Our August survey (see page 98) of 822 consumers aged 16 and older revealed that nearly three out of four consumers, 73%, feel that retailers could do more to protect the environment and conserve energy.

Consumers want national retailers to focus more on efforts to protect foods from pesticides, make waste sites biodegradable, protect forests and conserve energy. In direct practical terms, employing solar power and daylight, as well as using energy-efficient HVAC, lighting and refrigeration systems, top the measures shoppers expect from retailers.

Environmentally friendly stores are not expected to be different to the senses. But many people are sanguine about the impact on prices and assortment. Sixty percent think prices in a green store would be higher. Nearly a third, 29%, feel the assortment in a green store would be compromised, leaving them disappointed.

“If retailers confirm these reservations as they move toward becoming more environmentally friendly,” cautions George Rosenbaum, chairman of Leo J. Shapiro & Associates, “the competitive advantages of green may be neutralized or, worse, may backfire.”

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Winn-Dixie team honored for turnaround

BY CSA STAFF

JACKSONVILLE, Fla. The team that lead Winn-Dixie Stores’ successful turnaround initiative is being honored by the Turnaround Management Association for the best ‘Mega Company Turnaround’ for 2007. Comprised of financial experts from The Blackstone Group, Skadden, Arps, Slate, Meagher & Flom and Smith Hulsey & Busey, the team helped Winn-Dixie regain the market share and profits it started to lose in the mid 1990s and early 2000s to competitors Publix and Wal-Mart.

Winn-Dixie filed for Chapter 11 bankruptcy in early 2005 after reporting  year-to-date losses of $552.8 million or $3.93 per share of common stock and a decline of 4.9% in identical-store sales in its second fiscal quarter over the same period in 2004.

 

Despite the difficulty of achieving a succesful turnaround, Winn-Dixie began its reorganization effort, while still continuing to operate its core business and preserving jobs. According to the Turnaround Management Association, it created new common stock for five classes of unsecured creditors, with recoveries ranging from about 96% to 53%. The company emerged from bankruptcy on Nov. 21, 2006.

For its fiscal year ended June 27, Winn-Dixie reported adjusted EBITDA of  $85.9 million compared to a loss of $27.8 million last year and an identical-store sales increase of 1.6% 

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Sears ends deal with maternity retailer

BY CSA STAFF

PHILADELPHIA Sears and Mothers Work, the world’s leading maternity apparel retailer, will not be renewing their agreement, Mothers Work announced today. Under their current agreement, Mothers Works operates the maternity apparel department in 502 Sears stores through the sale of its Two Hearts Maternity branded merchandise.

Mothers Work said it expects its partnership with Sears to end on June 20, 2008, when it current deal with the company is expected to expire.

Rebecca Matthias, president and ceo of Mothers Work, noted, “While we are disappointed about the end of our relationship with Sears, we feel the decision not to proceed with a renewal is in the best interest of our stockholders since we were unable to reach terms on a renewal which would be favorable for Mothers Work and our stockholders. “

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