January Was Not So Bad
At the risk of debating the current wisdom that the sky is falling, January comp-store sales results may not be as bad as they appear on the surface. For many retailers, January 2007 was a very strong month with comp-store sales increases 1% to 4% above their trends at the time. These results set the stage for challenging comparisons for 2008. The following chart provides some interesting comparisons of the two years.
Combining the results of the two years, the trend for the past three to six months appears to be consistent. Generally, the slowing economy has negatively affected results 2% to 3% with the balance attributed to retailer performance. The continued weakness at Macy’s, Kohl’s, Chico’s, Sears, Dillard’s and Sharper Image is not a byproduct of the economic slowdown. Rather, it’s the consequence of not understanding what their Core and Must-Have customers want to buy. Recently reported restructurings at Wal-Mart, Macy’s and Sears will reduce costs, but will not solve the core problem of deteriorating sales.
In a weak market, vulnerable retailers are usually affected the most. Looking ahead, there are a number of factors to consider:
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Lampert, the Eli Manning of retail?
HOFFMAN ESTATES, Ill. The New York Giants triumph over the highly favored New England Patriots in the Super Bowl earlier this month, has become an example of coming from the bottom to win it all. Sears Holdings chairman Edward Lampert is one of the latest to use the Giants win, even going as far to compare himself, and the leaders of his company, to quarterback Eli Manning.
The Giants analogy, and Eli Manning comparison, is applied mainly to the company’s Kmart division. In a letter to investors, posted on the Sears Holdings investor relations Web site, Lampert said during Kmart’s bankruptcy in 2002, the unit was “like an undrafted free agent who nobody thought had a chance to play in the big leagues.” Lampert went on to say, “Like Eli Manning, we know what it’s like to be underestimated and questioned, but we intend to keep working on our game to achieve our full potential.”
Sears Holdings reported net income of $426 million, or $3.17 per diluted share, for the fourth quarter ended Feb. 2, compared with net income of $811 million, or $5.27 per diluted share, for the fourth quarter ended Feb. 3, 2007. For the fiscal year ended Feb. 2, 2008, net income was $826 million, or $5.70 per diluted share compared with net income of $1.5 billion, or $9.58 per diluted share, for the fiscal year ended Feb. 3, 2007.
Circuit City investor seeks to replace board
RICHMOND, Va. Circuit City Stores today acknowledged that it has received two proposals from shareholder Wattles Capital Management regarding its board of directors. Wattles holds approximately 6.5% of the outstanding shares of the company’s common stock.
Circuit City reported that Wattles proposed the idea of replacing the company’s Circuit City 12-member board of directors with its own nominees. Circuit City said its board of directors will review carefully the shareholder’s proposals and the qualifications of the nominees in accordance with its fiduciary duties, mindful that the proposal would give the shareholder absolute control of the entire board, which would be disproportionate to its relative ownership of the company’s shares.