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KPMG: Retailers ready to spend on expansion, IT

BY Dan Berthiaume

New York — Despite continuing economic uncertainty, new data from KPMG indicates retailers are ready to invest capital to spur growth this year. The 2013 KPMG Retail Outlook Survey shows that 85% of retail executives expect capital spending will increase or remain the same during the next year. When asked where they will increase spending most, executives most frequently cited geographic expansion (61%), IT (40% and advertising and marketing/branding (24%).

When asked which technology-related trends are having a significant impact on retail businesses, executives most frequently cited social media (71%), mobile and online shopping (52%), and mobile and online promotions and coupons (51%). The 71% of executives who say their companies are using social media to reach more customers and explore new ways of doing business is up significantly from 58% in last year’s survey.

In other IT-related findings, when asked about how their companies are leveraging data, executives most frequently cited that data analytics plays a key role in helping provide customer insight (72%), as well as in the areas of brand and product management (67% and pricing decisions (56%). Executives also say they use data to drive operational excellence and actionable insights (50%), and acquire customers (36%). However, a gap exists between this opportunity and retailers’ ability to realize it, as 43% of respondents rate their companies’ data analytics literacy as only average.

"Technology is paramount to driving growth and enhancing customer engagement for retailers," said Mark Larson, KPMG global retail leader. "With consumer behavior, spending and demographic profiles changing rapidly, it is absolutely critical that companies take an omni-channel approach to engage consumers, utilizing all the platforms at their disposal, including brick-and-mortar, online and mobile."

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Orchard Supply files for bankruptcy; Lowe’s buying assets

BY Dan Berthiaume

San Jose — Orchard Supply Hardware Stores Corp. is filing for Chapter 11 bankruptcy. As part of the filing, Orchard Supply has reached an agreement for Lowe’s to purchase acquire the majority of its assets for $205 million in cash, plus the assumption of payables owed to nearly all of Orchard’s supplier partners. Under the terms of the agreement, Lowe’s, serving as “stalking horse bidder,” would acquire no less than 60 of Orchard’s stores, based on further due diligence on the store locations.

Orchard expects to operate its overall business and the majority of its stores as usual during its financial restructuring and has secured $177 million in debtor-in-possession financing from Wells Fargo Bank.

The retailer expects to pay suppliers in the normal course for all goods and services delivered on or after June 17, 2013, with payment for goods and services delivered prior to the filing addressed through the Chapter 11 process. Orchard Supply anticipates Lowe’s will assume responsibility for most of those payments.

Orchard says it will operate as a separate, standalone business at the completion of the sale process, retaining its brand, management team and associates. The chain was spun off a standalone business from Sears in 2011.

“The steps we are taking today allow us to definitively address our balance sheet issues in order to fully execute on our brand transformation and growth strategies,” said Mark Baker, Orchard president and CEO. “We believe that Lowe’s offer is a validation of Orchard’s unique market opportunity and of our strategy to capture it. We are confident the steps we are taking today will allow us to achieve our financial and operational goals.”

Robert A. Niblock, chairman, president and CEO of Lowe’s, said Orchard has a good business model but has been saddled with debt, and the retailer’s neighborhood stores complement Lowe’s big box stores and will also boost Lowe’s presence in California.

“Strategically, the acquisition will provide us with immediate access to Orchard’s high density, prime locations in attractive markets in California, where Lowe’s is currently underpenetrated, and will enable us to participate more fully in California’s economic recovery,” said Niblock.

The transaction is expected to be consummated through a court-supervised process under Section 363 of the U.S. Bankruptcy Code and is subject to an auction and bankruptcy court approval.

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Deloitte Consumer Spending Index rises in May

BY Dan Berthiaume

New York – Improvements in real home prices, initial unemployment claims and real wages drove an increase in the Deloitte Consumer Spending Index last month. The Index, which comprises four components of tax burden, initial unemployment claims, real wages and real home prices, rose slightly in May to 4.27 from a reading of 4.12 the previous month.

The tax burden remained flat compared with the previous month but rose 2.26% from the previous year, while unemployment claims totaled 343,000, down almost 6% from May 2012. Hourly real wages moved up 0.4% from the same period a year ago, reaching $8.81, and real home prices climbed to $117,329, an 8.5% increase from the prior year.

"Three out of the four components of the Index contributed to an uptick in May and have stayed on a moderate and steady track of improvement over the past several months," said Daniel Bachman, Deloitte’s senior U.S. economist. "The labor market has stabilized, and initial unemployment claims fell nearly 6% since this time last year, while real home prices continued to climb and real wages crept up."

However, Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader, cautioned that weather can have an uncontrollable impact on consumer spending.

“Retailers should take a cue from the past year’s weather as a reminder of the many volatile and unforeseen factors that may affect their sales,” said Paul. “Predictive modeling and scenario planning can help retailers prepare for potential business disruptions, which can have a profound impact as they head into their busy and profitable back-to-school and holiday seasons."

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