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Loss Is a Four-Letter Word

BY Katherine Boccaccio

On behalf of fellow shoppers everywhere, I’d like to use this month’s column to post the following letter to each of our favorite retailers: “Please accept this written apology for having been remiss in my shopping duties. I know that I haven’t seen you in a while, but I’m afraid my gas bill has prevented me from being able to visit as often as I used to. I’m not sure when we’ll meet again, but please know that I’m thinking about you, and I miss you.”

Our absence is being felt. On the morning of May 1st—a banner news day in the retail real estate world—The Home Depot announced from its Atlanta headquarters that it would close 15 stores over the course of 30 days, and it was scrapping 50 store openings slated for the coming months. Kohl’s headlines followed a few minutes later, as the Menomonee Falls, Wis.-based retailer went public with news that it would open fewer stores than originally planned. Starbucks’ announcement less than an hour later came as no surprise given the morning’s tidings: CEO Howard Schultz said the company was slashing store openings through 2011.

The next morning delivered more bad news. Linens ’n Things filed for Chapter 11 bankruptcy and, in doing so, would close 120 stores in 31 states.

The May announcements came on the heels of earlier news that Foot Locker would close 140 stores over the next year, Zales would shutter 100, Ann Taylor 117.

With the retail meltdown has come the pain of loss, palpable throughout the chain of consumption. Customers are losing favorite retailers, whether by the closure of a local store or the reneging of plans to open a location nearby. Retailers are feeling the losses on every level, in every department. Suppliers are faced with unpaid invoices, some of them staggeringly large. And developers are dealing with unexpectedly empty buildings and bays, and with fewer leasing prospects for new projects.

And so we all peer into the dark tunnel, straining to see a ray of light, and wondering how best to lower our losses during the wait.

Developers have varying strategies for project-by-project survival. Some put plans on hold, awaiting an upturn. Others focus on “necessity retailers” as top leasing prospects, filling spaces with the tenants most likely to tread water when others are drowning. Many augment retail projects with additional uses.

And then there’s Laurence Siegel, real estate developer and a driving force behind the much-publicized, 2.4 million-sq.-ft. Meadowlands Xanadu. Siegel’s strategy is to remain optimistic in a sea of naysayers, asserting that the $2.3 billion entertainment project located in northern New Jersey’s Meadowlands Sports Complex can thrive despite the downturn. Some analysts have agreed, suggesting that the current climate could positively impact Xanadu by offering families a place to forget their financial woes amongst the center’s many entertainment offerings.

I can see where Siegel and supportive analysts are coming from. But I believe that while American consumers will indeed appreciate the distraction offered by entertainment destinations, they will be bolstered more by the continued survival of the retail chains they have patronized for decades.

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Michaels comps down for the quarter

BY CSA STAFF

IRVING, Texas Michaels Stores reported that total sales for the quarter were $847 million, a 1% increase from fiscal 2007 first quarter sales of $839 million. Same-store sales for the comparable 13-week period decreased 2.9%.

Ceo, Brian Cornell, said, “While our overall comps for the first quarter declined 2.9%, we were very encouraged with the sales of our kids and specialty craft categories, scrapbooking and frame and art supplies. Sales in April showed a reversal of trend with same-store sales up 3.1% on a strong increase in transactions. This positive sales and transaction performance gives us confidence that our new marketing and merchandising programs are connecting with our Michaels customers.”

For fiscal 2008, the company expects same-store sales growth  to be approximately flat given the current economic environment.

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Kirkland’s 1Q sales up 2.1%

BY CSA STAFF

JACKSON, Tenn. Kirkland’s reported that net sales for the first quarter ended May 3 increased 2.1% to $84.1 million from $82.3 million for the first quarter ended May 5, 2007. Comparable-store sales for the first quarter of fiscal 2008 increased 4.3% compared with an 18.8% comparable-stores sales decrease in the first quarter of fiscal 2007.

The company reported a net loss of $2.6 million, or 13 cents per diluted share, for the 13-week period ended May 3, 2008, compared with a net loss of $7.5 million, or 38 cents per diluted share, in the 13-week period ended May 5, 2007.

Robert Alderson, Kirkland’s president and ceo, said, “The first quarter results reflect strong merchandising execution and the benefits of aggressive financial initiatives that have reduced our operating costs, improved cash flow and strengthened our liquidity. During the quarter, we experienced improved customer conversions as shoppers have reacted very favorably to our merchandise mix. The positive comparable-store sales and trimming of unproductive stores led to leveraging of occupancy and distribution costs. Combined with an improvement in merchandise margin and a year-over-year reduction in operating costs of almost $5 million, we were able to post a significant improvement in our pre-tax results.

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