News

Magic Mirror on the Wall

BY Marianne Wilson

“Does this look any good on me?” When I was young, the person who heard that refrain (lament, actually, is more accurate) the most often from me was my mother. More often than not, we disagreed, particularly as I entered my teen years.

“I wish Bernadette was here,” (or Linda or whoever else qualified for “best friend” title at the time), I would say. “She would tell me.”

After all this time, it’s amazing how little has changed and, at the same time, how different everything is. My friend’s niece Becky, 17, loves to shop. When it comes to making a purchase, she values the opinion of her friends above all else. So much so she uses her cell phone to send photos of herself from the fitting room to her friends.

A new high-tech spin on the classic “mirror, mirror on the wall” fairy tale aims to make it even easier for Becky and her cohorts to share the shopping experience. It’s an interactive fitting-room mirror—the technology is called “social retailing” by creator IconNicholson—that at its most elemental level allows shoppers to send an image of themselves to friends via e-mail or cell phone or even to their own MySpace page. Friends vote “yes” or “no” and make comments on the outfit and text message back. The mirror displays the vote tally and messages. It’s all connected to the Web.

“It will be stores in the next year,” said Tom Nicholson, founder and managing director of the New York City-based company. He would not reveal the names of the retailers involved.

IconNicholson unveiled the concept at the National Retail Federation’s 2007 Convention in New York City. It was the centerpiece of the show’s “Store of the Future” space and it created a big buzz. When I expressed doubt as to its viability, an IconNicholson person working the display politely put me in my place.

“This isn’t aimed at people like you,” he said. “It’s for younger people. We don’t expect older [watch it, I told him] shoppers to send images across the Web.”

He’s right, of course. Style-conscious young fashionistas already share photos of themselves through fashion social-networking sites (take a look at ShareYourLook. com) and are constantly checking out MySpace and similar sites to see what their friends are wearing.

The debut of the technology came at the perfect time. IBM Global Business Services released a report at the same show detailing the differences in shopping habits between teens and baby boomers. The study found that for boomers, shopping is all about the “end,” while for teens it is about the “means.” When teens were asked about the biggest influence on their purchases, 67% named friends and peers.

“It is the social factor that is important, namely sharing the experience with friends online or in a store,” the IBM study said. “Nearly two-thirds said they use their cell phones to send text messages to a friend while shopping. Some girls also report sending a friend photos from their cell phone before making a purchase in store. When shopping online, nearly 30% of teens said they used the “e-mail a friend” link to gain advice.”

The magic-mirror lets a retailer hook into the social connections that matter so much to today’s young consumers. Retailers that incorporate these and other digital tools into their merchandising and marketing mix are likely to have a competitive edge in the future, at least with Becky and her friends.

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FINANCE

Home Depot Projects Lower Profit in 2007

BY CSA STAFF

Atlanta, The Home Depot Inc. said Wednesday it will pump $2.2 billion into improving its business this year even as it expects lower earnings and slim sales growth. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in comp-store sales in the middle single digit percentages and an earnings per share decline of 4% to 9%.

Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.

CEO Frank Blake told investors at Wednesday’s conference that like last year, “2007 also will be a difficult year.” But he said it will be a year of focus on Home Depot’s priorities and a year with “hopefully less noise.”

The “noise” was apparently a reference to the investor furor over former CEO Bob Nardelli’s hefty compensation in light of the company’s lagging stock price. Nardelli resigned in early January after six years at the helm of the company. He took with him a severance package valued at $210 million.

To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities, including the opening of 115 stores. The investment includes $1.6 billion in capital spending and $600 million in expense.

Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service, and redesign employee compensation and reward plans. It also will invest in new merchandise and review its pricing strategies. Additionally, the chain will spend money on customer loyalty programs, direct-ship programs, credit programs and other specialty sales initiatives.

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Federated Plans Name Change

BY CSA STAFF

New York City, Federated Department Stores on Tuesday said it would ask shareholders to approve changing the company’s corporate name to Macy’s Group Inc. A vote to amend the corporation’s charter to accommodate the new name will be held in conjunction with Federated’s annual meeting on May 18. If approved, the company will be known as Macy’s Group Inc., effective June 1. The move comes on the heels of the company changing most of its store nameplates to Macy’s.

“Macy’s Group is the appropriate name for our company, given that about 90% of our sales involve the Macy’s brand. That said, Bloomingdale’s is—and will remain—a very important part of our company,” said Terry J. Lundgren, Federated’s chief executive. Federated Department Stores also said stronger sales at established stores and lower costs drove a 5% rise in fourth-quarter earnings. For the quarter ended Feb. 3, net income rose to $733 million from $699 million the prior-year period. Sales fell 4% to $9.16 billion from $9.57 billion, as the company shuttered 80 “duplicative” store locations. Comp-store sales rose 6.1% in the quarter.

During the quarter, Federated lowered its selling, general and administrative costs 11% to $2.31 billion.

The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.

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