On My Mind
In our cover story this month, six retail firms do some crystal-ball gazing as to how stores will look and operate in the future. It makes for an exciting read. But back in the present, here’s what’s on my mind:
Wither Gap?: Is it just me, or is anyone else wondering what’s going on these days at America’s largest specialty retail chain? Lean inventories, cost reductions and operational efficiencies have boosted profits and impressed Wall Street. Judging from the lack of revenue growth, however, shoppers remain unconvinced.
Part of the problem has to do with Gap’s bland image (I’m talking mainly about the namesake division). Cutting back on pricey TV advertising is one thing, but the chain had practically no profile at all during the past holiday season. It’s a risky strategy in the super-competitive specialty-apparel business, where a company can live or die as much by its marketing as by its fashions and execution.
The real mystery here is Glen Murphy, who took the helm of the company last summer. Murphy’s low-key style served him well in Canada, where he helped build Shoppers Drug Market into a drug store powerhouse. But his penchant for maintaining a low profile may serve him less so at Gap. The company needs a vocal champion even more than it needs a makeover.
Re-energized Lord & Taylor: My mother barely recognizes Lord & Taylor anymore. And that’s a good thing. It’s not that she’s out of it. It’s just that the 182-year-old department store has staged an amazing, largely unheralded reinvention during the past couple of years, replacing its dowdy, matronly image with that of a hip, fashion-savvy retailer. It has put together an impressive roster of contemporary, upscale brands, from Nanette Lepore to Ted Baker.
Meanwhile, plans are in the works for another brand to be added to the department store’s staple: Fortunoff. The jewelry and home-furnishings retailer agreed to sell its business to Lord & Taylor parent NRDC Equity Partners through a Chapter 11 bankruptcy process (the deal is subject to court approval).
R-Rated Abercrombie & Fitch: The chain’s itch for generating controversy and headlines sometimes gets in the way of good sense. How else to explain the video on the Web site for its latest brand, Gilly Hicks?
I knew that Abercrombie would likely get carried away in its new role as an underwear marketer to teen girls. But I didn’t think it would go this far. The site features a sexy video clip that shows a bevy of beautiful models, golden girls and super-fit guys, frolicking on the beach. As the video plays on, the models are also quite naked, with lots of bare breasts and backsides. I wouldn’t care if the targeted audience was adults. But it’s not. It’s young teens, who already are burdened with too many fantasies and hang-ups regarding body image. There’s got to be a better way of selling underwear.
High-Flying Urban Outfitters: Amid a slump in apparel spending, Urban Outfitters continues to defy the odds. For its fourth quarter (ended Jan. 31), it posted an aggregate same-store sales increase of 11%, with growth in its namesake division as well as its Free People and Anthropologie brands. There’s little mystery as to the company’s success: It is delivering strong fashions across its portfolio, and is doing so in some of the most distinctive environments in mall retailing. And it had the good sense to put a talented merchant—Glen Senk—in its top spot.
This spring, Urban Outfitters takes a leap outside its comfort zone, launching an upscale landscape and garden format, Terrain. Meanwhile, it has a fifth apparel concept on the horizon.
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.