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New Look China selects DigitalPersona biometrics

BY Dan Berthiaume

London — The China-based business of U.K. fashion retailer New Look has selected a POS system enabled with DigitalPersona fingerprint technology. After a successful trial at six of the retailer’s stores in February, New Look is set to expand their use of biometrics in 16 of its stores by the end of 2014, with longer-range plans to equip 100 stores by 2017.

The retailer initially selected biometric technology as an alternative to passwords for improving time and attendance accuracy, but found it also enhances loss prevention and customer service. Each New Look store has two-to-four POS terminals depending on the store size, which are shared by the retailer’s employees. In the past, the potential for employees to clock in for each other existed, increasing the risk of payroll fraud.

Prior to adopting fingerprint biometrics, New Look implemented six-digit passwords to enhance security. However, passwords were cumbersome for employees to remember and had to be changed every 90 days to meet security standards. As a result, the IT department at New Look’s U.K.-based headquarters saw an uptick in the number of calls to reset forgotten passwords.

New Look employees now use their fingerprints to clock in and log on to the POS terminals, providing a more secure alternative to passwords. In turn, store managers and deputy managers must use their fingerprints to approve returns, discounts and overrides. New Look China is also considering recommending deployment at their U.K. headquarters.

“We have seen customer service levels improve because employees are more efficient since they no longer have to remember complex passwords,” said Sky Shen, senior IT consultant at New Look. “Biometrics has helped us stay below our one percent loss prevention standard since fingerprints are also now used for management authorization of overrides.”

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Competition takes a bite out of PetSmart’s Q1 same-store sales

BY CSA STAFF

Despite posting a net sales increase for the first quarter of fiscal 2014, PetSmart’s comparable-store sales missed expectations thanks in part, according to president and CEO David Lenhardt, to a challenging and volatile consumer environment and a competitive market. The company has updated its guidance for the full year as a result.

While net sales for the quarter increased 1.1% to $1.7 billion, comparable store sales, or sales in stores open at least one year, including online sales, decreased 0.6%, with comparable transactions falling 2.2%. Services sales, which are included in net sales, grew 4.5% to $200 million.

All was not bad news, however. Earnings of $1.04 per share were up 6.1% compared to $0.98 per share in the first quarter of 2013. Net income increased 1.3% to $104 million, compared to $102 million in the first quarter of 2013.

“We are pleased with the company’s ability to achieve earnings per share growth of 6.1% while continuing to drive earnings before tax margin expansion during the first quarter,” said Lenhardt. “However, we did not achieve our sales goals, which were impacted by a challenging and volatile consumer environment and a competitive market.”

Looking ahead, the company anticipates comparable-store sales for the full year to remain relatively flat, net sales growth in the low-single digits and earnings per share to range between $4.29 and $4.39. For the second quarter, the company anticipates comparable-store sales growth to remain flat or decrease slightly and earnings per share of $0.92 to $0.96.

PetSmart employs approximately 53,000 people and operates more than 1,340 pet stores in the United States, Canada and Puerto Rico, 200 in-store PetSmart PetsHotel dog and cat boarding facilities and is a leading online provider of pet supplies and pet care information.

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Target shows early signs of improvement in first quarter

BY CSA STAFF

Despite the massive data breach that hurt Target’s fourth quarter, people are not staying away from the retailer. According to a Reuters report, the company saw a dramatic improvement in traffic in the first quarter compared to its late fourth-quarter trends.

The company’s first-quarter financial performance in its U.S. and Canadian segments was in line with expectations, and according to interim president and CEO John Mulligan, reflects not only its continued recovery from the data breach but also early signs of improvement in its Canadian operations.

“While we are pleased with this momentum, we need to move more quickly,” said a cautiously optimistic Mulligan, who is also the company’s CFO and is temporarily filling in as chief executive while the company seeks a replacement for the ousted Gregg Steinhafel. “As a result, we have made changes to our management team and are investing additional resources to drive U.S. traffic and sales, improve our Canadian operations and advance our ongoing digital transformation. We have updated our 2014 earnings expectations to reflect the impact of these investments and believe that they position Target for accelerated profitable growth as a leading omnichannel retailer.”

U.S. sales for the quarter increased 0.2% to $16.7 billion from $16.6 billion last year, reflecting the contribution from new stores partially offset by a 0.3% decrease in comparable sales. First quarter gross margin rate was 29.5% compared with 30.7% in 2013, driven primarily by additional promotional markdowns this year.

The company’s Canadian segment generated sales of $393 million, compared with $86 million in first quarter 2013 when Target opened its first 24 Canadian stores. The first quarter 2014 gross margin rate of 18.7% reflects the continued impact of efforts to clear excess inventory, including long lead-time receipts. This compares to first quarter 2013 gross margin rate of 38.4%, which benefitted from a lack of clearance markdowns due to the short time stores had been open.

Heading Canadian operations now is company veteran Mark Schindele. He replaces Tony Fisher, whom the company terminated this week.

Target incurred $18 million of net expense in first quarter 2014 thanks to the data breach — during which an intruder gained unauthorized access to its network and stole payment card and other customer information — reflecting $26 million of total expenses partially offset by the recognition of an $8 million insurance receivable.

The expense does not include any accrual for the potential claims by the payment card networks for counterfeit fraud losses, the company said, adding that the amount accrued to date for probable losses on potential payment card network claims consists solely of operating expense reimbursement obligations. Target also added that at this time, it is unable to reasonably estimate a range of possible losses on the payment card networks’ potential claims in excess of the amount accrued.

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