REAL ESTATE

New white paper addresses retail project management challenges

BY CSA STAFF

New York — A new white paper from Austin, Texas-based Accruent offers retailers insights into key project management challenges.

Called “The Business Case for an Automated Project Management Solution,” the paper discusses ways to maximize store profitability by reducing the time and cost required to open new locations. It also summarizes research findings that support automating project management toward portfolio-wide visibility and maximum real estate asset value.

To access the white paper, click here.

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Staples digital reinvention results in 225 store closures

BY CSA STAFF

Ongoing weakness at Staples’ North American retail division has resulted in the planned closure of 225 units as part of a larger expense savings program and increased emphasis on digital initiatives.

The store closure announcement, part of a larger plan expected to save $500 million by the end of 2015, was announced in conjunction with the release of fourth-quarter results and new insights regarding the company’s online business.

Profits during the 13-week fourth quarter ended Feb. 1 increased to $212 million, or 33 cents a share, compared to the prior year’s 14-week fourth quarter, which saw profits of $78 million, or 12 cents a share. Despite the profit improvement, the sales picture at Staples remained challenging during the fourth quarter. During the period, total sales declined 3.8% to nearly $5.9 billion while sales at the North American Retail division declined 5.7% to $2.9 billion, excluding an extra week from the prior year reporting period. Same-store sales declined 7% and operating profits for the division fell to $176 billion from $317 million.

According to the company, sales declines in business machines and technology accessories, office supplies and computers, were partially offset by growth in facilities and breakroom supplies, paper and copy and print.

The newly announced closures follow a net store count reduction of 34 units last year which left Staples with a total of 1,846 stores in the U.S. and Canada at year end. Even with the elimination of 225 stores this year, Staples will continue to have a sizable retail footprint it can leverage to offer shoppers an omninchannel experience.

"A year ago, we announced a plan to fundamentally reinvent our company," said Ron Sargent, Staples’ chairman and CEO. "With nearly half of our sales generated online today, we’re meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency."

Sales at Staples.com increased by 10% during the fourth quarter as the retailer offered a dramatically expanded online assortment which increased to 500,000 products at the end of 2013 compared to 100,000 at the beginning of the year.

Sargent’s assertion that half the company’s total sales are generated online, while technically accurate, tends to overstate the situation with its physical stores. That’s because the company’s digital penetration rate is skewed by the dynamics of its nearly $2 billion North American commercial division, which focuses on large corporate clients whose interactions with the company are virtually all online.

In addition to saving related to store closures, Staples said additional savings would come from unspecified initiatives in the areas of supply chain, labor optimization, non-product related costs, IT hardware and services, marketing, sales force and customer service.

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Sales solid, but holidays pressured profits at Costco

BY CSA STAFF

In the sales versus margins battle at Costco, sales got the upper hand during the holiday season and the company’s second quarter ended Feb. 16.

Costco managed to grow sales by 5.8% to $25.76 billion and same-store sales, excluding fuel, at U.S. clubs rose a healthy 5%. However, in a shortened and intensely priced competitive holiday season impacted by severe winter weather, Costco sacrificed margin to maintain member satisfaction, which was evident in membership fee income that grew 4.2% to $550 million. The tradeoff between sales and margins was evident in the company’s bottom line as net income declined to $463 million, or $1.05 a share, compared to $547 million, or $1.24 a share, during the second quarter the prior year. Comparisons to the prior year were made more difficult because the period included a 14-cents-a-share one-time tax benefit related to a portion of a special cash dividend the company paid in Dec. 2012 to 401k plan participants.

“Even with that distinction, however, the year-over-year comparison was unfavorable,” said Costco CFO Richard Galanti. “Despite satisfactory sales results during the second fiscal quarter, several other factors led to lower earnings.”

Those factors included weaker sales and gross margin results in certain non-foods merchandise categories, particularly during the four-week holiday selling season, weaker gross margins in the fresh foods business and lower reported international profits resulting from the significant weakening of foreign exchange rates, according to Galanti.

“The first four-week period of the quarter represented the majority of earnings underperformance in the quarter," Galanti said.

Costco’s second quarter began Nov. 25, 2013 and encompassed the Thanksgiving weekend, which fell late last year and compressed the holiday season.

Total company same-store sales during the quarter, excluding fuel and the effects of foreign currency, increased 5%, and consisted of a 7% gain internationally and 5% domestic increase.

Costco ended the period with 649 stores, consisting of 462 locations in the U.S. and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 18 in Japan, 10 in Taiwan, 9 in Korea and 5 in Australia. The company plans to open as many as 14 new store before the end of its fiscal year Aug. 31, 2014.

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