Reacting to Slow Sales
For most retailers, October 2007 sales were somewhat softer than in previous months. The “whys” include: weather (September and October 2007 were warmer than the same months in 2006), sub-prime loans, declining home values, the stock market, the crisis in Pakistan, etc. There are many reasons for consumers to hold on to their money.
The critical question is: How will each retailer respond to this unfortunate reality? In some cases, retailers avoid making the hard choices and push the day of reckoning into the future. They don’t take timely markdowns, and they slow the flow of new inventory into the stores. This approach provides some short-term P&L relief, but the retailer suffers later on with higher-than-planned mark-downs compounded with lost sales on fresh merchandise.
Trends in Retail Sales
|Department stores||October ’07||90-Day Trend|
|Premium department stores||October ’07||90-Day Trend|
|Midline stores||October ’07||90-Day Trend|
|Mass merchants||October ’07||90-Day Trend|
|Warehouse clubs||October ’07||90-Day Trend|
|Off-price||October ’07||90-Day Trend|
|Specialty stores||October ’07||90-Day Trend|
|Abercrombie & Fitch||–2.0%||0.6%|
|American Eagle Outfitters||–3.0%||2.3%|
|Christopher and Banks||22.0%||9.7%|
|JoS. A. Bank Clothiers||1.8%||3.1%|
|Drug stores||October ’07||90-Day Trend|
|Longs Drug Stores||0.2%||1.4%|
The strongest retailers recognize the real cost of this short-term strategy and avoid it. On Oct. 11, Nordstrom acknowledged the situation and took action. While the company reported positive same-store sales for September, it didn’t achieve plan and had inventory levels above plan. Blake Nordstrom, president of Nordstrom, Inc. explained, “We are taking immediate action to bring inventory levels in line, which will negatively impact merchandise margins for the remainder of the year.” Nordstrom should be applauded for choosing to deal with the situation head-on instead of pushing the problems into the future. Other retailers need to decide what actions they need to take now to avoid a much greater total cost in the future.
To view the complete Trending Report, go to gordmangroup.com
Robert Gordman is the president of The Gordman Group, Denver, and is the author of “The Must-Have Customer—7 Steps to Winning the Customer You Haven’t Got.”
CompUSA may get a new look
ADDISON, Tx. After opening a new format store last month, CompUSA may be changing the format of its other stores, depending on customer demand and product interest.
According to reports, the elements found in the prototype store, located in Texas, will be incorporated into other CompUSA locations across the United States.
The nearly 7,700 square-ft. relocation site includes an Apple shop featuring Mac computers, iPods and Apple accessories, and a full-length LCD TV wall.
Additional expansions include extended gaming, which includes an entire wall devoted to the Nintendo Wii, PlayStation3 and Xbox 360 gaming platforms, plus a PC gaming setup to test equipment and play new titles.
While businesses can get their share of support with a specialized services section, all consumers can visit the store’s redesigned IT support area.
“This new store aligns CompUSA’s vision to better serve its three core customers, the technology enthusiast, educated professional and small and medium businesses,” said Gabriela Villalobos, the retailer’s sales and operations evp.
CompUSA announced in April that it would narrow its focus to three core customer groups rather than try to serve a mass audience.
The move was part of a comprehensive restructuring, initiated last February, that included an overhaul of senior management and the closure of half its store base as the privately held chain looked to improve sales and profitability.
Walgreens withdraws from CVS provider plans
DEERFIELD, Ill. After many months of talks over low and below-market payment rates by CVS Caremark for four prescription plans, Walgreens has withdrawn as a pharmacy provider from the plans.
Patients affected include members of prescription benefit plans managed by CVS Caremark for ArcelorMittal, Johnson Controls, Progressive Casualty Insurance and Wisconsin Education Association Trust.
Most of the affected members live in Illinois, Indiana, Michigan, Ohio and Wisconsin.
Trent Taylor, president of Walgreens Health Services, the managed care division of Walgreens, released the following statement:
“This is not where we wanted negotiations to lead,” he said. “We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy. Meanwhile, we’ll continue to work on resolving this issue with CVS Caremark.
“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark. We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”