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Retail Forecast 2013

BY CSA STAFF

By Phillip M. Perry

Overcast with clearing skies — That’s the economic forecast from a major research firm as retailers enter a new year. Drizzly conditions will remain at least for the first half of 2013 as consumers hold tight to their pocketbooks. By the summer, though, light should break through the clouds as the resolutions of critical national uncertainties encourage corporate hiring, capital investment and consumer spending.

The coming year as a whole is not expected to bring significant relief over 2012.

“We expect the recovery to remain lackluster,” said Sophia Koropeckyj, managing director of industry economics at Moody’s Analytics, a research firm based in West Chester, Pa. (economy.com). “The pace of growth will be too slow to meaningfully bring the unemployment rate below 8%.”

The numbers tell the tale. Moody’s expects GDP to increase by 2.4% in 2013. That’s not much of an improvement over the 2.3% anticipated for 2012 when figures are finally tallied.

Moody’s forecast might not seem all that bad, given that the GDP increase for an economy in average growth mode is 2.5%. However, a nation recovering from a recession needs a more robust expansion.

“By most measures, this recovery is among the weakest in the past 50 years,” said Koropeckyj.

What’s holding things back? Koropeckyj points to a number of areas:

“Fiscal restraint on the local and national level, weaker global demand, a housing market that has hit bottom but has a long way to go to become healthy, and weak income growth are all constraining a stronger pickup in employment.”

Other factors are the weakening economies of China and Europe — both important export markets.

All those factors are coming together to subdue the public mood.

“Consumer confidence is still at a level consistent with a recession,” said Scott Hoyt, Moody’s senior director of consumer economics. “Consumers remain concerned about economic conditions. There is still high unemployment, weak growth in wages, volatile stocks and high gasoline prices. There are a lot of things to keep consumers on edge.”

Retail sales: Retailers will suffer as concerned consumers hold onto their purse strings.

“Retailers are most concerned about jobs and income,” Hoyt explained. “The economy is not adding jobs fast enough to lower unemployment. Wage growth remains weak, and it is not putting the cash in the pockets of consumers that retailers would like to see.”

Moody’s expects pressure on retailers early in the year because of the major weight of a constraining federal fiscal policy. Consumers will continue to be impacted by the anticipated terminations of two initiatives: the social security payroll tax holiday and extended unemployment insurance benefits. Reduced federal spending, by eliminating some jobs, will also have an indirect but significant effect on consumers.

“We expect the environment to be difficult in 2013, with core retail sales growing at some 2.3%,” Hoyt said.

That pace represents a de-escalation from the 3.2% anticipated when 2012 figures are finally tallied. To put those figures in context, average annual core retail sales grew at 4.6% prior to the 2008 financial crisis. (Core retail sales exclude volatile revenues from auto sales and gas stations).

Good news: If the economy remains troubled, corporations have managed to thrive. By piling up mountains of cash, they have positioned themselves for a fresh round of capital and labor investment when the time is right.

“Businesses are in excellent financial health; their costs are down and they have become highly competitive and profitable,” Koropeckyj said. “Employers have little slack in their labor forces so layoffs have declined dramatically.”

By the fall of 2013, Moody’s expects major market uncertainties to be resolved as lawmakers bridge their differences, raise the Treasury debt ceiling and agree to longer-term tax and spending policies.

“Combined with the Fed’s aggressive actions and a more stable Europe, all of this will ease business fears,” Koropeckyj said. “Growth will accelerate and unemployment will begin to fall.”

Phillip M. Perry is a New York City-based business writer.

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Children’s Place CFO resigns, replaced by former Talbots COO

BY Katherine Boccaccio

Secaucus, N.J. — The Children’s Place Retail Stores Inc. reported Monday that its CFO Steven Baginski has resigned the company, effective immediately.

According to the retailer, Baginski is leaving to pursue other interests.

Former COO and CFO of The Talbots Inc., Michael Scarpa, has been named Baginski’s successor, effective Dec. 3.

Scarpa also worked at Liz Claiborne Inc. for 25 years.

In related news, Children’s Place also said its board approved the repurchase of up to $100 million in stock. The company approved the repurchase of $50 million in stock in March, and at the end of the third quarter $21.6 million remained under that authorization.

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Gordmans: Filling the Retail “Voids”

BY CSA STAFF

Jeff Gordman is following in the family tradition. As president, chairman and CEO of Gordmans, he leads a company whose roots go back nearly 100 years, to when his grandfather opened a store in downtown Omaha in 1915.

From that one store, the company evolved over the years, eventually expanding beyond Nebraska. It also added a discount division, Half Price Stores. By 1990 the company had 32 stores, equally divided between the two divisions.

Gordman, 49, took the helm in 1996. A 1986 graduate of the Wharton School at the University of Pennsylvania, he initially went to work as a mergers and acquisitions analyst for a Wall Street investment bank. He returned to school and, in 1990, earned a graduate degree in management from the Sloan School at the Massachusetts Institute of Technology.

In 1990, Gordman returned to the family business, working in various departments. In 1996, he was named president and CEO, and would go on to lead the company through significant changes, including a sale to Sun Capital Partners in 2008, and a return to the public arena in 2010.

Under Gordman’s watch, the company has evolved into an everyday-low-price family department store chain that offers a wide assortment of brand-name goods in a modern and inviting environment. The retailer forecasts 2012 annual sales of between $617 million and $621 million.

Chain Store Age senior editor Katherine Field Boccaccio talked with Gordman about the company’s evolution and strategy going forward.

How has Gordmans evolved in recent years?

A reorganization in the mid-1990s gave us the opportunity to focus on just one concept rather than two. We decided that the business to keep would be the Half Price Stores, an off-price concept, and we shuttered the Richman Gordman mid-tier department store concept.

When I became CEO in 1996, we launched a repositioning strategy after determining that the Half Price Stores nameplate reflected only one dimension of our holistic selling proposition. We developed a new store prototype, overhauled our portfolio of name brands, created a new brand personality based on the themes of fun, unique and energetic, established some financial management disciplines, and finally we returned the integrity to our pricing message.

Tell us more about the pricing.

Somehow, along the way, we had moved away from an everyday value-pricing message and had become more promotional. To rectify that issue, we recalibrated our advertising strategy to leverage the differentiated and intrinsic value of our merchandise that we sell at our everyday prices. The capstone of the repositioning was changing the name of the concept from Half Price Stores to Gordmans. That addressed the issues associated with the Half Price Store name and was more in consonance with our selling proposition.

How are the company’s roots evident in today’s Gordmans?

My grandfather used to say, ‘To dream, to risk, to care, but the most important of all is tenacity of purpose.’ That philosophy pervades our DNA. Gordmans is a very mission-focused culture. Our mission, which is to delight our guests with big savings, big selection and fun, friendly associates, hopefully inspires our associates to make the world a better place by delivering unique value to our guests, which will then lead to improving the quality of their lives. That’s what we are trying to do, one guest, one store and one market at a time.

As a more concrete example, my grandfather was pretty entrepreneurial. He helped pioneer the idea of the racetrack-shopping configuration, making it easy to navigate a relatively big box. Some of our stores were as large as 100,000 sq. ft., so they needed an efficient layout. He may or may not have been the inventor of the configuration, but he was certainly one of the early adopters, the first perhaps of any scale. That idea is reflected in our current prototype, which has two racetracks to maximize our aisle real estate.

How does Gordmans fit into the current landscape?

Whether you’re talking about stores like Target or Kohl’s or J.C. Penney, which are all great retailers, we try to capitalize on voids in the market by leveraging selected destination and niche businesses that may be underserved. We also try to infuse our assortments with a greater preponderance of fashion vis-à-vis basics.

In addition, we try to ensure that our stores are visually appealing, well organized, infused with fun and entertainment, and staffed by associates who are dedicated to high service to set ourselves apart from other retailers who compete in the value segment of the industry. When we look across the retail landscape, we believe that while every given channel may compete well on one or even two dimensions of our selling proposition, which is about optimizing the savings, selection and shopping experience concurrently, it doesn’t appear that there are retailers that focus on all three elements.

We want to make sure that while an off-price retailer might be really good on price, they aren’t going to have the assortment that we would have, or a specialty store experience like we’re going to deliver or a higher-end store design like we are going to provide. That’s just one example. We are not really a department store, or an off-price store, or a discounter, but we strive to combine the best elements of all of those formats.

What are your expansion goals for the chain?

We have committed to expanding our geographic footprint in excess of 10% annually. We started 2012 with 74 stores, and have added nine, which equates to a 12% increase. Next year, we plan to open nine to 10 stores, and make several market debuts.

What is Gordmans’ average footprint?

Our prototype configuration is 50,000 sq. ft. However, because a portion of our new stores is retrofits of second-generation space, sometimes that size will fluctuate a bit.

Are you undertaking any new technology initiatives?

We leverage technology to help us execute our selling proposition. We just implemented a new Oracle ERP as part of a technology infrastructure to support our growth plans. And we’re expanding our distribution and logistics network with a second DC in Indianapolis that will open in 2014. We have a technology-based labor management system to efficiently align how we schedule associates with task- and service-based activities.

What is your leadership style?

My style is reflected in our culture. We are really passionate about delivering on a fun, fulfilling and engaging work experience for our associates. The bottom line is that if our associates aren’t psyched to be a part of Gordmans, then they can’t delight our guests.

Also, we recognize that our success is totally contingent on collaboratively leveraging the ideas and opinions of our associates throughout the organization. That speaks to my leadership style and hopefully our company culture.

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