OPERATIONS

Sears CEO stepping down; Lampert taking reins

BY Marianne Wilson

New York — In a surprise move, Sears Holdings Corp. announced that CEO Louis J. D’Ambrosio will step down as CEO, effective Feb. 2, for family health reasons. D’Ambrosio will be replaced by the company’s chairman and its largest shareholder, Edward Lampert.

The surprise move fuels more uncertainty at the retailer, which has struggled with ongoing declines in sales for the past five years. In announcing D’Ambrosio’s resignation, Sears also announced it expects to report a $280 million to $360 million loss ($2.64 to $3.40 per share) in the fourth quarter, which ends Feb. 2. The loss includes a non-cash charge of $450 million in pension settlements and $42 million in pension expenses.

D’Ambrosio became CEO of Sears Holdings in February 2011. He was previously president and CEO of Avaya Inc., a communications company. Before joining Avaya, D’Ambrosio spent 16 years at IBM Corp.

Sears said D’Ambrosio will remain on the board until May 2013.

"In light of Lou’s decision to step down, the board feels it is important that there is continuity of leadership during this important period of transformation and improvement at Sears Holdings,” said Lampert in a statement. “I have agreed to assume these additional responsibilities in order to continue the company’s recovery and sustain the momentum we are experiencing.”

The nature of the health issues affecting D’Ambrosio’s family was not disclosed.

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N.Pasquine says:
Jan-08-2013 06:16 pm

Lampert and Sears
This is very bad news as whatever abilities Lampert may have he is a retail incompetent and the results bear that out. It remains a mystery why there has not been a stockholder revolt. He is totally out of touch both with what is going on in the stores and with the customers.

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Ascena Retail Group nabs new CFO

BY CSA STAFF

SUFFERN, N.Y. — Ascena Retail Group has named Dirk Montgomery as its new EVP and CFO.

Current EVP and CFO Armand Correia is retiring after 21 years with the specialty retailer, which offers clothing, shoes and accessories for missy and plus-size women and tween girls, under the Justice, Lane Bryant, Maurices, Dressbarn and Catherines brands.

Montgomery was most recently EVP and chief value chain officer of Bloomin’ Brands, which operates global restaurant brands Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse, generating approximately $4 billion in annual revenues. Prior to that position, he served as CFO of Bloomin’ Brands for six years.

“On behalf of our entire organization, I’d like to personally thank Armand for his 21 years of service to Ascena. His stewardship was instrumental in delivering market-leading rates of growth and return for our shareholders, particularly over the last decade. We are excited to welcome Dirk to our team, and are confident that his leadership, expertise and experience will enable us to continue building upon this record of achievement,” said David Jaffe, president and CEO of Ascena.

Prior to joining Bloomin’ Brands in 2005, Mr. Montgomery served in a variety of domestic and international leadership roles in the areas of finance, procurement, strategic planning and operations in the retail and consumer products segments. This included significant experience in financial leadership roles such as CFO of the $9 billion Con Agra Foods Retail Group, as CFO of Express (previously a division of Limited Brands) and in several senior management positions with the Sara Lee Corporation.

Mr. Montgomery began his career at Ernst & Young as an auditor and corporate finance consultant. He has an undergraduate degree in accountancy from Miami University of Ohio, a CPA from the State of Ohio and an MBA from the University of Chicago with a concentration in finance and a specialization in policy.

“I am very excited to be joining Ascena and share the strong vision the Ascena team has to continue to grow the business and to further extend the company’s leadership position in the specialty retailing industry. I look forward to the work ahead, including completing the integration projects already underway and, more broadly, to sharing my experience and expertise in developing and implementing a thoughtful and strategic approach to growth and value creation in the years ahead,” said Montgomery.

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From Hut to Haute: The Evolution of Outlet Center Shopping

BY CSA STAFF

By Ann Natunewicz, national manager, Retail Research, USA Retail Services Group, Colliers International

The outlet shopping experience has morphed from warehouse settings offering damaged and closeout merchandise to today’s centers that are designed to maximize customer flow and sell merchandise from the most exclusive international designers.

The U.S. outlet sector, estimated by Citi Research to be a $30 billion industry, has benefitted from a convergence of attitudes among consumers, retailers, and investors in response to a weak economy, with the recovery now moving through its fifth year.

There’s no question that weak macroeconomic conditions accentuate shoppers’ focus on “value,” which includes seeking discounted high-quality merchandise, especially designer labels. As shopper demand intensified, retailers not only expanded their outlet real estate programs, but they also recognized the viability of outlets as a distinct distribution channel — not just a dumping point for last season’s unsold inventory. They developed custom product lines to differentiate outlets from their full-line counterparts. Shoppers, once confused by outlets because they didn’t know what they were getting, now appear more accepting of this hybrid merchandise mix. The result: outlet centers, once seen primarily as “destination” shopping venues, have become more relevant for customers’ daily needs.

As retailers shifted their product mix, they’ve removed one of the major barriers to outlet development: radius restrictions where vendor conflicts prevented outlet stores from locating too close to an existing regional mall. Current real estate portfolios reflect a higher degree of comfort with proximity. Nordstrom is one high-profile example: Colliers estimates that nearly two-thirds of existing Nordstrom Rack stores are located within five miles of an existing full-line Nordstrom, with around 45% within one mile of a full-line store. (In fact, Nordstrom Rack recently relocated across the street from Nordstrom’s flagship store in downtown Seattle.) We expect this trend to continue.

Higher sales productivity and significantly lower store operating costs have made retailers more receptive to rent growth. As those attractive financials persist, so will retailers’ and landlords’ push to develop new inventory. Including three projects that opened last month, there are now approximately 195 outlet centers in the U.S., representing 72 million sq. ft., or around 2% of existing retail. Colliers can confirm an additional 34 U.S. outlet projects that have either been announced formally or are widely reported to be under development, with rumors circulating about nearly two dozen more being considered. Despite this pipeline, retailers’ expansion plans within this category are robust enough to suggest a shortage of inventory. The pressure is already being felt: Capri Capital Partners recently reported that outlet mall occupancy rates stand at nearly 95%, versus 90% for traditional malls.

Shifting consumer and retailer attitudes will continue to drive project site selection, layout/design, and merchandising. Because of their smaller size, today’s outlet projects are more easily accommodated closer to city centers, such as National Harbor just outside of Washington, D.C., and Harbor Center on New York’s Staten Island. New outlet projects’ initial project square footage is trending smaller, which is not surprising given risk concerns in real estate financing. The existing U.S. outlet inventory — 195 centers — has an average square footage of 393,000, reflecting a “barbell” distribution of older, smaller projects (many less than 100,000 sq. ft.) and large developments that have either been expanded several times to 600,000 sq. ft. to700,000 sq. ft. The current slate of proposed projects averages 360,000 sq. ft., with the majority falling within a tight range of 350,000 sq. ft. to 370,000 sq. ft. Smaller projects are not necessarily disadvantageous, though, for they come as retailers are downsizing too. Even with less square footage, a smaller project can still offer the diversity of tenants and uses to keep shoppers engaged. And this engaged consumer helps lenders and investors, who are far more comfortable providing construction financing, or acquiring interests in outlets.

What’s ahead for outlets? Look for record revenues and competitive sales growth stemming from the holiday season and into 2013. Tanger Outlets projected that 2012 would end strong given that their portfolio was at 98.6% occupancy at the end of the third quarter. Foot traffic and purchasing activity appeared robust during the holidays, with outlet centers on track to achieve year-over-year sales growth above 10% — numbers recently seen more in e-commerce than brick-and-mortar. On the development front, we already know of eight projects that will open in 2013, and expect at least another 10 to 15 projects to be announced. The sector has a long way to go before it reaches Value Retail News’ projected saturation level, which is an additional 250 outlet projects, including conversions of failed or alternative-use retail projects.

The concept will continue to evolve, and developers in heated competition for both the shopping dollar and the best retailers will continue to upgrade the quality of their centers. We wouldn’t be surprised to see a new moniker for the sector. Obviously, it hasn’t hindered performance, but the “outlet” name itself may become less relevant as the sector matures.


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