OPERATIONS

Starbucks amends Keurig exclusivity agreement

BY Dan Berthiaume

Seattle – Starbucks Coffee Company is amending its exclusive agreement to provide Keurig Green Mountain Inc. with super-premium coffee pods. The companies have updated their agreement to continue to expand Starbucks’ range of K-Cup pack offerings and to promote expanded consumer choice.

In exchange for eliminating the super-premium coffee exclusivity terms of the existing agreement, Starbucks will receive improved business terms, including significantly expanded Starbucks K-Cup pack and variety types.

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News

Kenmore and Craftsman can’t help Sears

BY CSA STAFF

Sears Hometown and Outlet Stores said fourth-quarter same-store sales declined 3.4% as two of the company’s best known brand had disappointing results. Sales in the fourth quarter declined 4.5% to $602.4 million due to the combination of a 3.4% same-store sales decline and an extra week in the fourth quarter the prior year, which added sales of $36.5 million. The same-store sales decline was made up of a 4% decline at the Hometown division and 1.5% decline at the outlet division. The comp decline was primarily driven by lower consumer electronics sales following a planned exit from the category in most Hometown stores, lower sales in the tool category in both segments, lower apparel sales in Outlet stores and lower major appliance sales in Hometown. The decreases were partially offset by higher lawn and garden sales in Hometown and higher major appliance and furniture sales in Outlet. If consumer electronics are excluded from the comp calculations, the total decline was only 1.1% overall, consisting of a 1% decrease at Hometown stores and a 1.3% decrease at Outlet stores. "Fourth quarter results were disappointing, especially in the Hometown and Hardware segment where holiday sales and margins of our important Kenmore appliances and Craftsman tools significantly underperformed management’s expectations,” said president and CEO Bruce Johnson. “In the Outlet segment, increased holiday promotional spending did not drive the expected sales increases. Total Company January sales were negatively impacted by the unusually severe winter weather in many of our trade areas.” That said, Johnson noted that the company made significant progress on four key strategic fronts during the quarter that leave it favorably positioned for 2014. For starters, Johnson said 30 new stores were opened during the past fiscal year with half of those coming in January. “Total sales from these 30 new stores during the first quarter of 2014 to date have met our expectations, with particularly strong sales from the new Outlet Stores (which accounted for 13 of the 30,” Johnson said. The company also continued its transition to a model whereby stores are operated primarily by independent dealers and franchisees. After 19 conversions in the fourth quarter, 1,115 of the company’s 1,260 stores are now operated by dealers and franchisees. Johnson also said the company achieved double-digit year-on-year growth in both online and multichannel sales, particularly at Searsoutlet.com where sales for the quarter grew nearly 80% from the prior year to approximately $11 million. Finally, new Outlet sourcing initiatives began to shift inventory positions in furniture, apparel and out-of-box appliances, to products Johnson said he is confident will deliver higher overall merchandise margins than in the fourth quarter of 2013.

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FINANCE

Ann Q4 profit doubles; integrates stores and e-commerce; cuts 100 jobs

BY Dan Berthiaume

New York – Ann Inc., owner of Ann Taylor and Loft, on Friday reported better-than-expected fourth-quarter profit but forecast a lower-than-expected outlook for the year. The retailer also announced a strategic realignment that includes integrating stores and e-commerce and will result in the loss of about 100 corporate jobs.

Ann said the realignment is expected to result in annual operating savings of about $25 million. The retailer expects about $15 million in savings for fiscal 2014. It anticipates an approximately $15 million restructuring charge related to the moves, with most of the charge coming in the first quarter.

“Retailing has undergone a sea change over the last few years, driven by the continued rapid shift of consumers’ purchasing behavior and the growth of omni-channel shopping,” said president and CEO Kay Krill. “Ann Inc. has been at the forefront of this evolution, investing in the infrastructure and system enhancements that led to the launch of our successful omni-channel platform in 2012. Today, we are taking the next critical step, by realigning our organization to support an integrated stores/e-commerce structure to accelerate our strategic growth agenda and overall financial performance in 2014 and beyond.”

Krill said the realignment builds on the chain’s ongoing initiatives to expand its omni-channel capabilities, enhance the productivity of its store fleet, and grow its international presence.

As part of the restructuring, Ann promoted Gary Muto to president of Ann Inc. Brands. He will mostly concentrate on design, merchandising and marketing for Ann Taylor and Loft.

For the three months ended Feb. 1, Ann earned $4.7 million, up from $2.4 million in the year-ago period.

Revenue increased 3% to $623.3 million, a bit less than Wall Street’s $624 million estimate. Same-store sales rose 2.9%.

For the full year, net income slipped to $102.4 million from $102.6 million.

Annual revenue rose 5% to $2.49 billion, from $2.38 billion. Same-store sales were up 2.3%.

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