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Two urban retailers combine forces

BY Marianne Wilson

Two urban-focused athletic footwear and apparel retailers have merged.

Private equity firms Bruckmann, Rosser, Sherrill & Co. and Goode Partners completed a transaction that will merge DTLR and Sneaker Villa (Villa). The merged company will operate nearly 240 stores covering 19 states and the District of Columbia, spanning the East Coast from New York to Florida, the Midwest, the Southeastern U.S. and Texas.

The store footprints of DTLR (formerly known as Downtown Locker Room) and Villa are complementary, with little overlap. Baltimore-based DTLR operates more than 100 stores, mostly in the Mid-Atlantic Region. It has been owned by Bruckmann, Rosser, Sherrill & Co. since 2005. The Philadelphia-based Villa has more than 120 locations, mostly in the Mid-West. It was acquired by Goode Partners in 2013.

"This merger will allow us to better serve our customers, employees and vendor partners" said Glenn Gaynor, CEO of DTLR. "The combination will allow us to enhance the consumer experience by leveraging the best practices of both Villa and DTLR. By combining our talent and resources, we can accelerate growth and expand our reach."

Both DTLR and Villa have "community-centric cultures" and both partner with the top footwear and apparel suppliers.

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Sears Canada chairman to make bid for troubled chain

BY CSA STAFF

There's a new person running things at Sears Canada.

Brandon Stranzl, executive chairman of Sears Canada has been removed from his day-to-day responsibilities of running the company in order to work on a management bid for the retailer, the Globe & Mail reported. Sears COO Becky Penrice is now leading the chain's executive team.

The report cited an internal memo regarding Stranzl that said "in light of the approaching bid deadline and focus required to assemble all necessary components of a bid, the board thought it was best for Brandon to focus exclusively on putting the bid together and step away from day-to-day operations of Sears Canada."

The report said that Stranzi wants to keep Sears operating as a going concern.

In June, Sears filed for protection from its creditors and announced it would be restructuring under Canada's Companies' Creditors Arrangement Act.

Click here to read more.

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Foot Locker stumbles in Q2 with big earnings miss

BY Marianne Wilson

Foot Locker reported grim results for its second quarter, and suggested that it may be mulling store closures.

The athletic footwear and apparel retailer posted net income of $51 million, or $0.39 per share, for the quarter ended July 29, down from $127 million, or $0.94 per share, in the year-ago period. The results were negatively impacted by a $50 million pre-tax litigation charge related to a lawsuit regarding the company's pension plans for former employees. Excluding the charge, earnings were $0.62, far below analysts' estimates of earnings per share of 90 cents.

Revenue fell 4.4% $1.7 billion, missing analysts' estimates of $1.8 billion. Same-store sales fell 6%.

“While we believe our position in the market for premium sneakers remains very strong and our customers continue to look to us for compelling new athletic footwear and apparel styles,” said Richard Johnson, chairman and CEO, “sales of some recent top styles fell well short of our expectations and impacted this quarter’s results."

Footlocker CFO and executive VP Lauren Peters suggested that the firm may be mulling store closures.

“In light of the current sales challenges in this unprecedented retail environment, we are considering a range of expense alternatives, including adjustments to our largely productive store base; reductions in overall capital spending, as well as shifting of emphasis from real estate to digital and supply chain; and various additional expense initiatives to create a more flexible, efficient organization," she stated.

In addition to weak sales, Foot Locker said its second quarter performance was also affected by the limited availability of innovative new products in the market.

"We believe these industry dynamics will persist through 2017, and we expect comparable sales to be down 3% to 4% over the remainder of the year," Johnson stated.

While some industry experts said that Foot Locker's weak results were indicative that the sneaker sector is losing momentum, Neil Saunders, managing director of GlobalData Retail, commented that while overall consumer demand for sneakers was a little soft during the quarter, it did not fall by anywhere near the level of Foot Locker's decline. “In other words, the company lost market share,” he said.

"In our view, the main issue is that Foot Locker was a little off-pitch in terms of the styles it showcased and did not have anywhere near enough stock of the key lines and items that consumers wanted," Saunders said. "Taken together, these things reduced conversion rates and average spend. Foot Lockers' sudden fall from grace points to a truism in today's sports market: Customers want and demand constant newness and innovation and are punishing of firms that don't deliver it."

During the second quarter, the company opened 24 new stores, remodeled or relocated 38 stores, and closed 19 stores. As of July 29, 2017, Foot Locker operated 3,359 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 68 franchised Foot Locker stores were operating in the Middle East, as well as 14 franchised Runners Point stores in Germany.

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