ETD: 997 End of a retail era; Chico's Falls Out of Fashion
With Investors; Fastest-growing retailers tend to be smaller ones
E-Tailer's Digest
etd_post at gapent.com
Wed Aug 2 20:47:44 GMT 2006
E-Tailer's Digest --- Everything for the Retailer
Issue #0997 August 3, 2006
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] End of a retail era
[3] Chico's Falls Out of Fashion With Investors
[4] Fastest-growing retailers tend to be smaller ones
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[1] Greetings.
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Hi All:
Yesterday was the end of an era for retailing -
Wanamaker's became Macy's. John Wanamaker was
regarded as the man who started the department
store in the late 1800s. Their history is quite
fascinating. Check out some of the firsts they did throughout history.
It's interesting to note that one of the Top 10
retailers in the U.S. has fallen out of favor in
the investment world. Here's a retailer that has
operating-income margin consistently exceeding
20%, compared with 3.5% for the apparel-retail
industry. And their average sales per square
foot of more than $1,000 are among the highest in
specialty retail. But investors are worried that
their new brands may not do as well. Go figure.
Speaking of the Top 10 Retailers, Stores Magazine
has published the Top 100 Retailers. It's
interesting to note that more than half of the
companies listed are NOT among the nation's
largest retailers. Sounds reasonable, since the
smaller retailer can grow more rapidly.
These stats can be used as a guide for your store. How are you doing?
I have to listen to my wife. She became a
Chico's junkie a couple of years ago. Just
recently she started shopping at Coldwater Creek,
which is doing better than Chico's (#7 vs #10).
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, LLC
mailto:georgem at gapent.com
http://www.etailersdigest.com
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[2] End of a retail era
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On Wednesday, August 2, 2006 an end of a retail
era occurred in Philadelphia. Wanamaker's
department store became another Macy's.
Wanamaker's was the first department store in
Philadelphia and one of the first, if not the
first, department store in the United States. It
was renowned for its honest reputation and for
innovating many retailing firsts in America. At
its zenith in the early 20th Century, there were
16 Wanamaker's stores, but year's of decline
caught up with them and in 1995 the chain was
absorbed into Hecht's (but kept the name.
History. John Wanamaker, the founder of the
store that bears his name, was unable to join the
U.S. Army during the American Civil War due to a
persistent cough. Having been rejected from war
duty, he instead ventured into business with his
brother-in-law, Nathan Brown. In 1861, they
founded a men's clothing store in Philadelphia
called Oak Hall. Wanamaker carried on the
business alone after Brown's death in 1868. In
1876, Wanamaker purchased the abandoned
Pennsylvania Railroad station for use as a new,
larger retail location. The concept was to
renovate the terminal into a "Grand Depot"
similar to London's Royal Exchange or Paris' Les
Halles - two central markets, and forerunners of
the modern department store, that were well-known in Europe at that time.
The Wanamaker's Grand Depot opened in time to
service the public visiting Philadelphia for the
American Centennial Exposition of 1876. In 1877
Wanamaker's was refurbished and expanded to
include not only men's clothing, but women's
clothing and dry goods as well. This was
Philadelphia's - and perhaps America's - first
modern day department store. A circular counter
was placed at the center of the building, and
concentric circles radiated around it with 129 counters of goods.
Enlightened retailing. Wanamaker first thought
of how he would run a store differently as a
youth, when a merchant refused his request to
exchange a purchase. A practicing Christian, he
chose not to advertise on Sundays. His faith also
informed other business decisions, many of which
were innovative and before their time. Before he
opened his Grand Depot for retail business, he
let evangelist Dwight L. Moody use its facilities
as a meeting place, while Wanamaker provided for
300 ushers among his store personnel. His retail
advertisements - the first to be copyrighted
beginning in 1874 - were factual, and promises
made in them were kept. Word of this increased
Wanamaker's business, and John Wanamaker never
lost the public's trust while he pioneered truth in American advertising.
Wanamaker guaranteed the quality of his
merchandise in print, allowed his customers to
return purchases for a cash refund, and offered
the first restaurant to be located inside a
department store. Wanamaker's also innovated the
price tag, because John Wanamaker believed if
everyone was equal before God, then everyone
should be equal before price. All of these
concepts were seen as innovations in American retailing at the time.
His employees were to be treated respectfully by
management (including not being scolded in
public), and John Wanamaker & Company offered its
employees access to the Wanamaker's Commercial
Institute, as well as free medical care,
recreational facilities, profit sharing plans and
pensions - long before these type of benefits
were considered standard in corporate employment.
Innovation and "firsts" marked Wanamaker's. The
store was the first department store with
electrical illumination in (1878), first store
with a telephone in (1879), first store to
install pneumatic tubes to transport cash and
documents in (1880),and was also the first store
with an elevator in (1884). In 1910, Wanamaker
closed his famous Grand Depot, and moved into a
brand-new, purpose-built structure in Center
City, Philadelphia, which opened in 1911. The
palatial store featured the former St. Louis
World's Fair pipe organ (one of the world's
largest at that time), installed it in the Grand
Court with a dedication attended by President
William Howard Taft on December 30, 1911. This
organ still stands in place in the store today
and is registered as the first organ designated a
National Historic Landmark (1980). The Wanamaker
Organ is the largest operational pipe organ in
the world. News of the Titanic's sinking was
transmitted to Wanamaker's wireless station in
New York City, and given to anxious crowds
waiting outside - yet another first for an
American retail store. Public Christmas Caroling
in the store's Grand Court began in 1918.
Other innovations included employing buyers to
travel overseas to Europe each year for the
latest fashions, the first White sale in (1878)
and other themed sales such as the February
"Opportunity Sales" to keep prices as low as
possible while keeping volume high. The store
also broadcast its organ concerts on the
Wanamaker-owned radio station WOO-AM beginning in 1922.
The famous advertising axiom "half the money I
spend on advertising is wasted; the trouble is I
don't know which half" is credited to John Wanamaker.
The slow decline. After John Wanamaker's death
in 1922 the business carried on under Wanamaker
family ownership and continued to thrive for a
time. Over time, Wanamaker's lost business to
other retail chains, including Bloomingdale's and
Macy's in the Philadelphia market. The Wanamaker
Family Trust finally sold John Wanamaker and
Company, with its now bedraggled and shabby
stores to Los Angeles-based Carter Hawley Hale
Stores in 1978. Carter Hawley Hale poured $80
million (USD) into renovating the stores, but to
no avail — customers had gone elsewhere in the
intervening decades, and did not come back.
Finally, in 1986 the now 15-store chain was sold
to Woodward & Lothrop, owned by Detroit real
estate businessman A. Alfred Taubman. Taubman
reorganized the business with a shortened
corporate name (Wanamakers' Inc.), and poured
millions more into store renovations and public
relations campaigns. This too was no help, as
Taubman's retail interests were heavily in debt
and the stores' combined sales were a
disappointment. Woodward & Lothrop collapsed in
bankruptcy in the early 1990's, and the Wanamaker
stores were sold to May Department Stores company
on June 21, 1995. Wanamaker's Inc. was formally
dissolved, the corporate offices on the upper
floors of the Center City flagship store were
closed, and operations were consolidated with
May's Hecht's Division in Arlington, Virgina. The
Wanamaker's name was removed from all stores and
replaced with Hecht's. In 1996, May acquired
Wanamaker's historic rival Strawbridge & Clothier
and re-branded all Philadelphia-area Hecht's
locations with the Strawbridge's name, excluding
the Center City location, as the Strawbridge's
flagship store was located only a few blocks down
the street. The Center City Hecht's was closed
for a lengthy renovation and refurbishment that
saw the retail space reduced in size by several
floors, and the former Wanamaker's corporate
offices on the upper floors subdivided into
commercial office space. In 1997, New York-based
Lord & Taylor, another division of May Department
Stores, opened in the former Wanamaker's flagship
in Center City, Philadelphia. In Summer 2006, the
store will be closed for a few months for yet
another renovation, and will reopen as a Macy's,
operated by Macy's East Division of Federated
Department Stores Inc., which acquired May in
late 2005. The rebranding to Macy's is due to
Federated's decision to downsize the Lord &
Taylor chain for eventual sale. Federated will
replace all of May's former regional brands with
Macy's and Bloomingdale's, and the announced
closure of the Strawbridge's flagship in Center
City meant that the Lord & Taylor was the only
suitable location left in the area for a Macy's.
Wanamaker history at...
http://en.wikipedia.org/wiki/Wanamaker's
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[3] Chico's Falls Out of Fashion With Investors
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Women's apparel retailer Chico's FAS Inc. has a
problem: It has been so successful that there may
not be many new customers left to attract.
After becoming one of the stock market's top
performers over the past decade, Chico's shares
have fallen more than 50% since reaching a high
Feb. 22 of $49.40. The slide began in early
March, when the company reported sales and
earnings below analysts' expectations.
The reversal in Chico's fortune revolves around
the question of whether the Fort Myers, Fla.,
company can sustain its success as the expansion
of its original brand -- which sells comfortable,
colorful styles aimed at baby-boomer women in
about 500 stores -- slows while the company
develops three other brands it has created or acquired in the past three years.
Chico's has high hopes for those newer brands:
White House/Black Market, with about 200 stores
that sell only black-and-white apparel and have a
younger customer base; Soma, an intimate-apparel
brand with 20 stores; and Fitigues, a small,
upscale active-wear chain of 10 stores. This
year, the company plans to open an additional 63
to 67 White House/Black Market stores, 45 to 47
Chico's stores and 33 to 36 Soma stores.
But they have a tough act to follow. Chico's has
long been one of the most admired retail
companies in the U.S. Its operating-income margin
consistently exceeds 20%, compared with 3.5% for
the apparel-retail industry, according to
financial-information service ProfitCents. Its
average sales per square foot of more than $1,000
for the Chico's brand are among the highest in
specialty retail, its embellished styles have
proved difficult for competitors to mimic and it
has one of the most successful loyalty programs
in retail. Its unique sizing system, which has a
scale of 0 to 3 instead of a standard 4 to 16,
has been a big draw for aging customers. Some
analysts cite these strengths in arguing the stock is undervalued.
But as long as Chico's remains the dominant
brand, investors will base their view of the
company on that brand's performance. Lately the
news hasn't been good. After the sales and
earnings disappointment in March, Chico's in late
May scaled back its earnings estimate for the year.
This month, it said sales at stores open at least
a year rose 5.1% in June -- less than the 5.8%
analysts were expecting and well below the
double-digit gains of recent years. Chico's
expects same-store sales, a closely watched
measure, to increase in the mid-single digits for the rest of the year.
The retailer attributes these problems to a few
discrete problems. It says it is fixing bad color
choices and improving its selection of
cold-weather clothing for its northern U.S.
stores. It is expanding some Chico's and White
House/Black Market stores, with more space for
cash registers and dressing rooms to shorten
lines. In April, it hired a new chief marketing
officer from teen retailer American Eagle Outfitters Inc.
For the first time in years, the number of new
sign-ups to Chico's loyalty program is slowing,
spelling trouble for future sales growth, as most
of its sales come from these regular shoppers.
Neely Tamminga, a retail analyst with Piper
Jaffray, points out that 23% of households with
an income of $75,000 or more -- Chico's target
demographic -- include a loyal Chico's shopper.
That is up from one in 10 three years ago. Ms.
Tamminga has a "market perform" rating, the
equivalent of a "hold," on the stock; she doesn't
own Chico's shares, but Piper Jaffray makes a market in its securities.
"Clearly this speaks to Chico's past success, but
we believe that the concept may be hitting a
saturation point," Ms. Tamminga wrote in a July 5
note to investors. She said retailers at a
similar stage of growth to Chico's typically
begin to command lower price/earnings ratios.
Chico's trades at a per-share multiple of about
20, while its specialty-retail competitors range
from 13 for the established Talbots Inc. to about
40 for relative newcomer Coldwater Creek Inc.
Details at...
http://online.wsj.com/article/SB115404324315219787.html
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[4] Fastest-growing retailers tend to be smaller ones
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The biggest retailers aren't necessarily the
fastest growing, according to a study to be
released Tuesday by Stores, the monthly magazine
of the National Retail Federation.
In fact, fewer than half of the firms in its
first-ever list of 100 retailers with the largest
revenue growth in 2005 vs. 2004 are among the nation's largest retailers.
For instance, Wal-Mart is the nation's largest
retailer, with $312.4 billion in 2005 revenue.
But it is 78th in terms of revenue growth (up 9.5% in 2005).
Mergers and acquisitions accounted for revenue
growth for three of the top five companies,
including the fastest-growing retailer, GameStop,
which sells computer software and games. Among
other reasons for growth: adding stores,
improving catalog sales, increasing online sales.
Alliance Data of Dallas studied all retailers
with more than $100 million in revenue. It found
that revenue jumped an average:
24.0% for department stores
20.9% for tweens and teens stores
19.7% for sporting goods
16.8% for women's apparel
16.6% for footwear
13.4% for housewares
Top 10 retailers for revenue growth
1. GameStop 67.8%
2. Overstock.com 62.5%
3. The Children's Place 44.0%
4. Federated Dept. Stores 42.0%
5. Abercrombie & Fitch 37.8%
6. Bebe 36.8%
7. Coldwater Creek 33.5%
8. Dress Barn 32.5%
9. Urban Outfitters 32.0%
10. Chico's 31.6%
Top 10 for earnings growth
1. Casual Male 606.0%
2. Rite Aid 320.9%
3. Gymboree 289.7%
4. The Pantry 267.6%
5. New York & Co. 235.4%
6. Circuit City 126.2%
7. J.C. Penney 107.6%
8. Federated Dept. Stores 104.1%
9. Longs Drug Stores 102.1%
10. Bebe 96.4%
Details at:
http://www.usatoday.com/money/industries/retail/2006-07-31-retail-lists-usat_x.htm
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