Thursday, February 25, 2016

MORE SIGN OF RETAILER STRUGGLES BECAUSE OF NOT CREATING AN OMNICHANNEL SUPPLY CHAIN?

Weak Holidays Force Retailers to Shrink, Rethink Web

Declining shopper traffic prompts closings of low-performing locations



Sears CEO Eddie Lampert said Thursday that 2015 was the year when the impact from e-commerce and other factors reshaping the industry “spread more broadly to retailers that had previously proven to be relatively immune to such shifts.” ENLARGE
Sears CEO Eddie Lampert said Thursday that 2015 was the year when the impact from e-commerce and other factors reshaping the industry “spread more broadly to retailers that had previously proven to be relatively immune to such shifts.” Photo: Elise Amendola/Associated Press
Dismal holiday results from retailers are prompting executives across the industry to shrink or adapt their stores, and rethink the cost of growing their online operations.
On Thursday, Kohl’s Corp. KSS 2.66 % said it would close 18 stores after reporting weak sales, while Sears Holdings Corp. SHLD 3.24 % is looking to sell $300 million in assets after reporting yet another loss. Best Buy Co. BBY 2.45 % warned of weak demand for electronics, and shares of Restoration Hardware Inc. RH -25.87 % plunged as much as 29% Thursday after it blamed poor sales on a “pullback by the high-end consumer.”
Declining shopper traffic is prompting companies such as Macy’s Inc. M 1.21 % and Wal-Mart Stores Inc. WMT 1.37 % to close low-performing locations this year. The shift to online shopping also is vexing chains: Nordstrom Inc. BBY 2.45 % said it would curtail technology spending after profits fell 29% last quarter, in part because of costs related to Web sales.
In his annual letter to shareholders, Sears CEO Edward Lampert noted Thursday that 2015 was the year when the impact from e-commerce and other factors reshaping the industry “spread more broadly to retailers that had previously proven to be relatively immune to such shifts,” including Wal-Mart, Nordstrom and Macy’s.
Sears has been trying for years to adapt to the changes with limited success. Its loss widened to $580 million for the period ended Jan. 30, compared with a loss of $159 million a year ago. The loss in the recent period included a $180 million write-down of the Sears trade name.
ENLARGE
Revenue fell nearly 10% to $7.3 billion. Sales excluding newly opened or closed stores declined 7.1%.
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Sears said last month that it planned to close 50 stores, but on Thursday it hinted that it likely would reduce its footprint even further. The company noted that more than half the leases on 1,253 stores expire in less than five years.
Moreover, Sears has the right to terminate space with respect to 266 stores that it contributed to Seritage Growth Properties, SRG -0.26 % a real-estate investment trust it created last year.
Kohl’s, in addition to closing 18 stores, plans to open seven smaller locations. The smaller stores will average 35,000 square feet, compared with about 88,000 square feet for its full-line locations.
The retailer said the fast pace of digital sales, which increased 30% in the fourth quarter and exceeded its expectations, prompted it to take a harder look at its store base. Categories that have a high level of digital demand will have less space in the smaller stores, though Kohl’s didn’t elaborate.
Kohl’s said it would close 18 stores after reporting weak sales. Total sales fell 0.8% to $6.39 billion. ENLARGE
Kohl’s said it would close 18 stores after reporting weak sales. Total sales fell 0.8% to $6.39 billion. Photo: Jim Damaske/Tampa Bay Times/Zuma Press
Kohl’s profit plunged 20% to $296 million for the three months ended Jan. 30. Total sales for the period fell 0.8% to $6.39 billion, while sales excluding newly opened or closed stores rose 0.4%.
The company said it expects to fall short of a previously set goal of reaching $21 billion in sales by 2017. It ended its most recent financial year with sales of $19.2 billion.
In addition to a shift to online shopping, retailers are grappling with other issues, including rising wages and unusually warm weather that left them awash in inventory.
Kohl’s CEO Kevin Mansell said the company was experiencing “wage pressure” in its stores, but hoped to offset that by reducing marketing costs and inventory. The company plans to reduce inventory by 10% per store, and is looking to use more personalized advertising to reduce its overall marketing costs.
On Thursday, Best Buy warned weak electronics sales during the holidays are expected to continue in the first half of 2016. CEO Hubert Joly said the smartphone market, which has buoyed its sales, is approaching a saturation point.
In the quarter that ended Jan. 30, domestic sales excluding newly opened or closed stores slipped 1.7% after rising 2.8% a year earlier. The company said weaker sales of mobile phones and tablets dragged down revenue. Earnings fell 7.7% to $479 million.
Furnishings retailer Restoration Hardware warned Wednesday that profit would fall 20% in the quarter ended Jan. 30. The company blamed shipping delays and weak demand, as slumping energy prices and stock market swings sapped demand for its upscale goods.
Gap Inc. BBY 2.45 % ended the fourth quarter with 73 fewer Gap stores in North America, part of a continuing strategy to prune underperforming locations. Profit fell 33% to $214 million in the three months that ended Jan. 30, including $25 million in restructuring costs. Total sales slid nearly 7% to $4.39 billion. Sales excluding newly opened or closed stores fell 7%.

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