Recent Blog Posts

As financial reporting comes in over the next few weeks from US -based retailers, we will continue to learn of remediation in the form of layoffs and store closures.  Impact on Canada will be twofold:

1.   Senior management attention on Canada will be diverted, even as sales here in many cases are a lone bright spot.  More significantly, layoffs at US HQ’s will slowdown or derail approvals of Canadian expansion efforts. This will buy time for domestic retail to work on business improvement and competitive positioning in advance of an upturn.

2.    Store closures will impact Canadian malls and other retail nodes.  Furthermore, a number of deals in the works for retail space will be postponsed or shelved altogether.  This will impact adjacent retail but might also be a catalyst to a downward cycle in lease rates.

A sample of recent reports include:

-    Terrible results for luxury retail. Tiffany's US operations were down a whopping 35% this November-December vs. 2007 (specialty jewelry chains in this period were down 16%).  Coach comparative-store sales were down 13% in the 4th quarter ending December 27. It is now slowing expansion and will offer more moderately priced items.  However, 6 of the 20 new North American stores will be in Canada (original plans were for 40 stores).

-    Although Canadian sales were solid, the bankrupcy of Circuit City has triggered The Souce owner InterTAN to follow suit. Possible buyers include The Brick Income Fund, BestBuy, and a management group.

-    Best Buy December sales declined 6.5%

-    Eddie Bauer 4th quarter same-store sales declined 10.5%

-    Sears US was down 13.8% same-store sales in December

-    The Gap's North American comparable stores sales declined 14% in December

-     Even the chains many felt could succeed in tough times underperformed: WalMart missed estimates at 1.2% growth while Costco declined 2% on same-store sales in the US in December. Both suggested low single digit growth in Canada.

-     A bright spot? Aeropostale seems to be siphoning teen spending (remember, they live at home and frugal is not yet cool) from traditional trendy competitors like Abercrombie.  Aeropostale was unbelievably up 12% in same-store sales in December, while Abercrombie continued its double digit declines of late.  This cost the latter 50 HQ jobs and American Eagle, fairing no better, has fired their Chief Marketing Officer.

-     Reuters reports: "In recent weeks, retailers including Saks Inc, Children's Place Retail Stores and Charming Shoppes Inc have announced job cuts. So have apparel and shoe makers such as Burberry Group Plc, Phillips-Van Heusen Corp, Kenneth Cole Productions Inc and Brown Shoe Company Inc." and today The Home Depot annouced job cuts of 7,000 people and closures of stores Stateside.

-     eBay is down 6%.

I will cover Canadian sales next.

Brenda is one of the top minds today on labour market trends in Canadian retailing.  This is her annual assessment of the year to come:

http://communities.canada.com/working/blogs/retail/archive/2009/01/01/my...

I have covered the ICSC Whistler Conference as a guest columnist many times in the past for Business In Vancouver.  It is one of the best for deal-making and networking.  I find it a terrific one-stop spot to gather insight around the growth prospects for retail in Canada and the US. 

Many CEO's are regular attendees, but the focus is on the leasing and development side of retail.  The panels and speakers are but a small part of the story - the focus is on the connections, the networking parties and the breakout meetings. 

I am looking forward to this year's event in particular.  The November edition was held in Toronto and the financial chaos was still too fresh to get any real read on the situation then.  Some deals were getting completed, while others died on the vine as credit access dried up.  The concensus was that nothing new would be started until after the Holiday season, once deal-makers could assess the economic lay of the land.

I will report in from Whistler early next week.

On-site registration is available.  Click here for more information:

http://www.icsc.org/srch/mt/descs/2009BC/2009BC.pdf

While US retailers experienced what I expect was a horrendous Holiday season, Canadian shoppers delivered some mixed results north of 49.

Toronto's Eaton Centre was very busy the day after Boxing Day, but most with teens and young adults unaware of RSPs and flush with cash.  Hollister and Abercrombie were lined up, and Aeropostale seemed in good shape (the latter was a rare bright light Stateside too).  On the other hand, stores catering to an older demographic (The Gap and Reitmans for example) were barren.  

Vancouver was the victim of more bad weather, with stores clearing out ahead of another storm by about 1PM on Boxing Day.  Boysco owner David Goldman said they muddled through OK with a comp-store gain of 2% over last year - good news, but much shy of their solid growth the past few years.

News from Calgary was that shoppers were still shopping, but being a little more choosy, as opposed to the normal wanton tossing of cash.  Winnipeg seems to be its middle of the country self, not booming, but avoiding down cycles.  In particular, reports are of a strong last couple of days prior to Christmas in that City.

Nationally, Best Buy went out of its way to cite $1million sales in certain stores.  Which tells me overall results were off target.  On the other hand, Mountain Equipment Co-op has had its best Holiday season ever. Perhaps its a flight by outdoor product gift-givers to seek value; Linda Letts, Warehouse One CMO, shares my view that perhaps experiences (adventure travel) will soon take a back seat to tangibles (a tent).

As Boxing Week rolled to a close, the discounts deepened further...

The trick when assessing Boxing Day shopping patterns is to acknowledge in advance that it will be the biggest shopping day of the year.  And that a large enough number of crazies will line up in the dark at Future Shop to provide great TV fodder.

The questions are: was the frenzy sustained all day? How deep were the discounts? How many bags did people have when leaving the malls?  Its not whether it was busy, it is about the magnitude of the selling.

Toronto saw huge traffic through most of the day, surprising me somewhat given the great deals to be had before Boxing Day.  But perhaps some extra shopping was missed with the inclement weather just before Christmas.  I am still determining how much was being spent and range of stores shopped (vs. one trip, one item).

Vancouver not only had the terrible weather last weekend, but Boxing Day saw another front coming through about mid-day.  That could only dampen the prospects of a robust day of selling in that City.

Stay tuned for more...

Leading up to Christmas, I was in the traditional hotbed of Holiday Retailing - New York City.  I was curious as to the mood this year, having experienced the City in some frantic shopping times.

By all accounts, it was bleak.  Many locals are fearful of cancelled bonuses if not outright job loss.  No matter what retailers were doing to discount, consumers seemed little inclined to shop.

Taken December 23rd, the pictures of Macy's to the right suggest great crowds and enthusiastic sales.  However, this department store is one of the prime Holiday shopping destinations in North America, a traditional favourite of locals and tourists alike.  Even with its value-focus appeal, staff told me this traffic was barely more than half of what they would normally expect. 

Higher-end Bloomingdales had much less traffic and featured many 50% discount racks.  And business was significantly down at the fabulous Holiday Market at Union Square, with unique vendors from all over the world.  

New York seems a tale of two Cities playing out across the US: big value-based retailers generating mediocre traffic but at deep discounting (Wal-mart and Costco excepted); independents and others experiencing even weaker sales all around.  Data emerging for the last few weeks suggests US retail sales were down a staggering 4%-8% from last year's lacklustre season.

Underscoring the significance, US-retailers were talking up the idea of having Boxing Day sales - a day not previously part of the American culture.

I promised myself I would not use this site for rants. Too easy; too pedestrian.

As I drain a Sam Adams at Gate A of La Guardia, after a day of waiting for my soon to depart replacement for my earlier delayed, delayed, oh-cancelled flight out of Newark and then trains and automobiles here, two things were brought home for me today:

1. Some fantastic frontline people work service and retail on Christmas Eve, and

2. Air Canada (and other airlines) are still woefully inept at basic service systems.

I became a font of passenger information in Newark after seeking some basics, such as, where is the plane? and, what happens next? and what are our options?  Many complained of no updates on txt to cell and especially not on the Air Canada website.  How can that be possible?  Why offer those services, if not for times like these?  Tried calling the call centre as recommended on the AC webpage.  Hung up after 45 minutes of the same porn soundtrack loop.  Why would extra people not be staffed when bad weather is forecast?  Sorry, silly question.

UPDATE - you have to laugh, especially when I read of passengers held hostage on the tarmack at Vancouver for 11 hours with no supplies (what does constitute a hostage taking by the way?).  But 15 minutes after getting on as a standby status on a flight leaving at the time the late flight was supposed to leave (the late one leaving later now, if you follow), an announcement was made to say that my new flight has been cancelled (again, not showing on website as cancelled, or even late, an hour after the announcement).

Eyeing the randomly formed line of about 40 people and counting, I asked the agent if this means I am back to square one, after I originally had a firm seat lined up on the late flight.  She said 'yep, what can you do?'.  I felt inclined to share with her that I would be in the last flight and there was no way in hell I was lining up to find out I cannot get a seat.  She saw fit to reissue me on the spot.  

Where is the logic?  Some people are here for their first crack at this today, others are in worse logistics than me, some waiting since yesterday.  The airline has nothing, and I mean nothing to do with people - front lines are hung out to dry and the passengers come last.  At least Westjet was offering passengers double their flight purchase if they gave up a seat and stayed overnight.

Breaking news... some people rerouted to Montreal all just scrambled in a flurry as a fellow passenger (strange, not Air Canada) informed them the Montreal flight gate is about to close!

Air Canada originally claimed that any forced stay-overs now will not receive compensation, as this is covered by the fine print of being "weather-related". I am aware there has been bad weather in the North East, but I have to wonder why United, Delta, Porter and others having been getting out to Toronto? They must be facing different 'weather'.  Subsequently, I learned that if pilots "walk out" (presumably for safety reasons), passengers of such flights will received hotel and meal vouchers.  About 60 people, including the couple pictured, received these, only to have no direction at ground level to the hotel or find the promised shuttles.  Air Canada at check-in claimed to know nothing of this plan, directing people back to the gate.  Said Rebecca, "there are many more in pre-security who cannot get back down here (to the gate staff) since they have liquids in their retrieved luggage... we all just want to get some sleep."

At a time when the airline industry is about to face its toughest business climate since perhaps 9-11, or worse, they are simply reinforcing the reasons why they do not deserve any business.  Problems will always occur, and weather will create challenges, but why is there never a communications plan or a sense of care for the people being affected? Hey kids - there is bad weather in the winter!  Why does it seem like they are improvising an totally novel situation?  Because Air Canada appears run by technocrats who see the business as managing numbers, loads and logistics, and not about human beings.  It does not have to be an 'either... or..." proposition.

Signing off the rant for now...Merry Christmas.  As a retail pundit, in a sick way, I am enjoying myself.

There have been a couple of themes for reporting of Holiday retail sales this year that warrant some clarification. nbsp;At the start of the season, one camp was reporting survey results suggesting shoppers would spend as much or even more than last year.  More recently there has been speculation of consumer retreat and empty malls. 

Neither are quite right.  The surveys occur every year and I generally dismiss them.  Often sponsored by credit card companies or industry associations, there is a media drive behind these that seem to be more concerned with generating shopping momentum than research rigour. There is no logical reason to think people would spend more this year and ... the aren't.

However, traffic is normal (notwithstanding Ottawa's latest snowstorm coupled with a transit strike, and other exceptions).  The critical point is that enough key retailers in certain categories got panicky about holding too much stock after Boxing Week.  Shoppers saw more deep discounts, more often, and much earlier than usual.  

The result is a trained shopper who will gladly wait for great deals while filling a pretty generous Holiday list - and saving money.  Advertised deals of 40%, 50% and even 60% on everything store set the tone in November.  And now we are less likely to see shoppers wait for Boxing Day when Boxing Day type prices are here now.  This in turn should dampen the desire for gift cards, not because there are fears of bankruptcy, but because there is no need to give a store of value that can be levered deeply once the sales start.  The big sales have started.

Consumer confidence will hold up for a while, but there will be a taking stock in the New Year.  A 2009 prognosis for shoppers and retailers will be dealt with in a subsequent blog.

Stats Can and media reported that September's retail sales gains exceeded expectations.  This surprises me.  They were exactly where they should have been.

First, the Lehman collapse did not occur til the second half of the month.  Furthermore, Gasoline prices were declining and the comparative August 2008 sales were low (a harbinger perhaps).  September was exactly where it should have been.

Stats Can reports month over month changes, seasonally adjusted per 'normal' historical patterns.  The retailers themselves benchmark to raw data comparisons to the same period last year. Even here, the comparative September 2007 reported unusually low sales, perhaps masking the true nature of retail sales this summer - mediocre.

Of course this is a moot point, as the recent past will have little meaning in the crazy times ahead.  We just need to push for valid interpretations of the tea leaves...

The rumoured purchase of the Hudson Bay Company by NRDC Equity Partners became reality today. 

The sale of HBC to another American may not be noteworthy to those who already lamented its passing from Canadian hands when Jerry Zucker acquired it in 2006. However, there are several aspects of this latest move that are noteworthy.

First, NRDC already owns the Lord & Taylor department store chain. NRDC’s owner, Richard Baker, is credited with a significant turnaround in that chain’s fortunes and turnaround skill is something that could benefit HBC.

More importantly, the Lord & Taylor connection is a terrific synergy for The Bay in particular, and the running of the large retail portfolio in general. In fact, the announcement points to 10-15 Lord & Taylor stores coming to Canada with some or all as converted Bay stores. These will likely be the more urbanite, downtown stores. This in itself will be a more tangible change to this Canadian icon than anything seen under Zucker’s reign.

Lord & Taylor, while still battling to full recovery in the U.S. would occupy a unique niche here, in an upscale position closer to Holt Renfrew. The Bay was never able to make that move, with too many years of “Bay Day” baggage and drilled-home customer perceptions. Depending on timing, this will make for interesting viewing, balancing Holt’s staggering success with the looming retrenching of consumers in a flat economy.

Jerry Zucker and Robert Johnston (CEO) had stabilized the organization. As a minority shareholder, Baker would be privy to the challenges and strategy being implemented. Baker’s successes elsewhere seemed more activist, or hand’s on than Zucker’s patient course of improvement. This suggests other changes across the broader network of Bay stores, as well as Home Outfitters and Zellers may be in store.

While I remain convinced the traditional department store concept is a relic of a past shopping era, this will be fun to watch and might be the last real chance the company has in its current form.

Related Canwest News article: www.canada.com/vancouversun/news/business/story.html