No Turn On Red

Retail sales in July continued to be a mixture of disappointment and mediocrity.

Retailers catering to teens saw a mixed bag of results as teens decided to spend more money at Aeropostale (same store sales up 6%) and Buckle (same store sales up 2.8%), but both retailers missed analysts projections. American Eagle saw an 11% drop in same store sales, on top of the 7% drop they saw this time last year. Abercrombie & Fitch continued their terminal velocity fall with a 28% drop in same store sales. No good.

Macy’s saw a 10.7% drop in same store sales, JCPenney reported a 12.3% drop in same store sales, while Kohl’s managed to eek out a nearly flat month (0.4% increase in same store sales). I guess shoppers are really going nuts over that new line by Avirl Lavigne.

Besides the general state of the economy and unemployment through the course of the year, some analysts suggest that the, recently enacted and more recently refueled, Cash for Clunkers program is diverting money from the retail industry:

“One of the unintended negative side effects of the cash for clunkers program was that it’s going to remove money that probably would have been spent in retail stores and restaurants and is now going to go toward a car payment,” said Purdue Consumer Sciences Professor Dr. Richard Feinberg.

And not just “spare change.”

Feinberg estimates the nation’s retailers could lose up to $300 million a month as consumers spend their disposable income on loans instead of lunch. By the end of what’s expected to be another tough holiday shopping season, losses could add up to between $1.5 billion and $2.5 billion, Feinberg says.

More information on retail sales from the New York Times and Los Angeles Times.

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Another reduction in the retail workforce: this time it is Macy’s announcing a 4% reduction in their workforce, slashing 7,000 jobs. 5,100 of those are at the store level.

“Reducing our workforce is an unfortunate outcome of the current economic environment, and I am frustrated that so many of our people will be unable to move forward with us as we proceed into a very exciting future for Macy’s and Bloomingdale’s,” Macy’s CEO Terry Lundgren said in a statement.

The retailer estimates the restructuring efforts will reduce previously planned expenses by about $400 million a year beginning in 2010.

This is the latest in a line of retail layoffs – last week Home Depot, Starbucks, Williams-Sonoma, and Target all announced layoffs. Best Buy has also announced that they will be cutting workforce in their corporate headquarters later this month.

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December wasn’t kind to Macy’s as they saw a 4.0% drop in same store sales and have now announced that they are closing 11 stores. Combining November and December, same store sales dropped 7.5% over last year for the retailer.

Close to 1,000 employees are affected by these store closings – unknown how many fo them will be able to transfer to positions in other stores.

From their press release, the closing stores are:

• Ernst & Young Plaza (Citicorp Plaza), Los Angeles, CA (135,000 square feet; 136 employees; opened in 1986)
• The Citadel, Colorado Springs, CO (195,000 square feet; 105 employees; opened in 1984)
• Westminster Mall, Westminster, CO (156,000 square feet; 110 employees; opened in 1986)
• Palm Beach Mall, West Palm Beach, FL (190,000 square feet; 71 employees; opened in 1979)
• Mauna Lani Bay Hotel, Island of Hawaii, HI (3,000 square feet; 3 employees; opened in 1983)
• Lafayette Square, Indianapolis, IN (160,000 square feet; 84 employees; opened in 1974)
• Brookdale Center, Brooklyn Center, MN (195,000 square feet; 72 employees; opened in 1966)
• Crestwood Mall, St. Louis, MO (166,000 square feet; 176 employees; opened in 1969)
• Natrona Heights Plaza, Natrona Heights, PA (73,000 square feet; 124 employees; opened in 1956)
• Century III Furniture and Clearance, West Mifflin, PA (83,000 square feet; 3 employees; opened in 2000)
• Bellevue Center, Nashville, TN (211,000 square feet; 76 employees; opened in 1990).

These store closings represent a troubling sign of things to come for the retail industry. I believe Macy’s is just the first in a line of retailers to announce downsizing over the next few weeks. Who’s next?

More coverage from the Consumerist, Reuters and BloggingStocks.

Photo above from Flickr user pkeleher. Use under Creative Commons License.

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A few of the stories I’m reading and wanted to share today:

John Zogby’s got a very insightful look into the political trends of retail consumers and dives behind the numbers to make sense of it all. He looks at presidential election polling numbers, the retailers the customers shop at, and how this relates to the retailers’ branding.

J.Crew’s website has had their share of mistakes and downtime lately. Church of the Customer is talking about the apology e-mail that the retailer sent out to their customers and what this means for the company.

Matt at A New Marketing presents a clean, easily digestable definition of what social media is.

.. and finally – Starbucks is offering a $2 discount on iced beverages in the afternoon when you buy a drink in the morning. I think this is a smart move that should drive repeat business throughout the day. Besides that, I’m selfish and now look forward to saving a little bit of money on my second trip to Starbucks every day.

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This morning, Dell announced new styles of their Inspiron series of laptops that will be available in a range of colors. Available in 8 colors (pink, yellow, white, red, black, blue and espresso), the laptops will start out at $749. While this isn’t a typical retail-related post, it is interesting because Dell chose to make this announcement with the backdrop of Macy’s Herald Square.

In addition to the new laptop colors, they’ve unveiled the ultra-thin XPS M1330 laptop and have extended the Inspiron line (traditionally a laptop line for Dell) into desktop PCs and monitors. The new Inspiron desktop line will feature “clean arctic white and silver design”.

One of the secrets to Apple’s success over recent years has been in providing consumers with well designed and exciting devices. Dell has lost market share, in the PC laptop field, to HP and they are trying to reclaim it by employing a tactic similar to what has been successful for Apple. By using Macy’s, as part of the unveiling, they are trying to reach out to a fashion-forward customer (who wants a pink laptop).

More information on the Inspiron notebooks is available on the Dell website.

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In one of the odder pairings of retail giants in recent memory, Dell computers has announced that they are going to be unveiling new consumer products tomorrow morning at Macy’s Herald Square location:

In a unique event at Macy’s Herald Square in New York, Dell executives will unveil several new and exciting products that deliver a hi-def entertainment experience, true mobility with broadband connectivity anywhere, and style and self expression.

Interesting combination of retailers. Speculation from CNBC is that this could be the announcement of a new line of image conscious laptops that has long been speculated by Engadget (see CNBC’s Margaret Brennan’s blog for more information and Engadget for photos of in-development Dell laptops).

I’m looking forward to see how Macy’s is playing in to this. Will they merely serve as the backdrop for the announcement or is there something more coming out that will surprise a lot of people?

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Some links for today:

First off, two stories from the Consumerist. In one, an Target employee alleges that security there “mostly follows black people”. Article contains a rebuttal on most of the points from another current Target employee. As usual with the Consumerist, great comments on that article with some more interesting information.

Also from the Consumerist, some leaked internal documents from AT&T, in regards to the retail end of the iPhone launch. As the biggest technology and consumer electronics launch of this year, this will have huge implications on retail. With so many people wanting to get it, I’m interested to see how other retailers (non AT&T/Apple) react to this and try to get people to buy their products on iPhone launch day.

Yesterday’s New York Post has an article, Macy’s Margins, on the behind the scenes concerns of Macy’s regional buying officiers and what that means to the consumer.

Finally, Zumiez’s Couch Tour was in Deptford, NJ (just outside of Philadelphia). Reports are that several teenagers were hurt at the concert. But what is amazing to me is that estimates put the crowd at 2,000 to 2,500 people. Great turnout for this event. I’d imagine Zumiez is happy with those kinds of figures. More coverage from the Gloucester County Times.

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In case you didn’t realize, today Federated Department Stores changed it’s name to Macy’s, Inc. The name change was first proposed earlier this year, with shareholders approving the change last week. In addition the name change, they also received a new, valuable stock symbol on the NYSE:

Federated first said in March it would change to the ‘M’ symbol from ‘FD,’ and also change its name to Macy’s Inc. Shareholders approved the move in May.

The NYSE does not disclose the exact process it uses to determine whether it will allow a company to have a single-letter ticker, but the assignation is prestigious.

“They’re desirable ticker symbols, valued for marketing reasons and investor relations reasons,” said NYSE spokesman Christiaan Brakman.

In March, NYSE Chief Executive John A. Thain said Macy’s was a good fit for ‘M’ because it is a “marquee name and a brand of great distinction.”

Others single-ticker companies on the New York Stock Exchange _ there are now 16 _ include AT&T Inc., with a ‘T’ ticker symbol, and Sprint Nextel Corp., with an ‘S.’

More from the Associated Press.

Obviously, not everyone is happy with the change. Fans of the Marshall Fields brand have long been blogging at fieldfanschicago.org to express their dismay over Macy’s ditching the Marshall Field’s name and converting all stores to the Macy’s brand.

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Federated Department Stores, the parent company of Macy’s and Bloomindales, has announced that they are investing $100 million into their online operations.

Of course, not all of it is going to fancy flash widgets and outsourced Indian php developers:

Most of the $100 million will be spent on a 600,000-square-foot distribution center in Goodyear, Ariz., that will be the main West Coast shipping point for Macys.com. Construction will begin this spring and take a year.

Some will be spent in San Francisco to support technical upgrades and infrastructure improvements. It is on top of $130 million being invested in such improvements in 2006-2007, including a 600,000-square-foot distribution center opening this month in Portland, Tenn.

Over a million square feet of distribution space should help Macys.com very nicely (see: Macy’s to invest $100M to build online store operation). They want to grow their online business to be a billion dollar slice of their overall sales.

I do. I’m expecting huge things from Macy’s online division this year. I think Federated has a chance to lead all retailers into the new social media revolution. Afterall, they did a test run of IconNicholson’s “Social Retailing” concept at Bloomingdale’s in NYC last month (see: Bloomie’s woos young shoppers with social retailing).

Bloomingdale’s may be known as a fashion destination, but that doesn’t mean it can’t reach out more to teens and young adults. So in a recent test at its flagship 59th Street Store in New York, it offered an interactive sales-floor mirror that let shoppers view themselves in outfits as well as comments—and images of alternate garments—sent to the mirror by their online friends.

If the shopper likes the looks of a dress suggested by a friend, she can touch the mirror to make the image of the dress appear life-size, then stand in front of the of it to virtually try it on.

Voila—social retailing. If web-based social networking can work wonders as a marketing and branding tool, online social retailing just might do the same for in-store retailing, says Tom Nicholson, CEO of IconNicholson, the company behind the “Magic Mirror.”

“We see this is a way of bringing the power of the web into stores to support customer sales,” he says.

Back in January, I got to see this concept first hand at the NRF Expo and let me say, I was floored. I think that IconNicholson has developed a very brilliant concept – a way to bridge the physical shopping experience with an online buddy list. It’s a costly project, but I think that a retailer is going to score a home run with it in 2007.

Macys could get their billion dollars in sales if they keep doing what they are doing. Invest in infrastructure, better order fulfillment, and stay on top of trends in technology.

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With risk, comes great reward. But in this case, a risky proposition by Macy’s has left them with a ton of unsellable merchandise.

Three Macy’s stores in Ohio were slated to open at 11:00PM last night, in order for fans of the Ohio State Buckeyes to come into the store to purchase merchandise proclaiming the Buckeyes the national champions of college football. The only problem is that the favored Ohio State lost to Florida 41-14 (see: Macy’s stuck with shirts after counting on Buckeyes win).

Even though the merchandise is unsellable, I think that this was a worthwhile risky venture by Macy’s. It has generated some press (unfortunately, for the failure of the promotion). I’m sure, in the scheme of things, that it did not require a huge investment by Macy’s, even though the inventory had to be ordered and paid for ahead of time, win or lose.

This risky proposition could have paid off well for the retailer. Although the impact on sales would have probably been minimal, this was a fantastic opportunity for the retailer to connect with the local community. Federated is being criticized for losing the local appeal of many of the former May doors and a targeted promotion like this is a step in the right direction.

I wonder if Macy’s was also advertising any national champions merchandise for sale at 11:00pm at it’s Gainesville location, just down the road from the University of Florida?

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