No Turn On Red

Members of the family that founded and, for many years, ran the Boscov department store chain have revealed that they have bid to buy back the stores current under bankruptcy protection:

Albert R. Boscov and his brother-in-law Edwin A. Lakin are among the group who put in an offer for Boscov’s Inc., in a bankruptcy auction that culminates next week with the selection of a winning bidder, Boscov said in a report published today.

The pair, who helped run the company for decades, received multimillion-dollar buyout packages when they retired in January 2006 and handed the controls to Lakin’s son, chief executive officer Ken Lakin.

Boscov’s, you may remember, filed for bankruptcy protection in August and immediately closed 10 of their 49 stores. The remaining 39 stores are still operating under bankruptcy protection while bids are accepted that will determine the future of the company.

The deadline for bids was October 15 and more information may be revealed next week as to who the new owner will be. The other top bidder is Versa Capital Management.

I’d like to see someone buy Boscov’s who will continue to operate it. It’s a respectable mid-size department store chain. While my local Boscov’s has already closed, I hope the other 39 can remain open as long as financially feasible.

With the economy as it stands today, I can’t really imagine someone buying the chain with the intention to shut it down and sell off the real estate. There’s not a huge market for mall anchor real estate right now. Other department store chains, like Kohl’s and JC Penney, have already announced reductions in their short-term growth plans. Who else would be moving in to these locations?

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Another mixed month for retail sales.  While some retailers rebounded and look to go into Back to School on a positive note, it was another dark month for some mall and teen retailers.

Wal-Mart beat expectations with a 5.8% increase in June (showing 6.1% increase at their US name-brand stores and a 4.6% increase at their Sam’s Club locations). Target ended up in positive territory with a 0.4% uptick in same store sales. Costco showed a 9% increase, Kohl’s beat estimates with a 2.3% increase, and even mall retailer Aeropostale showed gains with a 12% increase in June.

The month was not as kind to mall and teel retailers such as Gap (company down 7%), Abercrombie (down 3%), and American Eagle (down 11%).

June’s numbers have been posted to Retail Numbers, which allows you to chart and track the retail industry monthly same-store sales.

More coverage from Fox Business and the Associated Press.

Photo above from Flickr user James@mannequindisplay. com, used under Creative Commons.

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Just took a ride to the Freehold Mall, which is the closest Apple retail location. Long line outside the store, snaking it’s way down the center court and avoiding other stores. Probably 75 people in the line when I was there. A second line, with an additional 15-20 people, is located outside of the AT&T store, located just around the bend from the Apple store.

The Asbury Park Press has more on the crowd at the Freehold location. First person got in line at 4:00PM yesterday. Read more from Lines form as gadget fans get ready to scoop up iPhones.

The buzz around this product is building and I’m really interested to see one of thees myself. It’s hard, as a techie, to not get sucked in to the hype around this. From a retail perspective, it’s really incredible to see people who are willing to camp out and spend time to get the product. These are loyal customers, and sometimes, it doesn’t seem like too many retailers or brands have customers that loyal anymore.

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Let me say this first, I love Atlantic City. I do enjoy playing cards and sitting in front of an Elvis slot machine. Although my last few trips haven’t been very successful, I have enjoyed watching the development of The Pier at Caesars unfold.

The Pier at Caesars is a $200 million redevelopment project of the former Ocean One Mall on the beach in Atlantic City. Boasting a mix of high and mid level retailers (Coach, Gucci and Louis Vuitton meet Ann Taylor, Quiksilver, Gymboree and Victoria’s Secret), this mall has been eagerly anticipated by tourists and residents alike.

The mall officially opened on Tuesday, although it is only the first phase. About a dozen of the ninety stores are open, with none of the resturaunts open yet. Developers say that more stores will open throughout the Summer with everything open by Labor Day. Work is still being done on some of the more decorative pieces, including fountains and billboards.

A good overview is the mall and the opening is available from the Associated Press: Once Tacky Resort City Gets More Class. The Press of Atlantic City has another, localized article about the opening which says that opening day was not all that impressive to some shoppers.

The Pier at Caesars is the second major retail project the town has. 2005 saw the opening of The Walk, aka the Atlantic City Outlets. This $76 million retail development project is beautiful – a great mix of stores that seems to be doing extremely well. From Gap to Polo Ralph Lauren to coffee at Starbucks, I have enjoyed walking this outdoor mall. Last year, the Baltimore Sun had an excellent article about the retail development of Atlantic City, with a focus on The Walk.

With all of this retail development in a city that is increasingly focusing on non-casino offerings, Atlantic City has become a great place to visit for those who are interested in visual merchandising and creative retail solutions. I have already enjoyed trips to The Walk and I am very interested in going to see The Pier at Caesars. I believe shoppers and tourists will respond well to the mix of stores available in Atlantic City.

This isn’t the end of large scale, non-casino development in Atlantic City. I can’t wait to see what the next few years bring.

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Gap is relaunching all of their domestic stores on July 20 with a new store setup in an effort to win back customers and gain back some of it’s marketshare. According to CNNmoney, same-store sales have declined in 17 of the past 19 months at Gap, so obviously they are trying to mend that. The new layout will feature four “shops” within the store. CNNmoney describes:

The “denim shop” will sell jeans, denim skirts, trousers, vests and jackets. The “T-shirt” shop will feature all styles in one area of the store. The “clean shop” will feature more sophisticated urban upscale clothing such as cashmere sweaters, jackets, trousers while the “hoodies shop” will showcase a collection of fleece activewear clothing such as sweatshirts and casual cargo pants.

More from CNNmoney here.

The re-launch will also coincide with a new marketing and television campaign.

The Motley Fool also has an article about the recent developments with the Gap: Gap’s New Ideas.

As a visual merchandiser, I am most excited about seeing what Gap does with this new store layout. The current store layout is very neat and clean – wood floors, white walls, bright lights, and open space. This is a layout that allows the merchandise to really stand out, look sharp and almost sell itself.

But the fashion offerings from the Gap in the past few seasons haven’t stood out. The past few seasons have not been really impressed me or made me want to spend money at the Gap (I’m sure this is a common sentiment – judging by their downward trend in sales). The colors are very monotone. When you have a huge white statement surrounded by the wood and white walls, it makes the store look very sterile.

The Gap store in the Freehold Raceway Mall was recently remodeled. Looking back on my last visit there, I realize now that this was probably a test for the new store layout. I remember seeing the distinct shop concepts within the store, reminding me of their sister store, Old Navy, but making things more organized and logical to shop.

But more than anything, I noticed the colors, new fixtures, and exciting graphics. It is an extremely visually stimulating store – a much different feel from the previous layout. If this is in fact the new layout, I am very interested to see how this rolls out across the country.

Combine the new store layout with more timely deliveries of new merchandise (we shoppers are very fickle, aren’t we? We need everything today and new something new tomorrow) and this could be the push in the right direction that Gap needs right now.

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The May comp store numbers for the retail industry:

In the mall: Abercrombie up 3.0, Aeropostale down 1.1, American Eagle up 11.0, Ann Taylor up 12.0 , Hot Topic down 6.0, Limited Brands up 7.0, and Pacific Sunwear down 2.6. Gap as a company was down 6.0, however the break down between companies is interesting. Gap North America was down 5.0, Gap International is down 13.0, Old Navy was down 8.0, but Banana Republic is starting to show signs of a turnaround with a 3.0 positive comp.

In the department store sector: Dillard’s up 3.0, Federated up 9.2, JC Penny up 11.1, Kohl’s up 3.1, Nordstrom up 7.8, and Saks up 5.7.

In the battle of Target v. Wal-Mart and warehouse stores v. warehouse stores, Target was up 5.7 & Wal-Mart was up 2.0. Sam’s Club was up 4.0 while BJ’s Wholesale was up 4.2 and Costco was up 10.0.

Generally a pretty positive month across the board. Gap continues to struggle and Kohl’s is curiously one of the few companies with positive marks that didn’t beat investor estimates. Pacific Sunwear was down 2.6 after a fantastic April in which they posted a 14.0 positive comp.

Minyanville posts a good roundup of the May numbers, covering some retailers I didn’t cover here.

Interesting month and a good start to the Summer season in retail.

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After fantastic 2005, teen retailer American Eagle is off to a great start to 2006, continuing it’s upward trend, beating Wall Street estimates and putting up some solid numbers for Q1: net sales increase of 14%, comp sales up 9% and net profits up 16%.

CEO Jim O’Donnell attributes the success of the quarter to “successful merchandising and design, as well as the solid execution across our company.” Initiatives undertaken in 2005, such as the AE “All Access Pass” customer loyalty/reward program seem to be paying off in 2006 with AE President Susan McGalla saying that the “new enrollments are exceeding our expectations and the first two redemption periods were encouraging.”

As far as the merchandise itself, McGall goes on to say that for the Women’s end of the spectrum, “comps were best in graphic tees, tanks, shorts, capris, jeans, flip-flops and intimates, while women’s skirts, wovens and accessories were below our expectations.” Adding, “Men’s produced a positive low double digit comp with the strongest results in graphic tees, jeans, shorts, polos, flip-flops and boxers. Within men’s, we continued to see a planned downtrend in woven shirts.”

Accessories will be helped by the future launch of the AE sub-brand, aerie. aerie is the new intimates sub-brand from AE, with all stores having a full aerie store-in-a-store concept, launching in September. Results from the initial “bra test” in 100 stores have been encouraging, with a lot of positive feedback regarding merchandise assortment and trends in this area. McGalla says, “the number one bra that we thought was going to be number one wasn’t number one.”

As a male in his mid-twenties, I do not know much about an intimates department geared towards girls age 15-25. But I do know that AE seems to be swinging for the fences lately and I have no doubt that this launch will prove successful, turning into a gold mine for AE.

More about the aerie brand from this February article in WWD: American Eagle’s Strategy for ‘aerie’ intimates.

The other concept that they are excited about is the Martin + Osa store concept, debuting in four cities this Fall. CEO O’Donell describes it as “a unique, specialty lifestyle brand, targeting 25-40 year olds.” With merchandise that is geared towards an older demographic in style, design and price, I think that this store will wind up doing extremely well for AE. You have an entire generation of shoppers who are growing up and outgrowing AE, now get them to stick with you through the years. At the same time that AE is building/developing a lifestyle brand, they are also branding these customers for life. Smart move and I am excited to see this shop concept.

More information on the Martin + Osa concept from WWD, “Martin + Osa Mall Bound: Signs First Four Leases“.

The last area that AE repeatedly touched on is the improvement in sales in remodel stores. Remodel stores are gaining square footage through re-design and expansion, in some cases they are relocating within the same mall. In this area, AE did this remodel last year and the payoff is huge. The new store layout is larger, spacious, inviting, and fun to shop – it is a complete turnaround from the cramp quarters they once occupied.

To this regard, AE says that the average store profitability jumps 70% in the first year after remodel – 70% ! This is fantastic news for investors, as AE looks to remodel 68 stores this year alone. Retail Design Diva had a fantastic article on this a few months ago: You Know Improved Store Design Helps Increase Sales, But Would You Believe 46%? As the trend over the past few years was to reduce visual merchandising and the importance of store design, it is nice to see a company spend so aggressively in this area and be so vocal about their success. AE has even upped their 2006 capital improvement estimates from $175m to over $215m.

It is a good time to be American Eagle. They are poised for a very good year and will be a mall retailer to look out for going through the rest of 2006. Look for them to lead the way through the mall with their commitments to good design, value and aggressively seeking out opportunities to develop itself as a lifestyle brand.

More information on Q1 results here and here

Full transcript of the conference call here from Seeking Alpha.

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Target released their Q1 numbers, showing positive sales trend, positive comp store sales and a rise in net profit, but didn’t hit the marks set for them by Wall Street and their stock took a quick hit in an active day of trading.

The numbers: overall revenue up 12.1%, comp sales up 5.1% (compared to 6.2% Q1 LY), net profit up 12%, but selling, general and administrative expenses were up 15.3%. CFO Doug Scovanner said that the rise in expenses was due to the construction of three distribution centers and the rise in the number of stores they remodeled this quarter. He maintains that the yearly expenses for this capital improvement will be flat from last year, explaining: “As you know, as well, we remodel and expand a very substantial number of stores each year. We don’t even remotely try to time that by quarter for any particular purpose other than doing it when it makes the most sense. That drove a bit more expense in the quarter than we would expect for the balance of the year. That line item, per sae, should end up being flat year-over-year, but ended up putting some pressure on this quarter’s expenses.”

Scovanner talked about the positive response to the new apparel collections, including those by Luella Bartley and Tara Jarmon and growth in areas such as outdoor, electronics, and food. He also cites the growth in the average amount of items per transaction vs. the growth of the price per item.

Food seems to be an area in which they are making a bigger push. They are in the process of bringing all of their stores up to a newer food prototype layout, with about 650 of their 1418 stores having this new layout today, as many as 950 having an expanded food layout by year’s end and between 50 and 75 stores which will have an even larger food offering than the prototype.. Responding to a question, President Glegg Steinhafel said that although they do not have plans to offer fresh food (produce / meats) in the stores with the largest layouts, they will be focusing on offering a larger selection of their current assortment.

Steinhafel also commented on soft sales in home, the Global Bazaar shop concept from this past winter and tweaks that they are planning for the next year. They are looking to cut down the average unit price of the products in this area in order to spur more impulse buys, rather than having the customer wait for the items to go on sale.

To me, this last part actually makes a lot of sense. Target did get a lot of positive press for their global bazaar shop, but better merchandise mix between full scale furniture and smaller decorative/useful items will allow for more impulse buys, as they say. I will be very interested to see what tweaks they implement as the area was very beautiful, well designed, but didn’t seem to hit the pricing mark for a lot of their consumers.

Target posted very good numbers but Wall Street went into a little panic. Things wil llevel out and I think Targets yearly prospects look fantastic, as always.

Stephen Simpson at the Motley Fool feels that soon may a good time to buy TGT:

OK, so I’ve been positive on Big 2 discount retailer Target (NYSE: TGT) for a little while now and it’s gone all of nowhere. But the closer this one gets to its 52-week low, the more interested I get. I don’t often like to buy huge companies in highly competitive businesses, but at the right price I’ll consider just about anything.

…

I can understand the idea of staying away from Target because of overall fears about the health of the U.S. consumer. That’s not to say that I agree, but I at least can see the point there. In any case, these shares are getting more than a little interesting. A few more points on the downside and I just might add these to my own shopping cart.

More coverage from BusinessWeek.

Full transcript of the conference call here.

Full SEC form 8-k filing here, via Yahoo.

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