$35M TIF Furthers $260 MXD Project

WASHINGTON, DC-DC developer Roadside Developer has closed on a financing package with the District that will launch a one-million-sf adaptive reuse project in the Shaw community. The city is giving Roadside $35 million in tax incremental financing. That money will allow the company to break ground on the $260 million project a year from September, Susan Linsky, project manager, tells GlobeSt.com. The TIF, she says, "means CityMarket at O will actually happen now. Getting this financing was always crucial to our plan." There is $44 million of public infrastructure-related investment connected to the project, she explains. "That is what the city money will cover." CityMarket at O is a mixed-use project that will eventually deliver 100 units of senior affordable housing, 385 market rate rentals, 160 condos, a 200-room limited service hotel, 560 parking slots, 460 of which are below ground, 87,000-sf of retail, including a 71,000-sf Giant grocery store--the largest in DC, according to Linsky. These plans are still preliminary, she says, as the company is still in the schematic phase. As of right now, there will be five buildings all together: two multifamily buildings, a condo, the hotel and the Giant grocery store. It is the grocery store that is the adaptive use portion of the project. Roadside is restoring the O Street Market, a historic building, and incorporating it into the Giant. Built in 1881, the O Street Market served not only as a market but as a place for residents to meet and socialize.

Source: GlobeSt.com

American Eagle Merchandise Head's Departure Seen As Big Blow

NEW YORK -(Dow Jones)- Chairmen and chief executives may be the most visible faces of corporate America but, when it comes to the retail industry, the merchandising head plays just as integral a role.

"The retailers who do well have product that's different from what people already have in their closets," said Anne Brouwer, a partner at McMillan Doolittle, a retail consulting firm. "The chief merchandiser makes that happen."

That's why analysts have expressed concern about the near-term future of American Eagle Outfitters Inc. (AEO) after the company unexpectedly said its president and chief merchandising officer, Susan McGalla, won't renew her contract next year with the teen retailer, whose sales have been sagging in recent months along, largely, with the rest of its group.

McGalla has been with American Eagle for nearly a decade-and-a-half and has been chief merchandising officer for just over four years. She is credited with helping the company's turnaround in 2004 and its delivery of consistent results.

The head of merchandising is expected to be the company's visionary. This manager makes the final call on what's going to be presented to customers. And, in addition to setting the feel of the store, the merchandising chief steers a large staff and maintains relationships with vendors and suppliers.

"Having the right product in retail draws the line between fantastic success and just mediocre," said Britt Beamer, chairman of America's Research Group, a retail consulting firm. "Chief merchandisers make that magic happen. They bring customers into the stores."

There is no consensus from retail analysts regarding who can or will fill McGalla's position; whether the person will come from within the company or from outside. However, some expressed concern about the dearth of merchandising talent available for hire.

"Merchandising is about art and science," said Anne Brouwer, partner at retail consultant McMillan Doolittle. "It's easy to learn the science, but it's hard to learn the art."

If the right person is chosen, American Eagle could have a chance to rebound, once the economy becomes more favorable, Brouwer said.

A spokeswoman for American Eagle said McGalla wasn't available for comment, and that she didn't know what McGalla's plans were after her departure. In a statement, McGalla said it was "time to move on to new challenges."

Investors are certainly showing their concern, as a key internal position has been put in flux while, outside, a sagging economy still reigns. American Eagle's shares were recently down 14%, to $13.47, their lowest level in two-and- a-half years.

The stock has lost nearly half its value in the past year, one of the big losers in a teen-retail group that investors seem to either love, dislike or hate. Aeropostale Inc. (ARO) shares have gained 12% in the past 12 months, while Abercrombie & Fitch & Co. (ANF) has lost 10% and Hot Topic Inc. (HOTT) is down 50%.

In late May, American Eagle reported a 44% drop in fiscal first-quarter net income, citing increased merchandise markdowns amid weaker-than-expected sales.

McGalla's departure from American Eagle likely signals "the board's lack of confidence in the back-to-school assortment, and (her) ability to ultimately stem market share losses," said Lazard Capital Markets analyst Todd Slater, in a research note to investors.

Likewise, Slater predicts more trouble ahead for American Eagle, with same- store sales declines and margin contraction persisting "through the rest of the year." He sees "little near-term upside" for the company.

American Eagle said Chief Executive Jim O'Donnell will assume McGalla's responsibilities as president, and American Eagle will search for a new chief merchandising officer.

Until her contract expires Jan. 31, McGalla will work on the development of the company's newest brand, 77kids, as well as its concept for post-collegiate types, Martin + Osa.

Slater considered McGalla's interim position a demotion, saying "she will be relegated to a trivial role" and called Martin + Osa, a concept American Eagle first introduced in fall 2006 with 22 locations, a "money-losing" business.

Still, McGalla does have her fans. "Despite recent merchandising missteps, we believe McGalla is a very talented merchant and she will be difficult to replace," said Paul Lejuez, retail analyst at Credit Suisse. "We cannot construe a scenario in which this is positive."

Source: Morningstar

Wal-Mart to revamp logo at its US stores

LITTLE ROCK, Ark. - The familiar logo of the world's largest retailer is getting a makeover.

Wal-Mart Stores Inc. (nyse: WMT - news - people ) said Sunday the company will begin replacing logos on the front of its U.S. stores with a new design beginning this fall. Wal-Mart spokesman Kevin Gardner said the change would reflect changes customers already have seen in some store signs and advertisements.

"This logo update is simply a reflection of the refreshed image of our stores and our renewed sense of purpose of helping people save money so they can live better," Gardner said in a written statement.

Gardner said he had no other information about the change. However, The Wall Street Journal reported Saturday that the new look would include eliminating the hyphen in the company's name, now shown as a star at its more than 3,600 U.S. stores. The new logo would show company's name in white letters on an orange background, followed by a small starburst, the Journal reported, based on an artist's rendering filed with planning officials in Memphis, Tenn.

The revamped logo comes as Wal-Mart continues to tweak its image after facing criticism from union-led groups and local communities across the nation opposed to big-box store developments. In the time since, the company has launched a marketing campaign highlighting its environmentally focused practices and efforts to make health care more affordable for customers through a discounted prescription drug program.

Still, Wal-Mart's low-cost advantage remains what draws customers as questions persist about the strength of the U.S. economy.

Sam Walton started Bentonville, Ark.-based Wal-Mart in 1962, opening a single story in nearby Rogers. The company's logo once included lasso-like script, still seen on older tractor-trailers and distributing centers throughout Arkansas and elsewhere.

The company said it last tweaked its logo in 1992. Customers remain most familiar with its current incarnation, a white block-type logo lit against a deep blue background, red lines above and below.

Source: Forbes.com

S&P cuts AutoZone corporate credit rating

Standard & Poor's lowers AutoZone corporate credit rating to "BBB" CHICAGO (AP) -- Standard & Poor's Ratings Services on Thursday cut its investment grade corporate credit rating for AutoZone Inc. to "BBB" from "BBB+," following the auto parts retailer's announcement that it boosted its share buyback program.

The ratings service also affirmed the company's "A-2" short-term and commercial paper ratings. The outlook is stable.

"The rating reflects AutoZone's leading position in the stable but highly competitive retail automobile parts aftermarket along with its consistent operating performance and strong profitability measures," Jerry Phelan, an S&P credit analyst, said in a statement.

But the rating also reflects AutoZone's tendency toward aggressive share repurchase activity and expectations for continued flat-to-negative same-store sales resulting from a weak economy, S&P said.

Same-store sales, or sales in stores open at least a year, is an important measure of retail health because it measures growth at existing stores, rather than growth from expansion.

Source: Yahoo News

Terrified by Teen Retail

In large ways or small, teenagers often horrify us because they just don't do what we expect them to. Right now, these juvenile delinquents may be doing the last thing investors ever expected: not spending much money at the mall.

Gasp! How could it be possible? What's with these kids today? Do they hate America that much?

Teen angst
My Foolish colleague Todd Wenning and I took a trip to a local mall last Tuesday for a little recon. We figured that since school's out, surely we'd find some teens there, hanging out and maybe even buying stuff.

Instead, the mall was a ghost town. Most disconcerting, the mighty Abercrombie & Fitch (NYSE: ANF) was all but empty -- and entirely lacking actual teens -- despite its booming dance music.

Honestly, I was downright relieved to see a couple of warm-blooded, bona fide teenagers in American Eagle Outfitters (NYSE: AEO). Todd also spotted a few genuine young people there, as well as in Aeropostale (NYSE: ARO), and he was pleasantly surprised by foot traffic in long-struggling Gap (NYSE: GPS) and its Banana Republic unit.

However, with the exception of a few outliers, including a packed GameStop (NYSE: GME), the mall wasn't exactly teeming with spendthrift teens.

I intend to do a weekend check of a different local mall soon, to see whether teens are simply saving their mad shopping skills for Saturdays and Sundays. (I'd like to see how some of Urban Outfitters' (Nasdaq: URBN) stores seem to be doing, too, since I own a few shares of that stock.) However, I have a hunch a weekend trip might look strikingly similar.

The kids are all right ... aren't they?
In recent years, teen retail spending has been fairly well-insulated against macroeconomic factors. Kids don't pay mortgages or rents, worry about feeding the entire family, or fret about the phone, cable, and electric bills. Most of their spending is blissfully discretionary and often motivated by the desire to impress and outdo their peers.

Unfortunately, our current economic climate may be pinching the wallets of young and old alike. It stands to reason that with the high cost of living (food and energy) and the housing market's pains, many parents don't have as much discretionary income to give their kids.

Are babysitting and lawnmowing the lucrative options they used to be? With consumers pinched by rising prices on everything from gas to food, "nesting" and do-it-yourself may be summertime themes this year. Mom and Dad's generosity is likely reaching some limits, too. I wonder how many window-washings, tree prunings, and dishwashings make up an iPhone or an Xbox 360 in this day and age.

Meanwhile, the summer job market this year doesn't look good for teens who want to pad their wallets. Only 34.2% of teens aged 16 and older seeking summer jobs are expected to land one. This makes sense. Retailers and restaurants don't need to be so staffed up when fewer consumers are willing to spend on luxuries.

And of course, increasing unemployment and second-job seekers will put more contenders into the pool -- older applicants are likely snapping up the types of jobs teens usually take for granted during the summer months.

Maybe the kids aren't all right.

This awkward phase will pass
We'll have to keep our eyes on those scary teens -- and teen retailers -- to see whether this is an ongoing trend, at least for the near term. It may be a long, hot summer indeed.

Even if teens are the unthinkable and ratcheting down their spending, things won't always be this tough. Teens may end up learning to save for what they want -- an excellent lesson in the long run. Meanwhile, the current pressures will make some formerly pricey stocks very affordable for long-term investors.

As crazy as it sounds, the kids may be choosing carefully when they shop these days. Investors should choose carefully, too, shopping around for high-quality retail stocks worth holding for the long term. For now, though, I'm sure many investors wish our biggest worry about teenagers was more conventional, like whether those darn kids are huffing something from under the sink. Maybe those were somehow simpler scary times.

Source: Motley Fool

Best Buy Plans to Double Sales in 5 Years

Minneapolis (June 26, 2008) Best Buy Co. expects to double its sales to $80 billion in the next five years, president and COO Brian Dunn said at the company's annual meeting on Wednesday, according to the Minneapolis/St. Paul Business Journal.

Best Buy doubled its revenue from $20 billion in fiscal 2003 to $40 billion in fiscal 2008. The company expanded from 679 stores to 1,314 during that time.

Best Buy anticipates revenue of $43 billion to $44 billion in fiscal 2009. It expects same-store sales to increase 1% to 3%.

In May, Best Buy entered a joint venture with Carphone Warehouse, which has more than 2,400 stores in nine European countries. It anticipates opening its first European Best Buy stores later this year.

The retailer also plans to add stores in China and expand into Mexico and Turkey.

Source: Chain Store Age

Chico's FAS outlines strategic plan

Women's apparel retailer Chico's FAS Inc. on Thursday outlined its plan to improve results, including improving its merchandise selection and slowing real estate growth.

Chico's outlined the plan in a statement following its annual shareholder meeting.

The company plans to improve the "fit, fabric and quality" of its clothes.

At the same time, it plans to slow real estate square-footage growth until the weak retail environment improves.

It also plans to tighten control on inventory and cut expenses and capital expenditures.

Also during the meeting, the shareholders re-elected three directors, ratified an amended stock and incentive plan and appointed Ernst & Young LLP as its independent public accountant for the fiscal year ending Jan. 31, 2009.

Chico's FAS Inc. has suffered as consumers cut back spending amid a rising cost of living and declining home values. Women's apparel retailers have been among the hardest hit sectors in the retail industry.

In May, Chico's reported its first-quarter profit dropped 73 percent as sales of its core apparel brand dropped and expenses increased. Revenue fell 10 percent to $409.6 million.

Source: Business Week

Bed Bath & Beyond eager to grow

Union, N.J. –Bed Bath & Beyond opened its first international store in Ontario, Canada last December – and the $7.0 billion specialty retailer is ready for much more.

“We hope to expand aggressively in Canada, and to be the first choice for the home in Canada,” said BBB co-chairman Warren Eisenberg during last evening’s first-quarter earnings call.

Added president and ceo Steven Temares, “We believe the Canadian market has outstanding growth potential for us.”

Last month BBB followed up on that with a foray into Mexico via a joint venture with privately held retailer Home & More, which currently operates two stores in Mexico City.

How will future growth shape up? The plan for the current fiscal year is to open 50 to 55 new BBB stores in the United States and Canada. In addition, the 981-unit company has signed or is in the process of finalizing about 12 more sites in Canada and is in “active negotiations” for an additional dozen or so.

Still, Temares said the number of new BBB store openings is less than in prior years, as part of the company’s tactic to “afford us flexibility to take advantage of real estate opportunity that might arise from further retail consolidation, if we so choose.”

In results for the quarter ended May 31, BBB yesterday reported net earnings of $76.8 million or $.30 per diluted share. This was down sharply from $104.6 million or $.38 per diluted share in the year-ago period, however it beat analysts’ expectations by several cents per share, and BBB stock was trading about 6% higher today – counter to the retail sector’s general share price falloff of about 3%.

Quarterly net sales of $1.65 billion were up 6.1% from $1.55 billion one year ago; comps grew by 0.8%.

The company’s other nameplates are slated for expansion, too. BBB will “accelerate our growth” of the Christmas Tree Shops by 12 stores and buybuyBABY by a less precise “several” new units this year, and will open Harmon store concepts as departments within “a number of” BBB and Christmas Tree locations.

Also in the works is the addition of fine china to “a number” of BBB stores.

Overall, BBB’s long-term real estate goal remains to operate more than 1,300 stores, Eisenberg said.

Source: Home Textiles Today

Bank of America to cut 7,500 jobs after Countrywide deal

Bank of America said Thursday it will cut about 7,500 jobs after it closes its acquisition of mortgage lender Countrywide Financial Corp. The job cuts amount to about 12.5 percent of the combined companies' mortgage, home equity and insurance businesses, after the purchase is completed next week. The Charlotte-based bank said the cuts will take place over the next two years in locations across the country "in instances where the two companies have significant overlap." The company will begin notifying affected employees in the third quarter.

Bank of America expects to close the deal July 1, having received the go-ahead from Countrywide shareholders on Wednesday. The all-stock deal, valued in January at about $4 billion, is now worth around $2.8 billion, reflecting a decline in Bank of America's stock price over the last six months. Earlier this month, the Federal Reserve cleared the way for the acquisition, which would give Bank of America control of 20 percent to 25 percent of the home loan market.
Countrywide had been the nation's largest mortgage originator before a spike in bad loans ravished its business. The deepening housing slump and lingering credit crisis have since fueled deep losses. Countrywide lost about $1.6 billion in the last six months of 2007 and another $893 million in the first quarter of this year. It also faces numerous investigations and lawsuits related to its lending practices. This includes a pair of lawsuits brought Wednesday in California and Illinois. Both cases accuse Countrywide of systematically deceiving borrowers in order to get them to take on risky loans they couldn't really afford, and name Chairman and CEO Angelo Mozilo as a defendant. The states both seek unspecified damages and for Countrywide to pay restitution to borrowers who lost their homes or loans.

Investors have worried that further deterioration in the mortgage market as home loan delinquencies and defaults rise could make it harder for Bank of America to manage Countrywide's loans. That could lead to costly write-downs, hurting Bank of America's profits.
Bank of America is expected to report its second quarter earnings July 21. Bank of America shares tumbled $1.80, or 6.8 percent, to $24.81 Thursday. Countrywide shares fell 16 cents, or 3.5 percent, to $4.42.

Source: Boston.com

Wal-Mart plans fall opening for Marketside stores

NEW YORK, June 25 (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz) has launched the website for Marketside, the small, community grocery store concept that the discount retailer is developing, and it plans to open the first locations this fall.

Wal-Mart will open four Marketside stores in the Phoenix area, and they will feature "a wide selection of complete meal solutions, fresh ingredients, and everyday favorites at affordable prices," according to the website.

Wal-Mart has stayed mostly quiet on its plans for Marketside. The new store concept comes after British supermarket rival Tesco (TSCO.L: Quote, Profile, Research, Stock Buzz) entered the U.S marketplace last year, opening Fresh & Easy Neighborhood Markets stores in California, Arizona and Nevada. Fresh & Easy will open its 62nd store on July 2.

At a briefing with reporters earlier this month, Wal-Mart said it is developing the Marketside stores to lure shoppers looking for a quick option to buy fresh groceries.

Eduardo Castro-Wright, head of Wal-Mart's U.S. division, said Wal-Mart shoppers might shop at the company's large supercenters once a month and go to its grocery-based Neighborhood Markets once a week, but would use Marketside for quick trips to buy perishables.

He said the stores will feature a smaller assortment than a traditional grocery store and will focus on fresh goods.

Source: Reuters

New York clothing retailer opens at Liberty Tree Mall

Steve & Barry’s has opened a 24,000-square-foot store in the Liberty Tree Mall in Danvers, Mass. It is the chain’s first location in the Boston market. Steve & Barry’s is a New York-based casual apparel retailer men, women and children sold at discount prices.

Source: BBJ

Penney's Scales Back Expansion Plans

Once was not enough.

Reacting to the weak retail environment, J.C. Penney Co. Inc. Wednesday again reduced capital expenditures, this time cutting 2009 capex to $650 million from $1 billion and reducing store opening and renovation plans.

But Myron E. "Mike" Ullman 3rd, chairman and chief executive officer, told WWD plans for the rollout of Sephora in-store shops remain intact despite fewer new stores and said Penney's is still upbeat for its back-to-school season.

Investors snapped up shares of the retailer, sending them up 2.2 percent to close at $37.68 on the New York Stock Exchange.

As part of a midyear update, the retailer said it now plans to open or relocate 20 stores in 2009, down from the 36 in 2008, compared with the previous plans to open 50 stores each year through 2011. Plans for its first Manhattan store remain on track, and the company said that unit is "expected to be its highest sales volume location.

"Ullman said the capital expenditure cut to $650 million in 2009 would help the company maintain its "positive free cash flow" next year. The retailer's midyear update is part of its goal in maintaining a level of transparency with Wall Street, he noted. J.C. Penney is also scaling back its store renovation plans to between 10 and 15 units in 2009, down from 20 in 2008, compared with previous plans to renovate 65 each year through 2011. In April, Penney's slashed $200 million from its capex for the year, reducing new and relocated stores to 36 from 50 and renovations to 20 from 65.

Plans for Sephora's rollout haven't been affected, however. "The same number, 50 to 70, [is on track for] next year, except that more of our older stores will get a Sephora store now that we will have [fewer] new stores opening," the ceo stated. "We have 72 Sephora shops now and 20 more will open for the balance of this year. There'll be another 50 to 70 next year, with 20 [located] in the new stores.

"Ullman said Penney's hardest-hit markets coincide with the toughest markets in housing: Florida, Southern California, Las Vegas and Phoenix. J.C. Penney is adjusting by focusing its store opening program on where its customers are located, or at least where Ullman says the emerging community exists. "Most of our new stores are in the South, such as Louisiana, Tennessee, Alabama and five new stores in Texas. We'll open several more next year in Texas," he said.

Ullman doesn't expect additional modifications in the capex plan this year, noting it's still too early to make a call regarding 2010. As for the pullback on store openings, that initiative was taken in conjunction with requests from some developers that are looking to postpone a few projects of their own until 2010 and 2011 due to housing concerns, Ullman said.

Despite the lackluster retail environment and pressures on the consumers' household budgets, Ullman remains hopeful for back-to-school sales.

With seven years of strong back-to-school selling seasons, the retailer knows it is up against tough comparisons, and getting even decent results this year won't be easy, Ullman acknowledged.

"We feel good about our offers, good about our marketing and our pricing proposition....We're well prepared. It's the time of the year when mom has to shop. Most kids need new clothes for back to school," Ullman said.

Although the juniors category has been doing well, and the company will be launching Decree and Kimora Lee Simmons' Fabulosity juniors lines, Ullman said there are also high expectations for young men's.

"Our young men's in American Living has the biggest upside," he said. That category is hitting the sales floor in time for back-to-school, and the ceo said consumers will find the items "very sharply priced compared to the alternatives at the mall.

"Overall, the company is satisfied with early results from the American Living lifestyle collection produced by Polo Ralph Lauren Corp.'s Global Brand Concepts, which it believes could reach sales of $1 billion in three to four years.

"We are satisfied," Ullman said, adding the company expected it would be tougher to achieve the results it's seen so far.

While a few Wall Street analysts have criticized the higher price points for American Living, Ullman emphatically said the collection is "not inappropriately priced for what it is," adding that in a booming economy it likely would have been easier to get even better results.

Sales in apparel categories have been good, which "bodes well" for fall, Ullman noted, boasting too that the retailer had its best women's apparel business last fall. Women's apparel sales are doing very well this month, Ullman said. Casual sportswear was the top category in women's apparel, followed by the junior business and plus sizes. Career has also had a "positive" trend.

"We feel good about our women's business," Ullman said.Sales in the home business and fine jewelry categories have been difficult, but also usually entail higher-ticket purchases. The retailer expects total inventories to fall below 2007 levels by the back-to-school season, and plans to align inventory levels with sales expectations.

Penney's has endured declines in comparable-store sales in each of the first four months of the current fiscal year. May's were off 4.4 percent following declines of 1.7 percent, 12.3 percent and 6.7 percent in April, March and February, respectively.

When Penney's released first-quarter results in May, it said it expected comps to decline in the midsingle digits during the current second quarter. First-quarter earnings dropped 49.6 percent to $120 million as sales declined 5.1 percent to $4.13 billion, and dropped 7.4 percent on a same-store basis.


Reacting to the revised plans, Citigroup retail analyst Deborah Weinswig wrote, "This news was consistent with our expectations [and] demonstrates disciplined and prudent planning on the part of JCP's management team.

" She reiterated her "buy" rating on the retailer.The news from Penney's helped the Standard & Poor's Retail Index rise 1.4 percent to 374.46, while the Dow Jones Industrial Average remained steady, gaining 0.04 percent to 11,811.83. The S&P 500 rose 0.6 percent to 1,321.97.

In the department store sector, Macy's Inc. rose 3.2 percent to $20.02, Sears Holdings Corp. advanced 1.1 percent to $74.44 and Kohl's Corp. gained 2.3 percent to $42.05. Discounter Wal-Mart Stores Inc. jumped 1.4 percent to $58.12.

Among specialty retailers, The Talbots Inc. finished up 8 percent at $12.89 and landed on the New York Stock Exchange's list of top 30 advances. AnnTaylor Stores Corp. climbed 3.1 percent to $25.57, J. Crew Group Inc. jumped 4.1 percent to $34.59 and Gap Inc. rose 0.8 percent to $16.89.

Source: Women's Wear Daily

Private Label, Loyalty Programs Boost Kroger

A reliance on value products and promotions have led to record earnings at The Kroger Co., executives said at the company’s first quarter conference call. The expansion of private-label products and promotions to help cash-strapped customers led to net earnings of $386 million, compared with $336.6 million last year. Total sales increased 11.5% to $23.1 million. Identical-supermarket sales increased 9.2% with fuel and 5.8% without fuel.

“Kroger’s performance during the quarter demonstrates the resiliency of our ‘customer first’ strategy,“ said David B. Dillon, chairman and CEO. “Our latest customer research indicates the two biggest concerns on shoppers’ minds today are high gas prices and food costs. These two factors are driving some of the behavior changes we are seeing lately, such as shoppers combining trips and actively pursuing gas discount offers.”

The company has spent more than a year expanding its private label product line, and also has expanded its generic drug program to include 90-day supplies for just $10. Shoppers also can receive up to $120 in free groceries when buying Kroger gift cards, and discounts on gasoline as shopper rewards. Kroger is on track to open, expand or relocate 70 to 80 stores, and complete between 175 and 200 store remodels during fiscal 2008. Kroger operates 2,474 supermarkets and multi-department stores in 31 states under two dozen local banners, including Kroger, Ralphs, Fred Meyer, Food 4 Less, Fry’s, King Soopers, Smith’s, Dillons, QFC and City Market, as well as 778 convenience stores and 392 fine jewelry stores.

Source: GlobeSt.com

Circuit City CEO mum on buyout prospects at annual meeting

RICHMOND, Va. - Circuit City Stores Inc. stayed mum on Tuesday about whether a buyout is in the future for the consumer electronics retailer, but an activist investor expects an announcement of a possible sale within the next month.

Mark J. Wattles, whose investment firm holds a 6.5 percent stake in Circuit City, said three companies are in the late stages of conducting due diligence in regard to buying the Richmond-based company.

"The sniffing is over with," Wattles said after the company's annual shareholder meeting.

Wattles declined to identify the companies, but implied that one of those was Dallas-based video-rental chain Blockbuster Inc., which announced a more than $1 billion takeover bid in April with plans to create a chain that would sell electronic gadgets and rent movies and games.

Chief Executive Philip J. Schoonover gave no update to investors about the company's hiring of Goldman Sachs & Co. to explore strategic alternatives, saying there's no official time frame for any action.

Instead Schoonover defended Circuit City's turnaround plan, but acknowledged "some missteps in execution" and asked shareholders for time necessary to leverage the company's future.

"We're in a good industry despite headwinds in the economy," Schoonover said. "All this work is important and rational. We have significant opportunity to improve profitability in our core business."

Shares of Circuit City slipped 2 cents to $3.35 Tuesday after sinking to a 52-week low of $3.20 earlier in the session and tumbling more than 21 percent on Monday. Shares have traded as high as $15.99 over the past year.

Last week, Circuit City said its loss widened in the first quarter because sales at established stores fell more than 11 percent. It reported a loss of $164.8 million in the three months ended May 31 compared with a loss of $54.6 million a year earlier. Circuit City has seen only one profitable quarter since the second quarter of 2007.

Meanwhile, rival Minnesota-based Best Buy Co. reported a 7 percent drop first-quarter profits last week, saying net income dipped to $179 million from $192 million.

Circuit City also forecast a wider second-quarter loss than analysts were predicting and suspended its dividend to keep capital available for its turnaround efforts.

Shareholders on Tuesday voted overwhelmingly to expand the company's board to 15 in order to add three directors originally nominated by Wattles. Last month, Circuit City defused a proxy battle by agreeing to nominate the directors.

Those directors are: James A. Marcum, an operating executive at merchant banking firm Tri-Artisan Capital Partners and former chief executive at Ultimate Electronics; Elliott Wahle, chief executive of Toronto-based Rustique Home Furnishings; and Don R. Kornstein, a managing member of strategic management and financial consulting firm Alpine Advisors.

Source: Forbes.com

Pier 1 withdraws offer to buy Cost Plus

FORT WORTH -- Retailer Pier 1 Imports Inc. said Tuesday that it was withdrawing its offer to buy rival Cost Plus Inc. for $88 million.

Pier 1 said it was unlikely that it would be able to buy the company at a price that would make sense for its shareholders.

The company offered to buy Cost Plus this month in a stock swap transaction. In the proposal, Pier 1 said it would issue 0.6 of a share of its common stock for each share of Cost Plus common stock, implying a value of $4 a share.Last week, Cost Plus' board of directors rejected Pier 1's offer.

Pier 1 shares rose 3 cents to $4.03.

Source: Los Angeles Times

Copley Place seeks city of Boston’s OK for 47-story tower

Copley Place owner Simon Property Group Inc. is moving ahead with plans to remake the Back Bay skyline with a 47-story condo tower that will also expand the upscale mall’s footprint.

The mall owner, in a proposal filed yesterday with City Hall, details plans for nearly 800,000 square feet of new residential and Retail space at the corner of Dartmouth and Stuart streets.

Along with 280 high-rise condos, Simon is also banking on a significant expansion of Copley Place.

The proposal calls for adding 54,000 square feet to the existing 115,000-square-foot Neiman Marcus store, which would be renovated as well. Another 60,000 square feet of retail would be added beyond that, including space for a restaurant and a winter garden.

The condo tower will include a health club, luxury day spa, library and concierge service.

“The project will enhance the urban fabric of the neighborhood and be a striking addition to the city’s skyline,” said Carl Dieterle, executive vice president for urban development at Simon, in a statement.

But state Rep. Marty Walz (D-Back Bay) said there are still significant concerns about the shadows the new tower will cast across nearby Copley Square and the Commonwealth Mall.

“A building of that height will cast significant shadows on those two green spaces,” Walz said.

Rick Stockwood, a spokesman for the project, said the tower has been specifically designed to minimize the impact of any shadows it will cast. The impact itself, which he described as limited, is laid out in a report included in the project plans submitted yesterday to the Boston Redevelopment Authority.

The shadows that cross Copley Square, for example, are confined to the late fall and winter months, Stockwood said.

Source: Boston Herald

Eddie Lampert’s latest bid to lift Sears

Eddie Lampert used to be the smartest investor in retailing, if not the best investor of his generation. That was the case last summer when shares of Sears (SHLD) hovered above $170. In his recent letter to shareholders, Lampert presented a chart showing that even as Sears stock collapsed in the latter half of last year, his five-year return on investment in Sears Holdings, the combination of Kmart and Sears, exceeded 900%. His return, in fact, beat that of every other major retailer.

No more. Since May, as Sears stock has tumbled to $75, another retailer, Urban Outfitters, has risen to trump Lampert’s investment. Shares of the hot specialty retailer, at $33, are up more than eight-fold since 2003. Gamestop, the fast-growing videogame retailer that FORTUNE recently wrote about, is not far behind. “I guess you’re telling me I need to get moving,” Lampert said when I called him this morning.

Indeed. Lampert, who runs an $11.5 billion hedge fund called ESL Investments, owns 65.6 million shares of Sears Holdings, worth $4.9 billion. He is one of America’s most secretive investors - and to retail-industry veterans, a walking conundrum. While they criticize him for under-investing in Sears and Kmart, he cites the value of pruning until he discovers the right strategy to spend money on. “Only when you find something that leads to better results,” he says, “do you get behind it with a significant amount of capital.”

Lampert, 45, has made mistakes, as he readily admits. One error was ramping up inventory last year, while failing to anticipate a drop in consumer spending. Another mistake was buying back 33 million Sears Holdings shares at an average price of $132 between 2004 and 2007. (Ouch.) But Lampert, who made his billions by playing contrarian, refuses to let the rising chorus of critics distract him. “We’re the $50 billion company that people think doesn’t have any customers or relevance,” he says.

Even as Lampert loses customers to Wal-Mart and Target, among other rivals, Sears has lots going for it: plenty of cash, relatively low debt, vast real estate (now is not the time to sell, obviously) and maybe most important, its private-label brands. Kenmore appliances, Craftsman tools, DieHard batteries and Lands’ End, the clothing maker, are leaders in their categories. Since only Sears and Kmart carry them, however, these brands have serious distribution challenges. “We have to increase awareness and make them more accessible,” says Lampert, who operates out of a spare hedge-fund office in Connecticut but nonetheless is a hands-on Sears chairman.

A new strategy for the brands may be coming. In addition to searching for a new CEO (Russell Reynolds is conducting the Sears CEO search - and it’s slow going), Lampert disclosed that he is looking for an executive to oversee the company’s multi-billion bevy of private brands. He needs a brand ace to figure out how to innovate and distribute them more broadly. One option, actually, was debated at Yale professor Jeffrey Sonnenfeld’s recent CEO Summit in New York. There, brand experts from India - including a renowned professor and a prominent industrialist - said that Indian investors are eager to expand into retailing globally and would likely be interested in owning, or at least carrying, brands like Craftsman and Kenmore.

“Fascinating,” says Lampert. As for the opportunity, he uttered only that. As you read this, he is probably contemplating the possibilities.

Source: Fortune

Kmart tests concepts in out-of-way corners

As sales and profits sag, parent firm Sears Holdings is trying, in the quietest of ways, new layouts and ideas at two Rockford stores

ROCKFORD — For a glimpse into Kmart's possible future, take a drive down the main drag in Rockford's business district.Beyond Wal-Mart and past Target, the two competitors that long ago stole Kmart's thunder, a Big K store sits alone at the back of a vast parking lot facing an Old Time Pottery, a shuttered Value City Furniture store and an abandoned gas station.

It is here at this Big K, as many Kmarts are known, that parent Sears Holdings Corp. is experimenting with a new format aimed at turning around the brand, where sales and profits are declining at an accelerating rate.

The test store, one of two in this northern Illinois industrial town, has been operating in relative obscurity since November. Kmart has done little advertising to attract new customers to the store. There is also nothing on the outside to signal passers-by to stop in and look at the remodeled interior.

It's an unusually cautious approach by retail standards, but investors have long puzzled over Sears Chairman Edward Lampert's strategy. While he positions himself as a retailer, he doesn't operate in a conventional fashion, leading many to conclude he is more interested in his company's real estate value than its future as a retailer.

Lampert, a billionaire and Sears' controlling stakeholder, has explained it this way: He doesn't want to invest money in fixing up stores unless he is sure he will get a return on his investment.

And so far, it seems, Kmart has yet to decide whether it's time for a complete makeover.

"The worst thing you can do is send people into the stores when you're not ready," Maureen McGuire, executive vice president and chief marketing officer for Sears Holdings said in an interview at the company's Hoffman Estates headquarters. "It's like inviting someone into your home and it's like you never expected them. So we want to be prepared for our customers when they come in.

"From the outside, the gray single-story structure looks little changed from polyester palaces Kmart built in the 1960s and 1970s that transformed five-and-dime variety store S.S. Kresge Co. into one of the retail powerhouses of that era. But step inside the store and it's a different story.

"It looked really nice," said Enola Troxell, a frequent shopper at a Kmart in nearby Freeport who visited the Rockford store for the first time this month. "It looks cleaner and bigger and like they carry more stuff."Troxell was looking for women's safety work shoes. She didn't find them and left empty-handed.

A Kmart circular ad for a television at a bargain price brought Lotta Russey into the store, but she too left without making a purchase."The outside of the store looks dreary," said Russey. "It doesn't draw you in. It says cheap. You need to get people inside by what's on the outside.

"Crushed by Wal-Mart on price and Target in design, Kmart has struggled for decades to find its niche. A trip through Chapter 11 bankruptcy in 2002 wiped out a lot of debt but also led the retailer to close hundreds of stores and sell some of its best locations.

The slimmed-down chain bought Sears, Roebuck and Co. in 2005 with ambitions of turning Kmart stores, which are located primarily in strip centers, into Sears, which are located primarily in malls. Consumers were driving past the malls to the more convenient big-box stores such as Best Buy and Target, a shopping pattern shift that Sears needed to address.

The experiment didn't work. Many of the converted stores, called Sears Essentials or Sears Grand, looked like a Sears stuffed into an old Kmart shell. There was little overlap between Kmart and Sears shoppers. The plan was suspended last year and Sears is "exploring its options," McGuire said.

With 1,382 Kmart stores, down from 1,416 at the time of the merger, the diminished but still sizable discount chain is faced with finding a way to generate enough sales in its existing stores to justify the cost of keeping them open.

"The problem is you're dealing with a very beat-up, old store base," said Kelly Tackett, an analyst at Columbus, Ohio-based TNS Retail Forward.

Borrowing a page

In what appears to be a nod to rival Target, Kmart has reorganized its test store in Rockford to make it easier to shop: painting the perimeter walls vibrant colors, installing lower shelves so customers can see across the entire store at once, moving dressing rooms from dingy corners to the middle of the floor, putting the toy department next to children's clothing and installing price scanning stations.

At the front of the store, two flat-screen televisions run promotions describing the newly remodeled store. Off to the side, a "Just Ask" help station set up to resemble a row of bank tellers is ready to recommend a handyman, book a delivery service, find a part or set up a baby or bridal gift registry.

So far, shoppers seem to be overlooking the TV screens, and the response to the service desk has been mixed, McGuire said. On the other hand the lower shelf heights have fared well and Kmart has rolled them out to 100 stores.

Making room in middle

Perhaps the most risky experiment is in the middle of the store where Kmart cleared space for a "marketplace" filled with constantly changing seasonal goods, such as beach towels and flip-flops for under $10. The merchandise is displayed on wheeled carts reminiscent of a farm stand with plenty of room for shoppers to stroll about.

The roomy displays look inviting, but they also take up valuable floor space that could be packed with more goods and increase sales per square foot, a measure of a retailer's productivity.

"Customers liked that place of discovery, that open area, so we're thinking about how do you take that to the average store, this place of discovery, while still balancing productivity," said Don Germano, senior vice president and general manager of Kmart stores.

Kmart already lags its peers on that score.The average sales per square foot at a Big K was $116 last year, compared with $308 at Target and $443 at Wal-Mart and $137 at Sears, according to Cambridge, Mass.-based retail research firm Management Ventures. Target and Wal-Mart figures exclude stores that sell groceries, which bring down average sales per square foot to $258 at Super Target and $425 at Wal-Mart Supercenters. Big K stores don't include groceries and make up 1,327 of Kmart's 1,382 stores.

Most of Kmart's sales volume is generated at roughly the top 300 to 400 stores, or 20 percent to 30 percent of its base, estimated Anne Zybowski, director of retail insight at Management Ventures."

A lot of the most profitable stores are ones where there isn't a Wal-Mart nearby," said Zybowski. "They're urban locations where people walk to the stores."Sears doesn't disclose sales per square foot, and Germano and McGuire declined to comment on analysts' estimates.

Lift was temporary

Initially, Kmart had provided some hope for Sears. Sales at stores open at least one year, a closely watched metric of a retailer's health, stabilized in fiscal 2006, declining a negligible 0.6 percent, while Sears' same-store sales fell 6.1 percent. That trend reversed last year when same-store sales fell 4.7 percent at Kmart and 4.0 percent at Sears. In the first quarter ended May 3, 2008, sales at both divisions plummeted dramatically, declining 7.1 percent at Kmart and 9.8 percent at Sears.Perhaps more troubling, according to Credit Suisse analyst Gary Batler, is that Kmart's same-store sales have declined even as Sears rolled out Craftsman tools and DieHard batteries at Kmart stores nationwide and introduced Kenmore appliances to about 280 Kmart stores.

"If one wants to get to the root of the problems at Sears Holdings, it is Kmart," wrote Credit Suisse analyst Gary Balter earlier this year in a report.

Sears officials declined to comment on sales of Sears products in Kmart stores.But McGuire and Germano are quick to point out that they are only little more than a year into a five-year plan to fix Kmart.

The first step was to improve the apparel offerings, high-margin goods that can boost overall profits. And clothing in the children's and juniors departments, which include new in-house brands Piper & Blue and Wckd, are well-made, stylish and often 100 percent cotton.Bill Stewart, the outgoing chief marketing officer of Kmart, boasts that last year Kmart held a blind casting call for women in New York and Los Angeles to be in a national ad campaign.

The women were put in a big room with Kmart clothing, belts, bags and accessories and told to put together an outfit without knowing the retailer was Kmart. When the women were asked where they think the clothing came from, they named retailers including H&M, Banana Republic, Macy's and Forever 21. The promotion ran from March through May and the TV ads aired in April.

"I think we really changed a lot of perceptions," said Stewart, who is leaving Kmart at the end of the month after two years to work for the campaign to promote gay marriage in California.

Several tests aheadKmart's next challenge will be to keep its home goods business, a key component of its stores, in good stead even if its longstanding contract with Martha Stewart ends in 2010. Kmart is developing new brand names for the home. And Martha Stewart already has a deal in place with Macy's.Kmart makes up a smaller piece of the company than Sears, but its profits are declining faster. Kmart generated $17.3 billion of revenue in fiscal 2007, while Sears' U.S. stores rang up $27.9 billion. Operating income for the same period fell 58 percent to $402 million at Kmart and dropped 41 percent to $784 million at Sears.

For now, Kmart has an initiative under way to clean up the stores, Germano said.On the outskirts of Rockford, a second Kmart test store sits across from a trailer park, sharing a parking lot with a thrift shop and shuttered auto center.

This remodeled store is already starting to show signs of neglect. The new, blue "Healthy Living" sign hanging over the pharmacy area is missing three letters.

"You have to get some things right before you get to the next level," said McGuire. "Uncluttering the stores, making sure the carpets are clean, as much as you can possibly do. So that's the first thing. We have to get that absolutely right."

Source: Chicago Tribune

Wall Street to Blockbuster: Lower bid for Circuit City or walk away

Wall Street is sending messages to Blockbuster about its bid for Circuit City.

Don't do it. But if you do, pay less.

Blockbuster Inc.'s stock declined 10 percent Friday, closing at its 52-week low of $2.52 a share.
Circuit City Inc.'s deteriorating performance and Blockbuster's shrinking stock price make Blockbuster's $6 a share bid for the consumer electronics chain ill-advised.

Richmond, Va.-based Circuit City on Thursday reported a first-quarter loss of $1 a share, a 12.2 percent decline in same-store sales and deteriorating cash position.

A leading Blockbuster analyst on Friday said he gives the $1 billion proposal a 5 percent chance of happening.

Arvind Bhatia, of Sterne, Agee & Leach in Dallas, said he bets Blockbuster will either lower its bid to $4-to-$5 a share or walk away.

Blockbuster will update its intentions for Circuit City soon, within two weeks, he said.

Blockbuster has been reviewing Circuit City's books, and the Dallas-based company continues to say it will pursue Circuit City only if the deal makes sense strategically and financially.

A lower bid could make shareholders more receptive to Blockbuster management's synergy argument. The movie rental chain is trying to become a home entertainment store, and Circuit City could benefit from Blockbuster's higher store traffic, says Blockbuster chief executive Jim Keyes.

Blockbuster investors will need to see more than synergy, Mr. Bhatia said, specifically, how Circuit's core business could be turned around. Blockbuster could walk away, but he sees a merger at a lower price as the more likely outcome.

Sterne, Agee & Leach has a buy rating on Blockbuster shares with a price target of $5.75 a share, based on future earnings estimates.

Source: The Dallas Morning News

Fast-fashion concept fuels Forever 21's expansion

Owners Don and Jin Sook Chang know what sells quickly, and they want to sell it to the world.

Most retailers are tapping the brakes as they navigate a rocky economy. Forever 21 Inc. has its pedal to the metal.

The fast-fashion retailer is expanding around the globe, increasing product lines and opening showy new stores. The largest yet, which at 90,000 square feet on three levels will be bigger than the size of the Rose Bowl playing field, is scheduled to open in Times Square next year. In South Korea, the birthplace of owners Don and Jin Sook Chang, Forever 21 is preparing to develop a mall adjacent to Inchon International Airport.

The Changs' recipe: Create a niche, and then blow it out.

Having built a $1.8-billion business by focusing on trend-hungry, cost-conscious young women, privately held Forever 21 envisions its future as a comprehensive fashion department store chain, selling clothes and accessories for teens, women, men and children. The Los Angeles-based company has spent $47 million buying competitors -- Rampage and Gadzooks -- and has doubled its square footage over the last 2 1/2 years. The goal is to become a "global retail conglomerate," said Christopher Lee, Forever 21's senior vice president. "Where there's a flash of opportunity, we're stepping in.

"Don Chang, who pumped gas, washed dishes and cleaned offices after he and his wife arrived in the U.S. a quarter-century ago, has another way of putting it. "We are," he said, the "American dream.

"Forever 21 is known in the industry for its knack for spotting what sells -- or what will sell -- getting it into stores quickly and replenishing merchandise to keep up with what's hot. "Literally, you'll see something on a runway, and they get it into the stores in the next month," said Christine Chen, an analyst at Needham & Co. in San Francisco. "It's really unbelievable."

Critics have claimed it's something else. Forever 21 said it was working to settle what's left of a couple dozen copyright- and trademark-infringement lawsuits, and the company was embroiled earlier in the decade in a legal battle with employees of Forever 21 subcontractors who claimed they worked six days a week, sometimes 12 hours a day, for far less than the minimum wage. The matter was settled out of court and the company, which admitted no wrongdoing, agreed to take steps to ensure that its garments were not made in sweatshops.

Sales, meanwhile, continued to climb. The company has forecasted revenue of $1.8 billion this year, up from $1.3 billion in 2007. And for 2009? The projection is $2.5 billion.

Along with European competitors H&M and Zara, Forever 21 created the inexpensive fast-fashion concept, spurring other apparel sellers to pick up the pace.

"They run lean and mean," said Debra Stevenson, president of Skyline Studios, a consulting firm in Los Angeles. "They have a lot of young people working for them, and they do understand their culture."Chief Executive Don Chang has been working to understand shoppers since 1984, when he opened the first store in Highland Park. Business was slow, which helped him shape a strategy.

"The customer's always looking for the price," he said. If a purse didn't open, Chang asked questions. What's wrong? The fit? The fabric? "What kind of clothes do you want? I'll bring it for you.

"Ilse Metchek, executive director of the California Fashion Assn., remembers her first visit to one of the early stores, a "hole in the wall" jammed with merchandise. "They had no talent for display, none," said Metchek, who called a couple of manufacturers and suggested they come have a look. "They said, 'My God, he's selling at retail for less than we could have made it at wholesale.' "

And Forever 21's styles were "right on," Metchek said. Jin Chang, a former hairdresser who is now chief merchandise officer, had an eye for fashion that the company was willing to bet on.

While their business was growing, the Changs, who are in their 50s, were making a mark in other ways. With a partner, they built the four-story Oxford Palace Hotel in Los Angeles' Koreatown and co-developed the San Pedro Wholesale Mart in downtown's Fashion District. It was the city's first commercial condominium project and built when most people "didn't believe in downtown," said Kent Smith, executive director of the L.A. Fashion District Business Improvement District.

Anyone who has looked at the bottom of a Forever 21 shopping bag has a hint about another important aspect of the Changs' life. Each bag is inscribed with "John 3:16" -- the New Testament passage that says, "For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him shall not perish, but have everlasting life.

"The inscription is "evidence of their faith and their commitment to God," Senior Vice President Larry Myer said.The Changs have given millions of dollars to the Ttokamsa Mission Church in Los Angeles, where they attend the 5:30 a.m. prayer meetings Monday through Saturday when they're in town, Pastor Ken Choe said. "They are prayer warriors."

The church is part of the Christian Reformed Church of North America and directs more than 70% of its budget for overseas missions. Jin Chang has visited China, the Ukraine and the Philippines to serve meals to missionaries and local pastors, Choe said.

Don Chang teaches at the church and, Choe said, has a "zeal for the Lord" that the preacher sometimes envies. "It's very rare," Choe said. "That's why I believe God has poured his blessing on him.

"The church has helped build schools in China, Afghanistan, Cambodia, Vietnam and the Philippines, and Chang gave $3.4 million to build an auditorium at Faith Academy in Manila, a school for children of missionaries.

The Changs' business is looking toward Asia as well. Forever 21 plans to open its first store in Seoul this year and hopes to develop more than five malls in South Korea and elsewhere in Asia. The first store in China opened this month near Shanghai and more are expected in that country over the next year. Forever 21 will debut in Thailand this year and open in Japan over the next two years.

Once the company has its "global infrastructure" in place, Senior Vice President Lee said, it may go public. But not now, Chang said. "If a company wants to grow, I think private is much better," he said.

If the retailer files an initial public stock offering, there should be no shortage of interest, said Frederick Schmitt, a principal at Sage Group investment bank in Los Angeles. Financial institutions and private equity firms have hovered in recent years, "waiting for them to go public, or trying to buy them," he said.

"It's sizable, it's growing, it's seen as a good operator and they're understood to be very profitable, so that makes it an attractive acquisition target," Schmitt said. Shoppers, and investors, are fickle, of course, and trends constantly change. But although "everybody's saying the economy's bad," Chang said, "we're doing better. We are strong."

Source: Los Angeles Times

Baby Boomers, Entitlements Fuel Walgreens Growth

The prescription needs of aging baby boomers and speedy approvals are fueling record new-store growth this year at Walgreens, executives said at the company’s third quarter conference call. But expansion will slow to more normal levels next year. Record quarter sales of $15 billion (up 9.6% over last year) will only grow as baby boomers hit their senior years, said Chairman and CEO Jeffrey A. Rein. Net earnings for the quarter rose 2% over the previous year to $572 million. Total comp-store sales rose 3.4%.

"In spite of the current environment, nothing will slow the impact of nearly 80 million baby boomers moving into their chief prescription-use years," Rein said. "This is a very good business to be in for the long term." Walgreens will open 550 new drugstores this year, with a net increase of more than 500, expanding its drugstore base by approximately 9% in fiscal 2008. This is higher than its more typical 8% growth, boosted by swifter-than-normal entitlement processes, and is unlikely to be repeated.

“Many of these sites were [contracted] approximately 24 to 36 months ago,” Rein said. “In future years we will see this growth [level] go down.” The company remains on track to meet its goal of operating more than 7,000 drugstores by 2010. In May, Walgreens announced plans to open its first stores in Alaska in 2009, giving the company a presence in all 50 states.
As of May 31, Walgreens operated 6,727 locations in 49 states, the District of Columbia and Puerto Rico.

Source: GlobeSt.com

Linens ’n Things Hires DJM Realty for Store Disposition

Linens Holding Co., the operator of Linens ’n Things, said Monday it hired DJM Realty to manage the disposition of 120 underperforming stores that the company had targeted for closure as part of its restructuring.

“We are pleased to announce our partnership with DJM Realty and look forward to a successful disposition of these stores. This is a great chance for retailers looking to expand their real estate," said Hugh Scullin, senior VP of real estate, store planning, construction and legal for Linens ’n Things. Linens ’n Things said it would close the stores when it filed for bankruptcy protection in May. The hiring is subject to bankruptcy court approval. DJM plans to hold an auction before July 1.

Source: Chain Store Age

EveryScape plans to put interiors on the map

The popular Internet service Google Maps can guide you to the Upstairs on the Square restaurant in Cambridge. Google Maps' Street View feature will even show you a picture of the street outside the restaurant. But Google Maps can't show you the interior. A new mapping service from EveryScape Inc. of Waltham does just that. With the click of a mouse, a user glides through the front door of Upstairs on the Square and gets a 360-degree view of the colorful decor. EveryScape chief executive Jim Schoonmaker thinks thousands of businesses around the world will pay for this kind of exposure, and millions of Internet users will want to use the service. That's why he says his company has a fighting chance against the Internet's most popular search service.

"I'm quite confident that if we have world coverage of interiors and exteriors, people will leave Google and come to us," Schoonmaker said. A host of venture capital firms, including Dace Ventures, Draper Fisher New England, and LaunchPad Venture Group are betting Schoonmaker is right. They've invested $11 million in EveryScape since 2004, including a $7 million infusion in March. Still, Randy Giusto, an industry analyst with IDC Corp. in Framingham, is skeptical about EveryScape's prospects.

"There might be demand for it in certain locations - government buildings, certain shopping malls," Giusto said, but unless a lot of companies sign up to have their interiors mapped, traffic to the site, EveryScape.com, will be limited. "It's got to hit a critical mass for it to derive value for the consumer," he said. EveryScape might be better off selling its technology to established online mapping companies, Giusto said, such as Google, Microsoft Corp., or Yahoo Inc. A Google spokeswoman said the company won't comment on plans for its Street View.

To get his pictures, Schoonmaker will count on independent contractors to drive the world's highways. "Destination ambassadors" will be given "ownership" of geographic areas, and will be paid by the mile for creating new photo maps, he said. For example, the Baltimore area belongs to David Franklin. He recently completed the required training course for destination ambassadors. In a couple of weeks, he will start laying claim to his new domain by driving its streets, snapping pictures on the way. It's a two-person job. One ambassador drives, while the other operates a quartet of digital still cameras mounted on the roof of the car. Franklin, 50, and his assistant will be paid about $10 a mile. There are 2,000 miles of streets in Baltimore and Franklin estimates another 5,000 miles for the suburbs, so he could earn up to $70,000.

"That's kind of neat - driving around, getting paid to drive," said Franklin, who described himself as an affluent former computer entrepreneur who doesn't need the money. He signed up as a driver because he likes the idea behind EveryScape. "I saw it as a really neat business model, as a progressive company, and a cool product," Franklin said. Once an area has been mapped, EveryScape will pitch local businesses on the benefits of having their interiors photographed by a freelance professional photographer. Both interior and street photos are relayed to Waltham, where banks of server computers stitch the still digital shots into seamless panoramic images. Much of the underlying software was developed by EveryScape founder and chief technology officer Mok Oh, who holds a doctorate in computer graphics from the Massachusetts Institute of Technology. Once the computers have done their work, users can cruise up and down a street by moving a mouse. Businesses that offer interior tours are marked with special icons, which users can click for a quick look around.

Mary-Catherine Deibel, co-owner of Upstairs on the Square, said about one-third of its business comes from private events like weddings and corporate dinners. Deibel said the EveryScape interior shots make it easier to show off the restaurant to potential customers.

"It was exactly what we were looking for and more," Deibel said. Deibel won't say how much she paid for her panoramic advertisement. "Let's just say it was definitely nominal," she said. Schoonmaker said the cost of panoramic ads will vary from hundreds to tens of thousands of dollars, depending on the business's size. While Upstairs on the Square is a small venue, EveryScape has also shot panoramic interiors at larger locations like the Sir Francis Drake Hotel in San Francisco and the Breakers resort in Palm Beach, Fla. Despite the sentiments of observers like Giusto, Schoonmaker believes the world is large enough to support many online mapping companies, including his own. "We don't believe one company, even if it's Google or Microsoft, or even one country, is big enough to take on this challenge," he said.

Source: Boston.com

Steve & Barry's Faces Cash Crunch

As one of the country's fastest-growing store chains, Steve & Barry's LLC was billed as the future of discount retailing. It boasted of massive expansion plans, built on the back of fire-sale prices of clothes and shoes promoted by the likes of actress Sarah Jessica Parker and professional basketball player Stephon Marbury.

That future now looks bleak.

The closely held retailer is racing to find rescue financing of about $30 million. If it is unable to secure backing, it could seek protection from creditors sometime in the next month, say several creditors, bankruptcy lawyers and retail experts familiar with the matter. Steve & Barry's has hired Goldman Sachs Group Inc. to seek out financing and hired a bankruptcy lawyer to advise it on a restructuring, say these people.

A spokesman for Steve & Barry's declined to comment. Its attorney, New York-based retail-bankruptcy veteran Paul Traub, also declined to comment when reached Thursday.

The cash crunch comes even as Steve & Barry's expands across the country, with stores already in 40 states hawking exclusive fashion lines endorsed by tennis player Venus Williams and actress Amanda Bynes. Since May 15, it has opened nine stores, from upstate New York to Kokomo, Ind., and San Jose, Calif.

Steve & Barry's is just the latest retail player hurt by the economic downturn, and its demise would be a big blow to struggling mall owners. An ailing economy and $4-a-gallon gasoline have wreaked havoc upon the retail landscape, pushing the likes of Sharper Image Corp. and Linens n' Things Inc. into bankruptcy protection.

With fashionable clothes priced below $10, Steve & Barry's deep-discount model was built to thrive in such an environment. In a 2006 interview with The Wall Street Journal¹, co-founder Barry Prevor said the U.S. market could support 5,000 stores. Its founders have dubbed their effort the "Google of retailing."

The company currently has 270 stores and projected 2008 revenue approaching $1 billion, with earnings before interest, taxes, depreciation and amortization of roughly $20 million, said two people familiar with its finances.

But some of the forces pushing Steve & Barry's growth were not tied to end-consumer demand, but the needs of mall owners in a softening commercial-real-estate market. Much of the company's earnings came in the form of one-time, up-front payments from mall owners. Those payments were designed to lure the retailer to take over vacated sites, say several people familiar with the company.

Without these payments, the stores are barely profitable, if at all, people familiar with the company's finances say. In recent weeks, the retailer has been seeking at least $30 million to fund operations through 2008. It has approached a number of financing sources, say these people.

Without additional capital, the company's fate will largely be determined by the commercial-lending unit of General Electric Co. It provided the company with a roughly $200 million credit facility in March, and the company is already in default on that loan, said three people familiar with the matter.

Steve & Barry's closing would be another blow for owners of malls and shopping centers, who have struggled to cope with the 6,500 store closures predicted for this year by the International Council of Shopping Centers.

Steve & Barry's eagerly snapped up big-box sites vacated by consolidating chains like Macy's Inc. At a shopping-center conference in May, several mall owners said Steve & Barry's was one of the answers to the industry's problems filling vacant space.

"They should be able to see through this," said Anthony Cafaro Jr., a vice president at Cafaro Co., a large Youngstown, Ohio-based mall developer that leases 10 sites to the company. "They still have that sensational 'wow' factor in terms of their prices—it's a great concept."

Part of the chain's attraction has been its low prices. Everything from sweatpants to jeans to down jackets cost less than $10. The chain has a miniscule advertising budget. Mr. Prevor is also considered a master "tariff arbitrager," carrying an encyclopedic knowledge of tariff codes so the business can reduce costs by manufacturing products in such far-flung locales as Lesotho and Malawi.

Steve & Barry's has received much attention for its celebrity-branded products. In 2006, it signed National Basketball Association star Mr. Marbury to endorse a line of $14 sneakers called Starbury, which were hailed as an antidote to the prices for Nike and other basketball shoes. It also made a splash with a line of clothing designed by Ms. Parker, who named the line Bitten because she was "bitten by the Steve & Barry bug," she has said.

Last year, Ms. Parker and Mr. Marbury appeared on the Oprah Winfrey Show to promote their lines and the trend toward "cheap chic."

Mr. Prevor and Steven Shore were childhood friends from Long Island, N.Y., and opened their first store in 1985 in Philadelphia, selling discount University of Pennsylvania apparel and undercutting the campus bookstore. They slowly opened outlets in college towns across the country before transforming Steve & Barry's into a big-box-mall retailer.

In 2005, the International Council of Shopping Centers honored the chain with its "Hot Retailer Award," given each year to stores considered by mall managers as the best at generating buzz and bringing more shoppers to the shopping centers they occupy.

Later that year, the duo fueled those ambitions with investment capital obtained during the credit boom. Private-equity firm TA Associates Inc. paid $320 million for roughly half of the company. About half of that went into the company, with the balance -- about $170 million -- being paid to Messrs. Prevor and Shore.

Source: Wall Street Journal

Pembroke Launches Development's Phase II

MELROSE, MA-Pembroke Real Estate, the corporate real estate arm of Fidelity Investments, is pushing into its second phase of construction on Oak Grove Village here. The 16-acre neighborhood when complete will have 550 apartments and 15,000 sf of retail space. The second phase of the development will add 201 apartments and single-level, underground parking beneath five of its buildings. The projected completion for this phase is the spring of 2009. Pembroke would not comment on the estimated cost of the second phase.

The first phase of development entailed 349 apartments, a fitness center, media room, swimming pool and a great room for residents. The apartments vary one to two bedrooms that range in size from 615 sf to 1295 sf. The rent for single-bedroom units are $1690 to $1960 while two bedroom units go for $2175 to $2500. Officially, the development is considered to be in two different towns as neighborhood is bisected by the border of Malden and Melrose at the final stop of the Orange Line. The first phase of the development officially completed in August of 2007, although Pembroke began opening the development to tenants in 2006. Oak Grove Village is 97% leased to date. Pembroke is hoping the addition of retail shops to the neighborhood will attract tenants, recently opening three retailers in their development.

"We've taken special care in the design and development of this community, including our selection of retail amenities, to ensure it meets the needs of both Oak Grove Village residents and the surrounding neighborhoods," says Tom Walsh, development director of Pembroke Real Estate, in a prepared statement. The retailers--Bobby C's Ristorante, Forever Young Day Spa and Sal's Custom Dry Cleaning--total 6,000 sf with the fourth--Beauty Nail Design--opening later in the summer. Pembroke has been shopping the other three available stores at $14 per sf to lease up their entire retail space.

"We are very pleased with the response to the first phase of development and expect it to continue," says Walsh.

Source: GlobeSt.com

Struggling Talbots promotes three staff members

The Talbots Inc. announced Thursday promotions in leadership positions as part of the company's restructuring. John Fiske has been named executive vice president of human resources and administration, responsible for business development, corporate services and loss prevention in addition to his existing HR responsibilities. Fiske previously served as senior vice president, human resources for the Talbots and J. Jill brands. Julie Lorigan has been named senior vice president of investor and media relations. Lorigan joined Talbots in 1999 as the director of investor relations, and has served as vice president of investor relations since 2001. Carol Stone, a 22-year Talbots veteran, has been named senior vice president of finance. Stone, who joined Talbots in 1985, has held several positions within the organization, including vice president, corporate controller for the Talbots Inc. (NYSE: TLB).

"With a strong, seasoned executive team now fully in place, and operational initiatives successfully underway, we are well-positioned to drive profitable growth, deliver shareholder value and build on our legacy as the retail destination for the 35-plus customer," said Talbots CEO and President Trudy Sullivan, in a statement. The Talbots Inc. operates 595 locations under the Talbots brand name and 276 locations under the J. Jill brand name.

Source: BBJ

IKEA feels impact of housing slowdown

NEW YORK - Mobs of fans greeted the opening this week of build-it-yourself furniture chain IKEA's first store in New York City - but the fervor is masking shoppers' underlying frugality.

Even the most loyal followers of the Swedish leader in low-priced but sleek home decor are thinking twice about buying ready-to-assemble bookshelves or woodblock tables amid a housing slump that has lasted almost three years and the soaring costs of food and gas.

"I am definitely not shopping big items. And I am focused on sales," said Jewell A. Staley, a real estate investor who loaded her cart Wednesday at the new Brooklyn store with $10 lamps and a $29.99 bistro table. "I am spending $100 on gas every two days."

The man behind the company's global expansion, CEO and president Anders Dahlvig, told The Associated Press that the housing downturn has led to a global sales slowdown at IKEA as shoppers do less impulse buying and focus on price. And he doesn't see any economic recovery for another two years.

"A lot of things are going in the wrong direction," Dahlvig said, rattling off challenges like soaring inflation, the downturn in the job market and tighter credit. Global sales growth slowed to 11 percent in the fiscal year ended Aug. 31, compared to previous increases of about 15 percent.

The hardest-hit countries are the U.S., Germany and Britain, but Dahlvig said he's seeing business in Spain and other European countries starting to slow down as well.

Still, Dahlvig believes there are big opportunities for the privately held IKEA Group, which operates about 250 stores in 31 countries. He said IKEA has gained market share in the U.S. from home furnishings rivals like Levitz Furniture (other-otc: LVFIQ.PK - news - people ), which liquidated, and Linens 'n' Things Inc., which filed for bankruptcy protection in early May.

Instead of scaling back on overall expansion, the company is shifting its emphasis toward developing markets like China, Russia and Eastern Europe, while staying tough on prices and cutting expenses.

"Slowdowns in the economy are not forever," Dahlvig said. "It's better to stick with a strategy than panic."

The U.S. housing downturn has hit home furnishings retailers the hardest, however, as a decline in home sales stifle consumer demand to fill their new houses with curtains and new tables. The home furniture and furnishings category accounted for 27 percent of the total 4,600 store closings in 2007, according to the International Council of Shopping Centers.

"IKEA is not immune to the housing downturn, but they are in a sweeter spot than other retailers," said Shilpa Rosenberry, a senior consultant at WSL Strategic Retail. "Shoppers will spend on home given the right opportunity."

Janet Hoffman, managing partner of the North American retail practice of Accenture (nyse: ACN - news - people ), noted that the IKEA experience - along with its stylish low-price merchandise - sets it apart from other merchants. "You just don't dash in and out of the store," she said.

IKEA offers less-expensive furniture, in designs from modern to traditional, because most of what it sells requires assembly and is flat-packed, saving the company money in transportation and storage costs. Sofas range from about $399 in cloth to $1,400 in leather, while accessories include $20 mirrors, $7.99 woks and $3.99 throws in bright colors. The stores also feature cafeterias that serve Swedish meatballs and have Swedish food markets.

While IKEA faces increasing competition from discounters like Wal-Mart Stores Inc. (nyse: WMT - news - people ), which has freshened up its home furnishings sections, retailers can't match IKEA's breadth of offerings. A typical IKEA store features about 10,000 items. The Brooklyn store offers 49 room vignettes and three model homes, tailored to apartment living.
In the U.S., IKEA's second-biggest market behind Germany, sales increased a respectable 10 percent in its last fiscal year, but below the 21 percent pace of the previous year, according to Pernille Spiers-Lopez, president of its North America division. The U.S. market accounts for about 10 percent of total sales, which reached 21 billion euros, or about $32 billion, in its last fiscal year.

Spiers-Lopez said IKEA is seeing business lag in California, Arizona and Michigan - markets that have taken the biggest blow from the housing slump. But she noted that soaring gas prices are also affecting shoppers as well.

"The purchases are more planned," Spiers-Lopez said, adding that there's less impulse buying.
Shoppers are also choosing the least expensive offerings in a category, she said. For example, IKEA's lowest-priced couch, which sells for under $400, is faring well, while $79 bookcases are doing better than more expensive options. And while categories like lighting, cookware and tableware are sluggish, IKEA is seeing solid gains in furniture sales - indicating that people are careful where they shop for big items.

Alexandria Rosario of Brooklyn, who plans to move out of her parents' home, just spent $3,500 on a bedroom set at a small store, but saw an IKEA bedroom vignette that totaled $1,000 with accessories. She said she'll be back to buy.

"It's stylish, affordable, retro. It's perfect," she said.
But Aida Perez of Brooklyn was buying just a few big plastic organizers to store items for her three children.

"I'm buying stuff that I can use over and over," she said. "Maybe when I have some more money, I will come back to shop some more."

Source: Forbes.com

Foxborough development signs on six tenants

VinCo Properties Inc. announced Thursday it has signed six tenants for its 10,000 square feet of retail space in Foxborough, Mass.

Supercuts, Sharon Credit Union, Tanorama, Reliable Dry Cleaners, Foxy Nails, and Mamouzellos Pizza have signed leases for space ranging from 1,000 square feet to 2,400 square feet at Chestnut Green, a mixed-use 93-acre campus.

The new tenants join Walgreen's, The Learning Experience, Waxy O'Connor's Irish Pub and Restaurant, and Babel's Paint & Decorating Store. American Commercial Real Estate, which is managing the retail portion of Chestnut Green, brokered the deals.

The retail and commercial office will be complete in the fall of this year.

Boston-based VinCo announced in March it had closed on a $21 million financing package with Wells Fargo that allows for the final phase of office and retail construction at Chestnut Green.

Source: Boston Business Journal

Retailers evaluate new shopping centers more cautiously

ADDISON – Rising construction costs are causing some retailers to back out of new shopping center projects, according to a panel of retailers speaking Wednesday at a shopping center industry luncheon.

Still, major retailers such as Home Depot, J.C. Penney, Michaels Stores and Toys R Us say they want to hear about future projects but are scrutinizing the details more closely.

"We need a cooling-down period," said Hunter Stansbury, senior real estate manager for Home Depot Inc., which recently said it was closing 15 stores for the first time in the Atlanta-based chain's history.

But the Dallas area's population growth will create shopping center sites that the home improvement store expects to be in, he said during the event sponsored by the International Council of Shopping Centers.

Panel moderator John Weber Sr., president of Weber and Co., said construction costs are rising mostly from commodity prices rather than labor costs. It's a tough sell to explain to investors and lenders that prices have gone up 20 percent to 25 percent this year alone, he said.

Two proposed Home Depot stores that had been approved in December were canned last week, Mr. Stansbury said, due to stricter internal investment requirements and higher construction costs.

Projects that are being built in phases with two- and three-year lead times are also losing tenants as financing tightens, Mr. Weber said.
Irving-based Michaels Stores plans to open 45 stores this year, the same number it has built in each of the last 10 years, said Karen Slayton, real estate manager for the largest U.S. arts and crafts retailer. But the company will back out of a project if it's the only one left, she said.

"We're all expecting you to bring deals to us for 2010," she said.

Viral Patel, real estate negotiator for Plano-based Penney, said the company is going back over previously approved projects and delaying them "if the growth isn't going to be there."

He said that's happened in Arizona, but at the same time Penney is looking to fill in existing markets. The company is planning 36 new stores this year instead of 50.

Regardless, all deals are going through a stringent screening, including asking other retailers if they are committed to projects, Mr. Patel said.

But Texas is getting a bigger share of new stores, at least from these chains.

"Texas is our growth state," said Home Depot's Mr. Stansbury. Its Texas stores are performing better than the chain as a whole, with comparable store sales increases or slight declines.

"I'm in Texas every month," said Toys R Us real estate director Bill Oughton. The chain has no plans to retrench.

This year, the New Jersey-based chain is building 20 combination Toys R Us and Babies R Us stores under the same roof and plans to put Babies R Us stores inside 25 existing Toys R Us stores.

Source: The Dallas Morning News

German Retailer Lidl Planning U.S. Debut

Lidl, a German deep-discount food retailer comparable to Aldi but a little more upscale and brand-oriented, is making plans to enter the United States. According to Schwarz Group CEO, Klaus Gehrig, the company plans to enter the U.S. market with its Lidl banner by 2012 at the latest. Gehrig also confirmed that the next foreign market Lidl wants to enter is Switzerland.
Gehrig said the company also is pursuing a 1,000-store opening initiative in Germany, one that would bring it to 4,000 locations. Lidl does about $79 billion annually in sales and potentially could be a force in U.S. value retailing.

Source: Chain Store Age

OfficeMax to Cut 2,700 Management Jobs

OfficeMax Inc. said that it plans to eliminate 2, 700 positions in an effort to streamline operations, according to the Chicago Tribune. The company will be cutting half of its assistant managers and two-thirds of its store supervisors. OfficeMax is also creating new, lower-paid "specialist" positions on the selling floor in larger stores to take up some of the slack, the report said. These specialists will concentrate on more complicated products, such as office furniture and technology. OfficeMax expects the process to be complete by the end of the June.

Source: Chain Store Age

First Ikea store in New York City opens

The Swedish furniture retailer Ikea's latest U.S. store opened Wednesday in the Red Hook section of Brooklyn - the first in New York City, the 35th in America and the only one with views of Manhattan and the Statue of Liberty.
Eager shoppers had lined up as early as Monday outside, hoping to take advantage of free furniture and other giveaways for the first customers. The arrival of the store, with its bright blue-and-yellow exterior, was years in the making amid concerns about the traffic impact the 346,000-square-foot (32,144-square-meter) behemoth would have on the history-steeped neighborhood on the Brooklyn waterfront that still has cobblestone streets. Neighborhood activists worried that redevelopment was turning a district that dates from the early days of Dutch settlers and was a shipbuilding center for more than a century into an area overrun by luxury apartments and big stores. But on Wednesday, company representatives were joined by elected officials and others to welcome the store's opening.

"We are thrilled with the reception afforded us here in Brooklyn," said Joseph Roth, director of public affairs for Ikea in North America.

Roth said that while the store had space for 1,400 cars, there was also an emphasis on using public transportation to get there. Two city bus lines serve the area, and Ikea is offering free shuttle service from three of the nearest subway stations and a free ferry service from lower Manhattan. The store is like every other Ikea in the products it carries, but there are a couple of things that make this location unique, including the 6.5 acre (2.63 hectare) esplanade open to the public. The Brooklyn store will offer home delivery of furniture, as does every Ikea, but it will also offer a service that is only found in this store - customers buying small household items can arrange for a courier service to deliver those as well. It's a reflection of the reality of urban life in New York, Roth said.

"To take it on a bus, it's not as easy as having someone taking it home for you," he said.

Source: Plain Vanilla Shell

Big Push for Penney's: Retailer Aims to Rule Juniors With New Lines

At J.C. Penney, the approach to back-to-school is anything but academic.

Next month, in a concerted and aggressive push to become hipper and shore up some merchandise holes, the chain will roll out and market four exclusive youth-oriented brands — in juniors, private labels Fabulosity and Decree, and Le Tigre, and in young men's, American Living. The company will also start selling WhiteTag in young men's.

Juniors, along with accessories, dresses and contemporary apparel, is among the few clothing categories Continued from page one that hasn't cracked under the weight of the poor economy. It's a $1 billion-plus business at Penney's and a standout there for several years. Last year, juniors posted the best gains at the Dallas-based department store chain, and did well through Christmas.

Penney's quotes statistics from NPD, the Port Washington, N.Y., market research firm, indicating the retailer has the nation's biggest market share in junior denim, and the third biggest share of the junior market overall, behind Kohl's, the industry leader, and Macy's.

"We are looking at building on our strength," Liz Sweney, Penney's executive vice president of women's, said in an exclusive interview. "Juniors is a significant growth opportunity.

"The goal is not to be third," Sweney added. "The goal is to surpass those players out there."

Asked if Penney's ever unfurled five labels in the same season, Sweney replied: "I've been at Penney's for eight-and-a-half years and in my time, we've never done it."

For Penney's to sustain its momentum in juniors, the marketing is critical, and becomes increasingly challenging, considering the greater complexity of the offering and the need to make the messaging clear so each label projects its own character and brand image. Penney's declined to provide details of the marketing campaign, which is being planned, or how juniors is faring after last year's success. With the product development and marketing organizations in high gear, it's clear the team is anxious to score big again, though the pressure is on, considering that comparisons will be tough against last year's store gains and this year's deteriorating retail climate.

They are conditions far from ideal for such a major rollout of new lines, given declining same-store sales at many retailers, spiraling gas and food prices and rising unemployment. Myron "Mike" Ullman, Penney's chairman and chief executive officer, has described the retail environment as among the worst he's seen in his 35-year career. Of course, executives and analysts have said newness is the key to grabbing market share in good or bad times.

According to some analysts, Penney's also needs to capture more of the cool factor that certain specialty chains have, notably Abercrombie & Fitch and Hollister. "It's tough for J.C. Penney to be edgy enough to catch the fickle junior consumer," said Russell Jones, a director at restructuring and advisory firm Alix Partners, which recently conducted a consumer survey on shopping preferences. "They are always interested in being cool, and cool is usually associated with something new that hasn't been on the landscape forever."

"We're seeing that the junior market is becoming increasingly influenced by value and fashion. [Juniors] want both," said Marie Driscoll, director of Standard & Poor's retail equity research, noting that Penney's offers these things. "The only thing that J.C. Penney doesn't have to the same degree as the vertical brands in the mall is the coolness factor, but definitely their denim is cool."

Even though juniors has less discretionary income than when the economy was better and there were more part-time jobs, the market remains very brand driven, Driscoll said. However, she added that Penney's could be getting some, but not many, shoppers who are trading down from specialty players in the mall.

B-t-s at Penney's officially kicks off July 10. That's when Fabulosity, Decree and WhiteTag, along with the young men's component of American Living, developed by the Global Brand Concepts division at Polo Ralph Lauren, will be set on the selling floors. Le Tigre has been in Penney's stores since April, and the retailer has begun selling American Living in the men's, women's, home and children's categories. The season runs through Labor Day.

In terms of volume, "back-to-school is not more important than Christmas. But it's a core competency at Penney's, and a very important part of the year — probably more so than typical department store competitors," Sweney said.

The upcoming b-t-s program, said John Tighe, Penney's vice president for juniors, represents "an evolution of what's been going on for years" at the chain rather than a strategic shift. "We have a very good teen junior business, and strong market share."

For juniors, Penney's has adapted its three-year-old merchandising approach targeting four lifestyles: conservative, traditional, modern and trendy, and three price tiers: good, better, best. It's designed to fill voids in the assortments and already has been implemented extensively in the women's and home areas.

"It's a very, very strategic methodology to determine what brands we need in our assortment," Sweney said.

Penney's juniors department now targets four lifestyles, which are:

- All-American, considered the lifestyle with the widest appeal and driven by denim, fashion knits, fleece and sweaters. The key brands are The Original Arizona Jean Company, Levi's, Flirtitude, C7P...A Chip and Pepper Production, Le Tigre, which is owned by Kenneth Cole Productions, and Decree.

- Fast Track, for trendy fashion denim and "conversational" prints, represented by Fang, Underground Soul, Self Esteem and Vigoss.

- Dressy/Going Out, for evening and work clothes, including dressy separates for special occasions and the brands B Wear, Tracy Evans, Heart and Soul and Star City.

- Urban, which targets fashionable hip-hop styles including Southpole and Fabulosity by Kimora Lee Simmons.

"A few years ago, we were really 'Mom's store,'" Sweney said. "But with all the initiatives over the last few years, we are becoming much more relevant. Many teens really look to us. They might shop the mall to come up with style ideas and then she comes to Penney's to get style with great prices. We are [no longer] Mom's store. We are very relevant to the teen style."

According to Penney's executives, where teens go, adults follow. "Through our research, we found out how influential the teen is in the household. Teens today are much more influential on the spending than ever....They're really style advisers for their family," said Tighe.

What's critical to making juniors click is the production cycle and flowing the goods in so there's constant newness. Penney's says its production cycle time in juniors, from the time the goods are designed to when the customer can first buy them, has been reduced to 17 weeks from 52 weeks three-and-a-half years ago. Also, there's an improved flow, with key items coming in weekly.

Decree will be the lead label in the juniors department, and could be among the top brands at Penney's, with Arizona expected to maintain its top position as the biggest in-house label.

While Arizona is collegiate, preppy and item-oriented, Decree will offer layering, feminine details and a greater sense of individual style and outfitting. Decree will fall into Penney's better tier, with prices from $18 for a tank top to $38 for a five-pocket pair of jeans and $85 for outerwear. There also will be a separate Decree "accessory zone" to round out the outfitting, as well as signature fixtures, denim tables, lifestyle graphics and a platform of three mannequins. "It's a full teenage-girl brand, head-to-toe," Sweney said.

Fabulosity takes a more opulent, urban and evening approach, with a lot of gold looks and animal prints, and T-shirts, knit tops, sweaters, jeans, skirts, dresses, hoodies, jackets and outerwear. With items ranging from $29 to $108, Fabulosity falls into the retailer's best pricing tier. There also will be huge pictures of Kimora Lee Simmons, the celebrity behind the label.

Penney's perception of teens, which executives point out is based on research, seems more Richie Cunningham than James Dean. "The most interesting thing about teens is that they are really very close to their parents," Tighe said. "Seventy five percent like to do things with their parents, and kids want to succeed. They are very much into being successful. There isn't a rush to disassociate from their parents."

Ken Hicks, Penney's president and chief merchandising officer, takes the point of view one step further. "Teens have always been a cornerstone of our business," he said. "And they are emerging as today's key influencers of purchase decisions made by their family."

Source: Women's Wear Daily

120,000-SF Lifestyle Center Under Construction

GLOUCESTER TWP., NJ-Stanbery Development has launched construction for the Shoppes at Cross Keys, a 120,000-sf lifestyle shopping center on 24 acres. The site is at a newly created interchange of Berlin-Cross Keys Road, also known as County Road 689, and the Atlantic City Expressway in South Jersey. The cost of the project hasn't been released.

Slated to open in Sept. 2009, the center's tenant roster will feature such names as Banana Republic, Ann Taylor Loft, Coldwater Creek, Chico's, Jos. A. Band and White House Black Market. Also signed on to date are Select Comfort, Lane Bryant, T Mobile, New York & Co., Justice, Rack Room Shoes and Bensi Italian Grill.

"I support it 1,000%," said Gloucester Twp. Mayor Cindy Rau-Hatton at this week's formal groundbreaking. "It is an exciting opportunity for our community, and it will also provide much-needed job opportunities and economic growth. It includes a number of stores and restaurants that are welcomed."

P. Jon Meyer, a founding partner of the Columbus, OH-based Stanbery says that "retail development has been expanding dramatically along Berlin-Cross Keys Rd. because of the location halfway between Philadelphia and Atlantic City. But there has been little to satisfy shoppers that are looking for better apparel and dining. We're excited to fill that niche."

Harvey Sternberg, a local businessman who owns and is developing several outparcels surrounding the site, including Bertucci's Italian Ristorante and Texas Roadhouse units, says that "there is a lot of traffic and there are a lot of people." The Shoppes at Cross Keys trade area numbers more than 310,000 residents and a daytime workforce population of about 85,000.

The start of construction for the Shoppes at Cross Keys comes just as Stanbery is wrapping up another New Jersey project, the 113,000-sf Shoppes at Flemington to the north in Hunterdon County. That project is now slated to open in early September.

Source: GlobeSt.

Retail Not Part of Jones Lang LaSalle/Staubach Deal

Jones Lang LaSalle Inc.'s proposed $613 million acquisition of Addison, Texas-based real estate advisory firm the Staubach Co., which would create the second largest commercial real estate brokerage firm in the world, won't boost the Chicago-based global real estate giant's retail division.

The deal, which has been rumored for weeks, was finally announced late Monday night. But the planned merger does not include Staubach Retail or Cypress Equities, Staubach's retail development division.

“It’s not going to impact us at all,” says Greg Maloney, CEO and president of Jones Lang LaSalle Retail, its Atlanta-based third-party property manager.

Jones Lang LaSalle had considered buying both Staubach Retail and Cypress Equities, which are independently owned and operate under licensing agreements with Staubach, but decided that their existing structures would make the deal more difficult, Maloney says. Staubach Retail and Cypress Equities will continue to operate under long-term licensing agreements with Staubach and Roger Staubach will remain on the board of directors of both firms.

The deal will result in Jones Lang LaSalle commanding a combined $186 billion in investment sales and leasing volume, second only to New York-based CB Richard Ellis with $264.2 billion, according to National Real Estate Investor.

According to the terms of the deal, Jones Lang LaSalle has agreed to pay $613 million for Staubach, plus $114 million in earn-out payments over the next four-and-a-half-years if certain performance measures are met. The deal will give Jones Lang LaSalle a stronger tenant representation platform and raise the U.S. share of the company’s business to 37 percent from 29 percent, according to Vance Edelson, an analyst with Morgan Stanley.

Also, as a result of the acquisition, Staubach will end its eight-year-old alliance with DTZ, a global real estate advisor. The London-based firm partnered with Staubach to bolster its North American presence, but in recent years has built a direct base through acquisitions of U.S.-based firms such as DTZ Rockwood, DTZ Barnicke and DTZ FHO Partners. Following the announcement of the Jones Lang/Staubach deal, DTZ said it had served Staubach with a notice of termination of partnership. It also is cutting ties with Staubach Retail, despite it not being part of the acquisition. However, Clay Smith, president of Staubach Retail, says losing the alliance with DTZ won't affect the firm too much since the brokerage was largely focused on providing corporate real estate services to multi-national corporations.

“We are a retail company run by retail people," Smith says. "We are not focused on corporate users of real estate."

Jones Lang LaSalle wouldn't rule out pursuing Staubach Retail in the future, Maloney says. However, being part of Jones Lang LaSalle would interfere with the Staubach's core business model, which is focused on tenant representation, according to Smith.

The departure from its exclusive focus on tenants, which has been a legacy for the Staubach brand, is among the challenges facing the Jones Lang LaSalle / Staubach union, Edelson notes. In a June 17 report, he wrote that Staubach’s “'No conflicts of interest’ approach’ could be jeopardized as part of a larger organization serving both sides.”

Jones Lang LaSalle's stock closed Tuesday at $66.19 per share, up 1.56 percent since the beginning of the day Monday.

Source: Retail Traffic

Kohl’s gets lift from better exclusives

Chicago – Trading up with exclusive brands is working well in the home department, said mid-tier retailer Kohl’s – and the company intends to accelerate the process.

Even though the home business is “still pretty soft,” said Kohl’s chairman and ceo Larry Montgomery, speaking at the William Blair & Company Growth Stock Conference here today, the 957-store chain is “drawing customers from traditional department stores” as such shoppers give Kohl’s “huge credit” for its upgrades to quality, value and styling across its merchandise mix.

Montgomery said these fashion brand-destination Kohl’s consumers, “shopping for example for Simply Vera Vera Wang – are spending more, they’re opening up charge accounts, and they’re shopping in more than one area – which is like the trifecta for us.”

John Worthington, senior evp of stores, emphasized that long-term plans are bearing fruit at Kohl’s. He referred to the expansion of the better and best levels of merchandise, and the exclusive brands that have been added to the mix over the last two to three years, including Candie’s, Simply Vera Vera Wang, Daisy O, Elle, apt. 9 and Food Network. “Contemporary and updated are also growing well,” he said of those fashion components.

Kohl’s hit a 39% penetration of private and exclusive labels in 2007, and expects that to reach about 41% this year.

Worthington said in-store presentation has been key; for example, he noted that the use of “strike point” corner fixture packages has received favorable customer feedback, and said, “Everything on it exceeded plan.”

Source: Home Textiles Today

Wal-Mart cuts capital expenditure forecast

NEW YORK, June 17 (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz) on Tuesday lowered its capital expenditure forecast for its current fiscal year, saying it remains focused on moderating supercenter store growth in the United States.

The discount retailer said that for its fiscal year ending Jan. 31, 2009, it now expects capital expenditures to be in the range of $13.0 billion to $14.0 billion, down from its previous view of $13.5 billion to $15.2 billion.

At its analyst meeting in October, Wal-Mart cut its capital expenditure forecast and scaled back on planned supercenters -- or locations that combine a full grocery store with a discount store -- as it faced slowing sales in a saturated U.S. market.

The world's largest retailer said the pullback would allow it to concentrate on boosting sales at its existing stores by remodeling older locations and improving its merchandise assortment.

In recent months, Wal-Mart's sales at stores open at least a year, or same-store sales, have been outpacing those of competitors as cash-strapped U.S. shoppers look to buy basics like food and medicine at discounted prices.

In May, Wal-Mart's U.S. same-store sales rose a stronger-than-expected 3.9 percent while smaller rival Target Corp (TGT.N: Quote, Profile, Research, Stock Buzz) reported a same-store sales decline of 0.7 percent.

Speaking at a William Blair & Co conference, which was broadcast over the Internet, Wal-Mart Chief Financial Officer Tom Schoewe said the retailer's May sales were boosted in part by inflation and tax rebates, which are currently making their way into the hands of consumers.

He said the real question remains how much of a benefit it will continue to see once all the checks make their way into the hands of consumers by mid July.

Source: Reuters

Wal-Mart Going Upscale with Marketside Concept

Wal-Mart's formula for success has involved offering low prices on everyday staples to consumers looking to save any penny they can in an economic environment where fuel and food costs keep going up.

Interestingly, it appears that Wal-Mart may be deviating from its usual script with its new small format Marketside concept. The new stores are being built around a "premium" positioning rather than focusing the consumer on low-prices, according to a Financial Times report.

Wal-Mart's tact is curious considering the low price approach that Tesco has taken with its entry into the U.S. market under the company's Fresh & Easy Neighborhood Market banner. It would appear that the Marketside concept will be more like Safeway's Market by Von's small store format.

Tim Mason, chief executive of Tesco US, told the Financial Times that he doesn't see the new Safeway format as being directly competitive with Fresh & Easy. "It is very expensive and it has got an awful lot of service counters in it - so it has a meats counter, a bakery counter, a fish counter - which take an awful lot of service in a small store, so it is doing a slightly different thing," he said.

Wal-Mart has indicated that Marketside will focus on delivering "meal solutions" for consumers. The company's recruitment ads describe the store as offering "unique solutions for time-starved consumers in a premium fresh/convenience oriented format."

The Financial Times speculates that Wal-Mart may be developing a separate private label line for Marketside rather than import its existing store brands into the new environment.

Source: RetailWire.com

Tesco To Ease Fresh & Easy Concerns With New Opening

SAN FRANCISCO -(Dow Jones)- Tesco PLC (TSCDY) reaffirmed its commitment to its U.S. store expansion Monday and said the Fresh & Easy business was thriving, despite fears the retailer had misjudged with its first foray into the U.S. market.

Tesco is due to open its first U.S. store in three months on July 2 after suspending its store opening program in March - a move that sparked fears the U.S. venture had run into a trouble.

A Tesco spokeswoman dismissed these fears Monday and said the business was " thriving." She also reiterated Tesco's commitment to opening 200 U.S. stores by February 2009.

A new store on in Manhattan Beach, Los Angeles, will be the company's 62nd store in the U.S. when it opens on July 2.

The opening marks an end to the three-month hiatus in the rollout of the U.S. venture. Tesco, the U.K.'s largest grocer, began launching the small-format stores, in the southwestern states of California, Nevada and Arizona, in November 2007, but in April the company halted the store-opening process, fueling fears that the process wasn't going as smoothly as planned.

While analysts on both side of the Atlantic agreed Tesco's U.S. experiment had opened up a promising new market, they said the store formats had not met all of American consumers' needs. The company appears to have taken advantage of this pause in growth to take stock of the situation and address some issues.

The company's U.S. chief Tim Mason laid out the changes in an interview with the Financial Times Monday. The company has increased its focus on price, introduced more discounts, stepped up its leafleting and marketing and introduced more ready meals into its stores, he was quoted as saying.

Shore's Clive Black said the comments should help to "calm investor apprehension on the U.S., suggesting control, calm reflection."

Whether Tesco has eliminated all of its perceived teething problems remains to be seen.

Analysts in the U.S. had complained Fresh & Easy needed to build a better relationship with U.S. suppliers, improve its market positioning and make more use of the abundance of fresh produce available in the American southwest.

"I think the Fresh & Easy premise is sensible, but the execution has so far been lacking," says U.S.-based Jim Prevor, founder and editor in chief of Produce Business and Deli Business Magazines, who also acts as a retail consultant.

Tesco hasn't yet broken out any sales figures for Fresh & Easy. The lack of hard financial data has disappointed some analysts. In April Tesco did reveal higher than expected sales densities per square foot, which provided some comfort to the market, according to analysts at Citi, but some fears remain.

"We remain cautiously optimistic on the U.S. business," Citi wrote, but added "we still struggle to interpret the three-month planning hiatus as anything other than slightly concerning."

The fact Tesco has identified a promising market isn't in dispute. TNS Retail Forward estimated last year that the stores could generate $4 billion in sales for Tesco by 2011. Mike Griswold, a retail analyst with Boston-based AMR Research, says Fresh & Easy has "shone a spotlight on a significant opportunity for U.S. retailers," attracting the interest of the competition.

Supermarket giant Wal-Mart Stores Inc. (WMT), has also said it plans to launch small-format stores called Marketside, the first of which will launch in Phoenix, Arizona. Safeway's southern Californian subsidiary Von's has also opened a slightly larger store in Long Beach, California, close to a planned new Fresh & Easy store.

Retail analysts say it remains to be seen whether, having identified this market, Tesco can build a leading position. Initial indications, according to retail analyst Jim Hertel, a managing partner at Illinois-based Willard Bishop, are that in the weeks after launch sales were around the $50,000 per store per week level. Hertel noted, however, that he believed these sales figures were now rising to around $70,000 to $80,000 per store per week.

Tesco's initial sales targets are ambivalent. Analysts say they were told unofficially that Tesco hoped to achieve sales of $200,000 per store per week, but the timescale by which they hoped to reach this target is unclear.

Hertel points to initial impressions that the Fresh & Easy stores, typically 10,000 square feet, don't always chime with the U.S. consumer experience. "The store formats in the South West tend to be larger and have a different store orientation. Fresh & Wild appears to have been designed for a more frequent, urban shopper and the experience is more utilitarian than Americans are used to."

Jim Prevor says he has identified key failings, which, he says, suggest that despite extensive research, Tesco hasn't fully understood the U.S. consumer.

He points to the fact that in the U.S., and especially in the southwest, zoning laws mean shopping tends to take place in commercial areas, rather than residential districts. With lower population density than in the U.K., and with more people driving to shops, this may be a failing, he says.

But, he adds, "Where they really fall down is on the 'fresh' part. Almost every U.S. supermarket has a deli counter. Even in a small-format Safeway there's typically a butcher, a baker and a sandwich-maker. When you go into a Fresh & Easy you see a rotisserie chicken served in a plastic bubble stone cold. This isn't what Americans understand as fresh." He also believes that Tesco, which in the U.K. is known for very sophisticated market segmentation, has so far failed to bring this approach to the U.S. and, notably, has yet to deploy its successful loyalty card, which allows it to gather large amounts of customer data in order to fine-tune merchandise and promotions, in the U.S.

"The stores in the U.K. are very diverse, but here they have a virtually identical product range, everywhere from very upscale areas such as Scottsdale, Arizona to virtual slums such as Compton, Los Angeles, so in effect this means they're targeting everyone and pleasing no-one."

But AMR's Griswold says its too early to write off Tesco's American experiment. "They have some core competencies, particularly in supply chain management, which have served them very well in international expansion and which are very transferable to the U.S."

"If successful in the far West, Fresh & Easy can be expected to move east," said Shore Capital's Clive Black, "something that we have factored into our expectations since day one."

Chicago and the Midwest are rumored to be the next territories for Fresh & Easy's expansion. The Tesco spokeswoman refused to comment on the speculation that Fresh & Easy would launch in the Midwest.

Source: CNNMoney.com

Frugal shoppers hit dollar stores

The shops strive to keep prices down as cost of living rises

Janice Allen has always been a price-conscious shopper, especially for groceries.

That bargain prowess has paid off in the past six years since Allen founded the Community Academy of Jacksonville, a day-care and after-school program provider for youths ages 1 to 12 years.

Paper products - cups, plates and napkins - school supplies, snacks and a host of other necessary goods could strain any budget.

But Allen says she gets the best prices by employing the same strategy for family and business shopping: hitting the dollar stores.

As rising grocery prices have added to pressure from higher gasoline and housing costs, shoppers like Allen are expected to keep flocking to discounters with "dollar" in their names to stretch a buck.

Even without a history of price shopping, they might stumble on a similar approach.
Armed with a master list, Allen careens up and down every aisle to check out the steady stream of new items, which in some stores includes refrigerated foods.

While most trips are to Dollar Tree, Allen routinely looks for deals at Dollar General and Family Dollar, also in Lakewood.

The 53-year-old still shops the grocery store, but mostly for what's left on the list and special items such as meats.

Some might see it as a lot of work, but to Allen it's imperative.

"I'm an advocate for dollar stores because in this business, you have to budget to make ends meet," Allen said. "You're getting the same quality and in most cases the same quantity for that dollar."

By 2011, nearly 35,100 stores are projected nationwide (up 1,665 from 2006) and sales are expected to reach $50 billion, according to TNS Retail Forward's "Industry Outlook: Dollar Stores and Other Small-Format Value Retailers."

The retail industry consulting firm notes that consumers can expect expanding food selections, different payment options and attention to improving the overall shopping experience.

Another benefit to shoppers is each company's desire to deepen its competitive niche.

Dollar Tree's niche is focusing on a single price - $1 for every item in a store - for more than two decades, spokeswoman Schelle Davis said.

The company offers discounts through long-standing relationships with its domestic and international suppliers, nine distribution centers and focusing on its "four pillars" of health and beauty items, food and snacks, seasonal goods and party supplies.

Dollar General's items vary in price and focus on consumables, such as laundry detergent, toothpaste, hand soap and facial tissues, with both brand and off-brand names.

Underwear, socks and other basic apparel items are sold and stores are smaller than competitors at 6,900 square feet, spokeswoman Tawn Earnest said.

At Family Dollar, shoppers can find a variety of groceries, clothing (including brand name), some shoes, pet supplies and seasonal goods such as tents, coolers and other summer items.

The company's Web site also promotes its automotives, hardware and paint sections, something other dollar stores are less likely to carry.

Deepening niches amid pressure to compete against each other and keep Wal-Mart at bay means continued focus on offering the best prices. That's something consumers will undoubtedly welcome as the overall cost of living rises.

Duval County Extension Service Agent Anita McKinney is familiar with dollar stores both personally and from clients.

While quality can be an issue for some people, McKinney said the Extension's budgeting classes include dollar stores in a discussion of cheaper shopping opportunities.

"It's a way for folks who don't make a lot of money or are trying to be careful with their money to find a deal," McKinney said. "It fills a need in the market place."

Source: Florida Times Union

Baltimore: Local developer to give Essex shopping center a facelift

An Essex shopping center is slated for a makeover, nearly six years after it lost its major anchor tenants and most of the smaller businesses that depended on them.

Pikesville developer Carl Verstandig has a contract to buy for the 29-acre Diamond Point Plaza for $15 million. Another six acres will cost about $3 million. He plans to spend another $12 million to redevelop the Eastern Avenue site, replace find new merchants to take the place of the former Sam's Club and Ames department store, and fill up the dozen vacant storefronts lining the center.

With the ink not yet dried on the deal, which is expected to close in the next 60 days, ShopRite Supermarkets and Food Lion have each signed letters of intent to take space in the 65,000-square-foot former Ames store. Lowe's Home Improvement and BJ's Wholesale Club also have said they are interested in moving into the 162,000-square-foot former Sam's building, but those discussions are not as far along, Verstandig said.

With those deals in place, Diamond Point could also attract a handful of smaller businesses. Among them, Verstandig said, a bank, drug store chain and an auto parts store have each said they are considering opening branches on a trio of 2-acre pad sites Verstandig bought adjacent to Diamond Point.

Breathing new life into the property has been on the mind of Baltimore County economic development officials, who view Diamond Point as an untapped resource.

Developed in 1988, the center is passed by a large number of motorists who commute along Maryland Route 150 between Middle River and Baltimore City, said Chris McCollum, a commercial revitalization specialist with Baltimore County's economic development department.

Giving those drivers a reason to stop off and shop, McCollum said, could be a great economic driver for the community.

The center lost its two major anchor stores, a Sam's Club and an Ames department store, in 2002, and one by one, most of its smaller tenants closed up shop as well. Now only two stores remain: a Chuck E. Cheese and a Sally Beauty Supply.

McCollum said the project could be eligible for commercial revitalization tax credits that would freeze property taxes at their current rate for up to 10 years. But that will depend on the extent of Verstandig's plans.

"The right plans could turn that center into a gem," McCollum said. "It has a ton of different options that would be exciting to us. The status quo is not exciting to us, and a low end retail is not exciting to us."

The redevelopment would come after a prolonged legal battle sparked when Diamond Point Plaza LP, which owned and operated the center, defaulted on its mortgage in 2002. Diamond Point later sold the center to ORIX Capital Markets LLC of Dallas in March 2006 for $10.3 million.

According to court documents, Wells Fargo Bank N.A. claimed Diamond Point failed to disclose Sam's Club was going to close its store when it refinanced a $16 million mortgage on the property in June 2000.

The loan, through Pinnacle Capital Group LP, was assigned to Paine Webber, and then to Wells Fargo. The Maryland Court of Appeals ruled against Diamond Point and awarded Wells Fargo $22.8 million in principal and interest from Diamond Point and its partners.

Source: Baltimore Business Journal

Experiential Concepts Ready for Rollouts

While retail expansion has slowed significantly this year, many of the newer concepts are offering fresh takes on the experiential retailing trend, according to Retail Traffic magazine. At experiential retailers, the way consumers interact with the store environment is often more important than the merchandise.

For example, American Girl Place stores include a café with special booster seats for the chain's 18-inch dolls, an on-site theater featuring young actresses as characters from the company's books, and a salon where girls get their dolls' hairdos made over. Other retailers known for experiential strategies include Apple stores, Build-A-Bear Workshops, FAO Schwarz, Niketown, and outdoor retailers such as REI and Bass Pro Shops.

Among the new crop of experiential retailers, according to Retail Traffic, is Gilly Hicks, an intimate apparel spin-off from Abercrombie & Fitch. The 10,000 square foot concept is built around the fictional story of Gilly Hicks, an English teen who moves to Australia with her family in the 1920s and opens a lingerie store. It resembles a beach house but is designed as a colonial-style manor house with rooms featuring fireplaces, chandeliers, plush sofas and antique-styled cabinets. "Gilly's" portrait hangs in the "living room" of the store, between the foyer and the "bra library" where hundreds of bras are displayed on dark cherry wood shelves.

Other examples of newer experiential concepts:

• House of Hoops: A basketball-themed concept from Nike and Foot featuring technology to help consumers color coordinate their footwear and apparel and customize T-shirts. A VIP Area allows shoppers to read magazines, or check out commercials and behind-the-scenes interviews with top NBA players - all from leather chairs in front of a 65-inch TV screen.
• Ridemakerz: Described by the Chicago Tribune as the American Girl for boys, consumers can customize their own toy car or truck with a choice of colors, tires, wheels, lights and various options. Each comes with a certificate of title, personalized license plate and assembly tools;
• Aura: From French cosmetic giant, L'Oreal, the stores feature diagnostic stations where salespeople help customers pinpoint the product best suited for their skin type;
• Finish Line Ltd: Created by Nike and Finish Line, the stores are divided into three sections - running, sport style and training - and feature a wide array of products ranging from Nike footwear to iPod Nanos. Customers can test numerous products before buying them.

"You can't just put merchandise in a store nowadays," Mike Tesler, partner and principal with Retail Concepts, told Retail Traffic. "You have to put action into it."

Source: RetailWire.com

True Religion opens first store in New England market

True Religion Apparel Inc. opened its first store in New England in the Back Bay.

The 1,984-square-foot store, which opened Thursday, is located at 119 Newbury St. It will carry the True Religion collection for men, women and kids, as well as a full range of licensed products, such as footwear, swimwear, headwear and handbags.

True Religion (Nasdaq: TRLG) is based in California; its core product is designer jeans and apparel.

Source: Boston Business Journal

Wal-Mart and Penney roll out casual furniture

Wal-Mart's new Canopy and J.C. Penney's new Linden Street home furnishings brands don't have the name recognition of an Ikea or a Pottery Barn, but they're going after the same customers.

Last month, Wal-Mart Stores Inc. mailed shoppers a 33-page Canopy catalog and launched the Web site www.canopyliving.com.

Online, the find-a-store function leads shoppers to Wal-Mart locations.

The catalog notes that items delivered to Wal-Mart stores have free shipping.

The Wal-Mart name scarcely appears, by design. The company says it's trying to create a brand identity for Canopy, a line of ready-to-assemble furniture, bedding, rugs, lighting, dinnerware and table linens.

Penney created Linden Street because it noticed customers were gravitating to its simpler furniture, window coverings and bedding.

They were buying comfortable everyday furniture. The emphasis was on function with some fashion, but not so ornate.

Analysts say the two retailers are launching modestly priced furniture lines this summer to satisfy a shift that's been coming for some time.

Even before the housing downturn put home furnishings retailers in a spiral, Americans were migrating to a more casual style and lower prices for furniture.

Penney's and Wal-Mart's moves signal a recognition that the furniture industry has to "find ways to attract a new generation," said Jerry Epperson, a longtime furniture analyst for investment banking firm Mann, Armistead & Epperson.

"They aren't going to do it selling $5,000 to $10,000 dining room and bedroom suites," he said.

"Younger people are buying items, not suites, and they want them to be practical and functional."

Smaller living spaces, younger households and the desire for everything to be both functional and fashionable have led consumers to ready-to-assemble furniture and modestly priced pieces that will move from first apartment to family room.

Ikea, now in 33 U.S. markets, gets credit for showing the way. Others say it goes deeper than that.

If we're comfortable buying clothes at Target and wedding dresses at J. Crew, why not buy a sleigh bed from Wal-Mart or a candlelight chandelier from J.C. Penney?

Shifting tastes

There's "a very real shift" to less expensive furniture, said Nick McCoy, furniture analyst at TNS Retail Forward.

Even before the economic headwinds, Retail Forward's shopper surveys found a mindset toward changing furniture more often, rather than buying and sticking with heirlooms.

Crate & Barrel recognized the shift a few years ago and created CB2 to compete with Target and Ikea.

While Wal-Mart's and Penney's timing may seem awful, Mr. Epperson said it's excellent.

Whatever product is on the floor when the economy turns will get the attention of shoppers, he said.

Every city has had independent furniture stores that have gone out of business.

Major specialty furniture chains from Pottery Barn to Restoration Hardware are hurting in this downturn, but they have loyal customers.

Whether their shoppers gravitate to a Penney or a Wal-Mart remains to be seen, Mr. McCoy said.

"Still, everyone should be paying attention to cross-shopping. People may at least try it out with a piece or two," he said.

Price and function are the hooks.

"Ikea is one of the most successful in recent years, and they are a lower-price retailer," Mr. McCoy said. "Linden Street and Canopy are lower-priced, too, but these days everything is competing with gas pumps and grocery stores."

Jeff Allison, Penney's executive vice president for home, said that although the furniture business is tough, "we're in it and we're going to continue to be in it."

Linden Street is in 30 home categories, and he expects that window coverings and items that people can replace easily will initially do best.

"We'll be cautious with the furniture part of it," he said.

To get Linden Street's larger pieces into stores that don't have furniture departments, Penney will use the merchandise instead of store fixtures.

It will set up beds, nightstands, rugs and lamps in the bedding department to display sheets and comforters.

Signs will let shoppers know the furniture is for sale, too.

Linden Street

Penney's in-house design team created Linden Street.

The theme is simple, with two wood finishes – pine and cherry – and three colors for slipcover sofas. Lots of function is built in, such as an electrical outlet hidden in a nightstand.

Steve Castella, vice president in product development for soft home goods, said the creative team looked at what was missing from Penney's furniture offerings when it formulated a new lifestyle brand.

Those items matched with individual pieces that online customers were buying: "less formal, done-up, embellished and more monochromatic," said Deb Schweiss, J.C. Penney home trend director.

Then the team focused on how people live, said Kevin Rooney, vice president in product development for hard goods.

"People take their laptop to bed and don't want to crawl behind a bed to plug it in. There are different sizes of dining rooms, so we came up with the modular storage units," he said.

Price was an overriding issue, he said. Linden Street is priced at Penney's opening and midprice levels.

Canopy

Wal-Mart is already the largest U.S. seller of furniture, but it's better-known for dominating grocery, toy and many other categories.

It's trying to broaden the appeal of its home furnishings with Canopy and will add Better Homes and Gardens products this fall, Wal-Mart spokeswoman Tara Raddohl said.

Unlike Penney's new brand, Canopy is ready-to-assemble furniture with "friendly" instructions available online.

Only about 15 stores, mostly in the Southeast, have vignettes set up.

Catalogs are available in all home departments.

Source: The Dallas Morning News

Fresh look for Fresh & Easy

Tesco rethinks format to create a 'warmer' feel as it prepares to press on with US store openings

Tesco is revamping its Fresh & Easy stores in the US to create a "warmer" shopping environment as the grocery giant gears up to resume openings.

The 61 Fresh & Easy stores, which launched with a functional design and basic layout, will be given more colour and signage. The overhaul is in response to shopper feedback.

Tesco corporate and legal affairs director Lucy Neville-Rolfe said consumers' reaction to Fresh & Easy has been "very strong" and confirmed the shop improvements. She said: "We've been working on brighter stores, better ranging, signage – the sort of things we always do when we move into a new market."

The grocer, which opened its first Fresh & Easy store in November last year, paused expansion in April to assess the format. As part of the refresh, which will be completed by July, further signage will be added to popular products.

A Tesco spokesman said the design has been "tweaked" and, while it will maintain its clean look and feel, the changes should help shoppers "dash in and find the milk or whatever other products they want to find quickly and easily".

The grocer has also added a further 250 products to its own-label line, including new ready meals and juices, and the stores now also take American Express cards.

"Tesco took a break in order to tweak a few things," said Planet Retail grocery research manager Natalie Berg. "The concept is hugely innovative, but, as other supermarkets in the US are full of signage and promotions, the Fresh & Easy stores can look a little stark in comparison."

On July 2, Tesco will open a store at Manhattan Beach, California, and remains committed to having a total of 200 stores in the country by the end of the year.

On Tuesday, Tesco reported group sales for the 13 weeks to May 24 rose 13.7 per cent. In the UK, like-for-like sales were up 3.5 per cent, excluding petrol, but non-food growth slowed.

Neville-Rolfe said: "We're well within our 3 to 4 per cent like-for-like target and are in good shape.

"We've seen good growth in our core food categories, but what we find is higher food prices affect non-food demand. We have focused on how we can help people save money."

Source: Retail Week

Cost Plus Rejects Pier 1's Unsolicited Proposal

OAKLAND, Calif.--(BUSINESS WIRE)--Cost Plus, Inc. (NASDAQ: CPWM - News) today announced that its Board of Directors has unanimously rejected the Pier 1 Imports, Inc. (NYSE: PIR - News) unsolicited stock-for-stock merger proposal it received on June 6, 2008.

After careful consideration of Pier 1’s highly conditional proposal, and in consultation with its legal and financial advisors, Cost Plus’ Board of Directors has unanimously determined that Pier 1’s proposal is not in the best interests of Cost Plus and its shareholders.

The Board’s response to the proposal was communicated to Pier 1 in the following letter:

June 16, 2008
Mr. Alexander W. Smith
President and Chief Executive Officer
Mr. Tom M. Thomas
Chairman of the Board
Pier 1 Imports, Inc.
100 Pier 1 Place
Fort Worth, TX 76102

Dear Messrs Smith and Thomas:

Our Board of Directors has met to consider the unsolicited proposal it received from Pier 1 on June 6, 2008 to acquire all of the outstanding shares of common stock of Cost Plus. After careful consideration, and in consultation with our legal and financial advisors, our Board has unanimously determined that Pier 1’s proposal is not in the best interests of Cost Plus and its shareholders.

Our experienced management team, led by our Chief Executive Officer Barry J. Feld and supported by our dedicated and enthusiastic employees, is committed to delivering sustainable long-term growth and profitability. We believe that our strategic plan, which is yielding positive results, will provide Cost Plus shareholders with superior and compelling long-term value as an independent company. Despite your statements to the contrary, Cost Plus has significant liquidity to pursue its business objectives and to deliver improvement in our core business metrics.

Your proposal to combine our operations is not attractive from either a financial or a strategic perspective. It is both distracting and ill-timed given the difficult retail environment and the progress we have made investing in and improving our business. We believe that our shareholders want us to remain focused on our business and provide superior operational execution.

It is therefore the Board’s strong and unanimous belief that Cost Plus shareholders will be best served if the Company remains independent and continues the execution of its business plan.

Sincerely,

BOARD OF DIRECTORS

By:

/s/ Fredric M. Roberts
Fredric M. Roberts
Chairman of the Board of Directors

Source: Yahoo.com

Restoration Hardware Shareholders Approve Buyout

Restoration Hardware Inc. said its shareholders approved selling the company to the private-equity group Catterton Partners for about $179 million. The company said Thursday that more than 99% of the votes cast at the meeting were in favor of the deal. Catterton Partners will buy the outstanding shares of the company for about $4.50 per share in cash. Restoration Hardware said the deal should be completed next week. The retailer said it also reached a preliminary agreement for the settlement of a shareholder complaint filed in a California state court against the company, its directors, Catterton Partners and certain shareholders participating in the acquisition. Under terms of the settlement, the suit will be dismissed with prejudice and the company will establish a fund of $3.7 million to be paid to shareholders when the acquisition deal closes. The company said it settled the case to "expedite the closing" of the acquisition.

Source: Chain Store Age

Patriot Place set to hire 2,000 workers

Patriot Place tenants will create 2,000 full and part-time jobs over the next year. Patriot Place, the 1.3 million-square-foot retail and hotel facility, which is under construction in Foxborough, Mass., will feature more than 70 shopping, dining and entertainment destinations. The project, backed by New England Patriots owner Robert Kraft, is being built adjacent to Gillette Stadium. Bass Pro Shops, Staples, Circuit City, Christmas Tree Shops and Off Broadway Shoe Warehouse are already open and more than half of the 70 stores will be open by this September. The CBS Scene Restaurant & Bar, a three-level, 15,000-square foot restaurant and entertainment venue, for example, needs to hire 150 people. Red Robin Gourmet Burgers, a family restaurant, is also hiring. Local retailers to open include Davio's, Skipjack's, Dunkin' Donuts and Baskin Robbins.

Source: BBJ

Bag'n Baggage Sold to Gart Capital Partners and Colorado Baggage

In a transaction in which Clear Thinking Group LLC served as advisor to the seller, Texas-based luggage retailer Bag'n Baggage has been sold to a new company formed by specialty retailer Colorado Baggage Company and Gart Capital Partners (GCP). By combining Bag'n Baggage's 34 stores in 12 states and Colorado Baggage's 10 locations in Colorado, the newly created Colorado Bag'n Baggage will emerge as one of the nation's largest specialty retailers of luxury luggage, business cases, women's lifestyle bags, and business and travel accessories. The new Denver-based company will be led by Colorado Baggage's management team, including president and CEO Peter Paradise and COO Tom Nelson.

"The combination of Colorado Baggage with Bag'n Baggage appears to be a natural strategic fit," said Adam Cook, managing director of Hillsborough, N.J.-based Clear Thinking Group. "By leveraging the specialty retail, finance and real estate background of Gart Capital Partners and the luggage retailing expertise of Colorado Baggage, this new entity should have a bright future."

Clear Thinking Group was retained by Bag'n Baggage Ltd. in April to assist on the sale of the company just before the chain filed for Chapter 11 Bankruptcy Protection in Texas' Northern U.S. District Court in Dallas in early May.

"This is exactly the type of partnership we like to pursue," commented Chris Brown of GCP. "Colorado Bag'n Baggage brings together two family-owned businesses in a specialty niche of retail with exciting potential for growth and development -- three of the criteria we find attractive when considering partnership opportunities."

Both retailers have catered to the elite traveler for more than 30 years -- Colorado Baggage was launched in 1977 by Peter and Susan Paradise, while Bag'n Baggage was founded in 1973 in Dallas. Stores are primarily located in premier shopping malls. According to Paradise, management's immediate plans are to focus on "a concentrated and cohesive strategy" to increase sales of the stores' prominent brands, which include Tumi, Hartmann, Rimowa, Victorinox, Bosca, Kipling, Eagle Creek, Brics, Briggs and Riley, and Lodis.

"This is an exciting partnership for us because it gives us the opportunity to better streamline and manage inventory with our new partners while allowing us to concentrate on what we do best -- understanding our clients so that we can customize our products to fit their individual travel needs," said Paradise.

Source: Plain Vanilla Shell

Toys R Us improves, holiday season will be key

NEW YORK, June 11 (Reuters) - Toys "R" Us' credit spreadsimproved slightly after the toy retailer late on Tuesdayreported first-quarter earnings, and the future direction ofits debt will likely be driven by how far appetite for toysholds up in this year's holiday season.

The company reported revenues rose 5.3 percent in the first quarter of 2008, due to foreign currency gains, higher sales over the Internet and the addition of 16 net new stores, Barbara Cappaert, analyst at KDP Investment Advisors, said in a report on Wednesday.

Earnings before interest, taxes, depreciation and amortization for the quarter, however, slipped 2.5 percent to $114 million.

"Given that Toy generates 70 percent of its EBITDA in the fourth quarter, we believe the slight decline in first-quarter EBITDA will not have a material impact on the company," analysts at Barclays Capital said in a report on Wednesday.

And EBITDA for the 12 months ended with the first quarter increased by 7.4 percent "given Toy's continued operational improvements," they said.

The retailer is trying to increase traffic at its Toys "R" U.S. stores by situating them next to its Babies "R" Us locations.

"Toy's pairing of Toys U.S. with Babies, which is resulting in double-digit sales growth, is particularly impressive," Barclays said.

The cost to insure Toy's debt with credit default swaps fell to around 801 basis points on Wednesday, or $801,000 per year for five years to insure $10 million in debt, from 805 basis points at Tuesday's close, according to Markit Intraday.

Demand for toys in the critical Christmas shopping season will be key to the company's future earnings, as well as the performance of its debt, and with mixed messages over how far the economy will weaken this is hard to predict.

Barclays analysts believe demand will be strong regardless of the economy.

"We believe consumers will continue to shop for toys and electronics, especially around the holiday season, irrespective of the challenging macro economic environment," they said.

KDP's Cappaert is less convinced.

"We continue to take a cautious view on the consumer," she said. "Toy is particularly vulnerable in light of its high concentration of cash flow generated during the Christmas season."

She added, "Foreign operations could temper the impact of lower spending domestically."

Source: Reuters

Aeropostale plans to add stores, new concept

NEW YORK - Teen retailer Aeropostale Inc. plans to reach 1,000 stores in the U.S. over the next several years and is also developing a new, undisclosed store concept, Chief Executive Julian Geiger said Wednesday.

Geiger spoke at the Piper Jaffray (nyse: PJC - news - people ) consumer conference in New York, which is being webcast.

He said the New York-based company, which operated 814 stores at the end of last year, could grow to 1,000 with a "couple years' growth." About 85 stores are expected to open this year.
Aeropostale (nyse: ARO - news - people ) also plans for about 100 stores in Canada eventually. The company now has about 27.

The plan is an "aggressive and well controlled store-opening program," Geiger said.

Aeropostale has in large part outperformed its teen-apparel rivals in recent months amid a difficult retail environment. Last week the company said sales in stores open at least one year, a key retail metric known as same-store sales, rose 6 percent in May, as teens reacted positively to summer merchandise.

Geiger also added that he does not expect product-cost inflation to influence results in 2008, but expects some sourcing pressure in 2009, as companies Aeropostale uses to make its clothes raise prices because of inflation.

However, Geiger said because Aeropostale is such a big client for the companies that make its clothes, "increases will be later than and smaller than competitors."

Geiger did not offer any details about the new store concept it is planning but said that if Aeropostale growth slows in the future, the new store concept, along with the company's Jimmy'Z clothing store line, could pick up the slack.

Aeropostale shares fell 49 cents to $32.94 during afternoon trading.

Source: Forbes.com

Nordstrom to open stores, roll out new products

NEW YORK - Nordstrom Inc. expects to weather a sagging U.S. economy by enticing customers with fresh products and new store openings, the luxury retailer's chief financial officer said Wednesday.

CFO Michael Koppel, whose comments were webcast from a Piper Jaffray (nyse: PJC - news - people ) consumer conference in New York, acknowledged that many Americans are facing tough times, given record high gas prices, a soft labor market and tighter credit.

"Obviously, I don't have to tell many of you what's going on in the current environment," Koppel said. "It's pretty tough out there."

Still, Koppel remained confident that Nordstrom (nyse: JWN - news - people ) will gain market share with an improved product line and opening new stores. Specifically, the company will open eight stores this year and five next year.

"New stores are our best investment," said Koppel, adding that they generate long-term growth and excitement among shoppers in the community.

Also, Nordstrom has been revamping current locations. Koppel said the company has spent over $120 million per year to remodel stores.

Another factor that will help Nordstrom, Koppel said, is that the company's core demographic, typically between the ages of 25 and 54 and making over $100,000 in income, is growing faster than the broader market.

Also, demand for Nordstrom's core consumable items, like cosmetics, has remained healthy, Koppel said. Consumers may be less likely to skimp on purchasing items like these, since they're viewed as somewhat less discretionary.

In the first quarter, Nordstrom's profit came in better than expected, but earnings still declined 24 percent as high gas prices and tighter credit had consumers holding the line on spending.
Same-store sales, which measures sales at stores open for at least a year, dropped 6.5 percent for the quarter, below the 3 to 5 percent decline expected by analysts.

Currently, Seattle-based Nordstrom has 159 stores in 28 states.

Nordstrom's stock declined 64 cents to $33.17 in afternoon trading.

Source: Forbes.com

Big Lots CEO sees 1,800 stores

New York – Closeout retailer Big Lots, now operating more than 1,350 stores in 47 states, could reach 1,800 stores, said chairman and ceo Steve Fishman, speaking at the Piper Jaffray Consumer Conference here today.

Fishman for more than a year has focused the $4.7 billion retailer on operational issues, while putting real estate expansion on hold. Now – with SG&A costs trending down toward the lowest level in company history – he is indicating a sharp new interest, especially as the real estate market is growing more advantageous. He told analysts, “The rent market needed to cool down before we were going to be able to open a significant number of stores profitably.”

“We believe we are in the perfect position to capitalize on real estate opportunities,” said Fishman. “We’ve streamlined our business – and are ready to grow. We’re highly motivated to open more stores at the right price.”

Fishman said the current Big Lots distribution infrastructure can support one-third more stores. He emphasized that better management of distribution centers and transport has helped push down overhead costs.

At Big Lots, SG&A as a percentage of sales has dropped from 38.5% in 2005 to 34.7% in 2007, and is projected at 34.4% this year.With a record year under its belt in 2007 and a good start with a 75% upswing in quarterly profit for 1Q 08, Big Lots may be poised for growth, and home can be part of that. Home textiles and home décor combine for 15% of volume at Big Lots – and furniture is another 15%. In home, dedicated agents overseas are the key resource, Fishman noted.

Source: Home Textiles Today

Retail REITs Weigh in on Industry Trends at REIT WEEK

Retail REITs Say ICSC Was Strong, Leasing Getting Tougher, Distressed Opportunities Arising

Last week, all the major Retail REITs made presentations and participated in question-and-answer sessions at the National Association of Real Estate Investment Trusts (NAREIT) annual investor forum, REIT Week, held at the Waldorf Astoria in New York City. Executives at REIT Week provided investors with a number of take-aways from the conference. (Editor's note: Read more CoStar Advisor coverage of the conference.)

To start, each company was asked their perceptions regarding the attendance, deal volume and trends at ICSC's RECon, which was held May 18-21 in Las Vegas.

"ICSC was better than our expectations and the retailers that were there were there to do business. Our leasing people felt encouraged with the results they were able to achieve at the convention," said David Simon, Simon Property Group's CEO. He added that as Simon is the largest retail landlord, the convention is not instrumental in its business.

Michael Glimcher, chairman and CEO of Glimcher said a "slowdown" wasn't apparent at ICSC, "other than the fact that there were fewer bankers and lenders." He estimates attendance was down about 10% over last year, but said; "we had a couple hundred retailers come through our booth."

John Foy, CBL's vice chairman and CFO said, "ICSC attendance was consistent with past years. The conference was very productive for our company and I think everyone was pleasantly surprised at the mood and the tone of the conference." Charles Lebovitz, CBL's chairman and CEO, said, "As much as we tried to boost morale of our leasing staff in advance of Vegas, the headlines are the headlines. So I think our leasing staff expected a difficult reception there. They came back with a far more encouraged outlook than when they went."

Marshall Loeb, Glimcher's president and CEO, said the company took care to really coach its leasing agents this year, as "many of them have not been through a down environment." He added, "Each of our leasing agents work with our general managers to focus on leasing strategy, to figure out 'Who are our next level of tenants?"

Loeb said that Glimcher has seen a few lease deals fall through towards the end of the leasing process and expects this trend to continue, so the company is focused on getting deals done quickly. It formed a "75-day" group to push leases through to execution. "We're trying to get out and on the road in front of retailers to do deals as rapidly as they can. Speed is of the essence," said Loeb.

Foy said retailers were interested in leasing at ICSC, but on "quality expansion" only. Lebovitz gave a particular example involving luxury handbag retailer, Coach. "Earlier this year we completed a deal with Coach to locate in six of our projects. At ICSC, we met with the head of real estate for Coach and they informed us that they had conducted their own survey concluding that there are seven more of our malls where they could have Coach stores, based on sales of their products in department stores in those malls. So that may represent the thinking of retailers today. They're conducting their own independent market analysis, looking at both major and middle markets. What they're really trying to accomplish is good occupancy cost in locations where they can be in the main retail destination in any given market."

At ICSC, CBL hosted a dinner with 15 major restaurateurs represented. "They definitely are experiencing significant slowdowns in their business and are accordingly slowing down their growth program. We're seeing that there's definitely a slowdown in commitments from that type of restaurant [full service casual dining] -- we're not sure how long it will continue, but its something we're having to deal with," said Lebovitz speaking on the restaurant sector in particular.

Steve Sterritt, Simon's CFO commented on the change in the industry atmosphere and situation compared to last year's ICSC conference, "There is going to be some stress in the marketplace. The music stopped so fast. Last year at ICSC, Money was everywhere -- anyone who had a shovel and an architect called him or herself a developer and was trying to do a deal. By Labor Day the world was ending."

"One of the trends we saw at the ICSC show is that everything [new projects] is being pushed to 2010. The fact that we're delivering space this year is a positive because there's not a lot of product being delivered right now," said Glimcher in explaining that although retailers are "certainly doing fewer stores than in years prior," they still need space.

Ken Bernstein, CEO of Acadia said his perception of ICSC was mixed, "ICSC is always fascinating. There are a lot of guys you run into that say things are great. At night at a cocktail party they'll tell you they have 10 developments going, but then in the morning they say they need $20 million tomorrow because they're about to be foreclosed on all of them."

Bernstein said Acadia executives spent most of their time at ICSC with retailer CEOs. "They're seeing very mixed results. There's no consensus on how the recession is playing out. Some of them are able to pass through the cost increases or any of the issues to their vendors, and some are not. Some are enjoying the food inflation; some are not. There wasn't a clear consensus that this is the worst recession we've seen in 20 years, but we're starting to hear some retailers say that. What we are hearing is across the board is that they're being much more cautious in secondary and tertiary locations. The third interesting piece was the recognition that they're sitting on a lot of real estate still and the thought that they could monetize the underlying inherent real estate value in-house, the 'anyone can be a re developer' concept, is shifting a little. It wouldn't surprise me to see if retailers recognize that their use is not 'best and highest' and that there could be some kind of evolution and redevelopment of their real estate," said Bernstein.

Analysts asked executives to comment on the retail environment regarding layoffs and store closings. Simon said, "Bankruptcies are up slightly from last year, and last year was abnormally low. There are a few we continue to be concerned about, but generally the bigger retailers are so much better positioned financially than they were. There will always be marginal retailers that come and go, but we don't see the economy driving the retailers into chapter 11. Look at Linens 'N Things, which was really buyout-oriented, as opposed to performance-oriented; the deal just had too much debt on it. Our vast majority of retailers are well positioned, regardless of low comp sales." Sterritt added, "Last time we saw a large amount of bankruptcies was in the mid '90s. Today, the balance sheets, capitalization and management teams of our bigger retailers are much stronger than they were back then."

Glimcher said he's only seen a "handful" of bankruptcies that have affected the company this year. He echoed Simon's comments regarding the improved strength of retailer's balance sheets. When asked if retailers that are opening stores have more leverage in this environment, Glimcher said, "No. We still expect releasing spreads of 10% to 13%, which is a product of our assets, not retailers negotiating harder. Retailers are certainly doing fewer stores than in year’s prior. The relationship is really with the quality of the asset and how much the retailer wants to be there. If a market's bad or conditions are bad, there's still always bright spots and retailers are making 7-10 year decisions on these stores."

Lebovitz said, "There are going to be store closings and bankruptcies - it’s the nature of the business ad this isn't the first time. It's not all bad because you always want to introduce fresh new concepts into your projects and that's when you're given the opportunity to do, as the ones who are not performing go out of business. We experienced it in the past, will in the future and are today."

"it is very encouraging when you look at companies that were in bankruptcy 3-4 years ago, such as KB Toys and Wilson Leather; today they are back in the business of opening stores and going forward with some interesting programs. I thought it was very important to see Toys 'R Us' new announcement of combo stores with Babies 'R Us, occupying 60,000 to 75,000 square feet, especially considering headlines reading that the toy industry was suffering. Specialty retailers have the means to reformat their operations," added Lebovitz.

Simon was asked how it deals with store closings, in particular big boxes. After saying he expects the trend of department stores closing to continue over the next 3-5 years, Simon said, "The alternative uses go from Target to Kohl's to J.C. Penney's, and then tearing it down and rebuilding it with bookstores, theatres and other tenants as an outdoor lifestyle center." With the caveat that getting the real estate back from department store retailers who own their spaces can be hard, Simon added, "The mall is very enclosed and doesn't create an appearance to the outside. As we reclaim some department store space, we're going to open it up and invite you in."

When asked to suggest retailers or categories that continue to do well and are in expansion mode, executives consistently mentioned names in the teen category including Hollister, Aerie, Buckle, Gilly Hicks, Forever 21, Vans, Aeropostale and Abercrombie. H&M and J. Crew were other favorites named.

Nearly all the retail REITs said that as long-standing institutional entities that have been through down times before, they are all poised to take advantage of opportunities that come their way, whether it be joint venturing on distressed assets, making strategic acquisitions, or simply providing financial relief to developers in need.

Bernstein said, "There's still a lot more issues within the financial institutions that needs to be reconciled on the commercial real estate side. I thought we would see a lot more trading this year, but so far, we're seeing enough opportunities for a small company of our size, but no where near the wholesale opportunities. The distress will come further up the food chain at the developer and owner level realizing they own 100% of the downside. There are recapitalization issues that have to play out there over the next year or so."

Acadia added the parameters it sees as sensible in reviewing pro formas of properties it would consider investing in, "Don't assume construction costs are coming down; Rents - unless it is a must-have location, the tenants are going to have a stronger seat at the negotiation table, so don't assume rental growth is going to match CPI." He talked a little about cap rates saying the spread between Class A and secondary/tertiary assets will continue to widen; where before the difference was usually only 50 to 100 basis points.

Bernstein still sees retail acquisition and/or redevelopment opportunities for Acadia in the New York City metro area. "We have 10 developments and 2.5 million square feet of retail and mixed-use here in NYC. We think from a retail perspective, NYC has certain attributes that are unique -- the single most important fact is that the U.S. has roughly 22 square feet of retail per person; in NYC, the number is six square feet per person - with that fact, tenants are recognizing that [like Target, Best Buy] and they seize the opportunity when it presents itself, because they may not have that chance later on."

Simon's Sterritt said although its early, Simon expects opportunities to increasingly come its way, with developers who "got caught" looking to Simon to help them complete their development through supplemental financing, or unload their developments. "We're always looking. What's exciting about this market, which is counterintuitive, is we can be terrifically opportunistic, so we're really thinking about what we're going to do next. One will be capital oriented -- people wanting to unload paper or needing capital. Second, for a lot of people, it gets very difficult to run a company when things are grinding away. I say bring it on. I think some are wearing down and I am gearing up and that's opportunity for us," said David Simon.

CBL gave a specific example of a recent opportunistic move, "In February, in a market near Biloxi, MS called D'Iberville; we are in the process of starting construction on a 700,000-square-foot power center anchored by Kohl's, Target, Dicks and Best Buy. Forum Development proposed this project and they got caught in economy and didn't have the financial wherewithal to take project ahead. Target was very much committed to the location, so they contacted us and asked if we could involve ourselves to see if we could make that project happen so they could open their store in the fall 2009. So after a very extensive eight-week due diligence and renegotiation of over 60 individual owners of parcels and the ability to finalize financing through the state, we were able to step in and restructure. Now Forum development is a 15% minority owner. That is a good example of being opportunistic, but also being selective. I have no question there will be many other opportunities; many projects are having to be abandoned or delayed because of abilities to secure financing as well as challenges in the leasing environment," said Lebovitz.

Source: CoStar

U.S. Retail Sales Increase Twice as Much as Forecast

June 12 (Bloomberg) -- Retail sales in the U.S. rose twice as much as forecast in May as Americans used their tax rebates to shop at electronics and department stores, and record gasoline prices swelled service-station receipts.

Purchases climbed 1 percent, the most since November, following a 0.4 percent gain the prior month that was previously reported as a drop, the Commerce Department said in Washington. Purchases excluding gasoline increased 0.8 percent last month.

The figures indicate the government's stimulus plan and the Federal Reserve's seven interest-rate cuts since September are benefiting retailers such as Wal-Mart Stores Inc. and keeping the economy growing. The report bears out Fed Chairman Ben S. Bernanke's assessment this week that risks of a "substantial downturn" have receded.

"The gain is largely because of the rebate, but maybe the American consumer is just hanging in a lot better than we anticipated," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "It casts more doubt on whether the economy is in a recession."

Treasuries slid after the report, with benchmark 10-year note yields rising to 4.17 percent at 9:18 a.m. in New York, from 4.07 percent late yesterday. The dollar gained 0.9 percent to $1.5410 per euro, and stock-index futures rallied, though later surrendered their gains.

Import Prices

A separate report today showed that prices of goods imported to the U.S. rose 2.3 percent in May from the previous month, less than economists had forecast.

Initial claims for unemployment benefits rose to 384,000 last week from 359,000 the prior week, the Labor Department also reported today.

Economists' forecasts for sales ranged from a decline of 0.3 percent to a gain of 1.2 percent. Excluding autos, sales rose 1.2 percent, also exceeding the median forecast of a 0.7 percent rise.

Today's report showed sales at every merchant category increased last month, except for miscellaneous retailers.

Purchases of electronics increased 0.7 percent and sales at department stores jumped 1.2 percent, the most since March 2007. Building-material retailers sold 2.4 percent more than in the prior month.

Sales at automobile dealerships and parts stores increased 0.3 percent after dropping 2.1 percent in April. That contrasts with industry figures that showed cars and light trucks sold at an annual pace of 14.3 million annual pace in May, the fewest in almost a decade, as sales of pickup trucks and sport-utility vehicles plummeted.

GM's Plans

The surge in fuel costs is "a structural change, not just a cyclical change," General Motors Corp. Chief Executive Officer Rick Wagoner said June 3 as Detroit-based GM said it would close four North American pickup and large SUV factories and focus more on making small, fuel-efficient cars.

Filling station sales surged 2.6 percent in May. Regular gasoline reached as high as $3.98 a gallon in late May, about 53 cents more than the average for the prior month, according to AAA.

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product, sales climbed 0.8 percent, after a 1 percent increase the prior month. The government uses data from other sources to calculate the contribution from the three categories excluded.

Wal-Mart Sales

Wal-Mart Stores Inc., the world's largest retailer, had a 3.9 percent jump in same-store sales last month, as consumers bought cut-rate staples and took advantage of promotions linked to the tax rebates.

"Many of our customers need to live from paycheck to paycheck," Wal-Mart Chief Financial Officer Thomas Schoewe told reporters last week. "The amount they're spending on basics is a big portion of the total basket."

Consumers cashed $350 million in rebate checks at Wal-Mart stores, Schoewe said. The retailer doesn't know how much of that was spent at the chain.

Most economists aren't convinced the jolt from the stimulus checks will last.

"This good report suggests the tax rebates are having an impact," Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Radio interview. "As these tax-rebate effects fade, the weaker job market is going to take over."

Spending may grow at an annual rate of 0.8 percent this quarter, down from a 1 percent pace in the prior quarter and the weakest since the first three months of 1995, according to the median estimate of economists surveyed by Bloomberg News this month.

The bulk of the tax rebates will probably be spent from July through September, giving third-quarter growth a lift, before the economy decelerates again in the last three months of the year, the Bloomberg poll also showed.

Source: Bloomberg

Fed paints gloomy picture of New England economy

The New England economy remains "mixed" but by some indicators is "generally softening," the Federal Reserve Bank wrote in Wednesday's edition of its Beige Book, a summary of nationwide economic activity.

The sector-by-sector review found a little reason for optimism in residential real estate but little other good news.

In residential real estate, "contacts in Massachusetts continue to report increased activity at open houses, and April's pending home sales numbers in the Boston area are said to look promising. However, one contact notes that financing issues could still prevent increased activity from translating into increased sales," the report states.

Commercial real estate contacts report that the Boston office building market, "dormant" during the first quarter, "has seen a number of properties come up for sale in recent weeks." But transactions are not increasing significantly, the authors added.

Commerical real estate deals are being financed by life insurance companies and commercial banks, not by Wall Street investment banks, they said.

Commercial leasing activity, the report stats, has slowed in recent weeks.

The authors appeared surprised in noting that despite problems in commercial real estate, layoffs have been "minimal."

The retail outlook appears especially grim.

"Retailers say they see clear evidence that consumers are scaling back their spending, and the majority of respondents complain that the media's "doom and gloom" portrayal of the economy contributes to such cutbacks," the report states. Nevertheless, capital spending remains on pace.

Many retailers "expect conditions to improve by early to mid-2009," the report states.

Manufacturing, the report states, shows continued "deteriorating" conditions.

"Contacts say that demand has started to weaken for nonresidential building equipment and for non-automotive transportation equipment and services," the report states.

"Contacts from various industries report that overseas markets remain relatively strong, although some say their Western European sales have been sluggish in recent months," it adds.

Materials costs have been especially tough on manufacturers, the report states, while "average pay increases (in manufacturing) are in the range of 3 percent to 4 percent."

Software companies reported some slowness in domestic licensing revenue.

"All (software) contacted firms have raised pay, generally around 4 percent. The majority of New England software and information technology respondents are projecting revenues to continue growing at current rates."

A staffing executive said companies increasingly are holding out for "A" candidates rather than settling for "B" candidates.

Source: Boston Business Journal

Cole Realty Advisors Acquires 119,598 SF Retail Bldg for $19.4M

Cole Realty Advisors purchased 25 Shelley Road, a freestanding retail building in Haverhill from Realty Partners Northeast for $19.4M, or about $162 per square foot.

The single-story, 119,598-square-foot, retail building was built in 2007 and sits on 9.54 acres of land in the Lawrence/Andover Submarket.

BJ’s Wholesale Club currently operates this property under a 20-year, double-net lease. BJ’s is a leading wholesale club chain operating in the eastern United States from Maine to Miami and in the State of Ohio.

Richard Liljedahl of Net Lease Capital Advisors represented both the buyer and the seller.

Source: GlobeSt.

Tweeter expands electronics ‘playground’ model

Tweeter hopes corporate “right-sizing” measures and an interactive prototype store will yield a profitable run for the high-end consumer electronics chain.

One year after the formerly Canton-based Tweeter Home Entertainment Group was bought out of bankruptcy, the now private and renamed Tweeter Opco LLC is set to relaunch its Dedham retail showcase tomorrow.

The store takes the 36-year-old company’s most recent “consumer electronics playground” concept a step further. New “Try Me” buttons allow customers to discover how they can automate their homes room by room and make side-by-side comparisons of TV sets, speakers and other products.

“It’s not that we have a lot of new products,” said Bob Stinehour, Tweeter’s director of training. “But for the first time, you can interact with them and understand them and really have fun.”

The original playground concept came too late to save the then-publicly held Tweeter from bankruptcy last June with $165 million in debt after six years of losses. The company blamed declining profit margins for plasma and LCD TVs and increased price competition from big-box retailers including Best Buy and Wal-Mart. New York investment firm Schultze Asset Management bought Tweeter’s assets for $38 million last July.

Since then, CEO George Granoff has pared the store count from 103 to 94 and changed Tweeter’s inventory management to ensure eight-week supplies of all products sold in its stores.

Tweeter also is downsizing its distribution network from seven centers totaling 500,000 square feet to five with 200,000 square feet. It will close a Canton center this month, laying off 30 workers.

“We’ve fine-tuned and right-sized the infrastructure of the company. ... Any company that gets in trouble in the retail business suffers from a combination of heavy expense loads and not enough sales,” Granoff said.

Only time will tell if Tweeter’s strategy will ensure the long-term survival of the company, which gets half its revenue from installations. Sales are “improving,” said Granoff, who wouldn’t elaborate.

The consumer electronics market remains as competitive as it was when Tweeter filed for bankruptcy, said William Armstrong, an analyst at CL King. “You can get a huge, state-of-the-art TV at Best Buy, so I don’t think Tweeter has an advantage there,” he said. “And Tweeter does a lot less volume, so Best Buy has cost advantages.”

But Granoff says the big-box stores largely concentrate on the “good” end of product options.

“We focus on the ‘better’ and ‘best’ merchandise offerings,” he said.

Source: Boston Herald

The Talbots, Inc. Announces New $50 Million Term Loan Credit Facility Commitment

Company Reconfirms 2008 EPS Outlook

HINGHAM, Mass.--(BUSINESS WIRE)--The Talbots, Inc. (NYSE: TLB - News) today announced that Aeon Co., Ltd., which through its wholly owned subsidiary is the majority shareholder of The Talbots, Inc., has agreed to provide to the Company a $50 million unsecured subordinated working capital term loan credit facility to support its turnaround plan, maturing January 28, 2012.

This proposed new $50 million credit facility would supplement the Company’s currently existing working capital lines of credit of $165 million. This new credit facility would increase the Company’s total working capital borrowing capacity to $215 million.

Talbots President and Chief Executive Officer, Trudy F. Sullivan, said, “Talbots delivered a solid first quarter performance, despite the broader macroeconomic issues facing retailers today. We are also currently experiencing improving sales trends at both our brands and remain on track to achieve our previously announced outlook for earnings per share from ongoing core operations for fiscal 2008. While we believe we had in place sufficient liquidity to fund the turnaround of our business, this new credit facility will provide us with an additional level of assurance and even greater flexibility to weather the current uncertainty in the credit markets. We appreciate Aeon’s demonstration of confidence in our strategic plan and in our ability to successfully execute it.”

On behalf of Aeon, Mr. Tsutomu Kajita, Senior Vice President, International Operations for Aeon Co., Ltd. and a member of the Talbots Board of Directors since 2005 commented, “This commitment of a new credit facility underscores our confidence in Talbots management team and the Company’s turnaround plan previously approved by the Board of Directors, which is already showing positive signs of success.”

Under the proposed new credit facility with Aeon, interest on outstanding principal will be LIBOR plus 500 basis points. The Company will pay a fee of 50 basis points per annum on the undrawn portion of the commitment. Proceeds of the borrowings under the new credit facility will be used for general working capital and other appropriate corporate purposes in connection with the Company’s turnaround plan.

The proposed new working capital facility with Aeon is subject to various conditions including completion of satisfactory confirmatory due diligence by Aeon, the preparation and execution of definitive loan documentation mutually satisfactory to Aeon and Talbots and generally consistent with the summary of terms agreed upon between the companies, and mutual agreement on all other terms, conditions, covenants and provisions of the definitive loan documentation.
T
he principal terms of Aeon’s proposed financing were reviewed and considered along with other proposals from unrelated financial institutions. The Aeon proposal was approved by The Talbots, Inc. independent Audit Committee.

Additional information related to this financing is included in the Company’s Form 8-K, which will be filed today, June 11, 2008.

The Talbots, Inc. is a leading specialty retailer and direct marketer of women’s apparel, shoes and accessories. The Company currently operates stores in 869 locations in 47 states, the District of Columbia, and Canada, with 595 locations under the Talbots brand name and 274 locations under the J. Jill brand name. Both brands target the age 35 plus customer population. Talbots brand on-line shopping site is located at http://www.talbots.com/ and the J. Jill brand on-line shopping site is located at http://www.jjill.com/.

Source: Yahoo Finance

Corporate Express accepts $2.7B Staples offer

AMSTERDAM, Netherlands - The Dutch office supplies distributor Corporate Express NV accepted a sweetened buyout offer Wednesday of about $2.7 billion from U.S. office supplies retailer Staples Inc.

Staples, which doggedly pursued the deal to broaden its reach in Europe, raised its offer four times, the last two after Corporate Express made a bid for Lyreco of France in a defensive maneuver. Corporate Express is calling off that deal.

The board of Corporate Express said it decided to endorse the Staples deal and recommend it to shareholders after the U.S. company raised its offer to 9.25 euros ($14.36) per share, up from the previous bid of 9.15 euros.

Including Corporate Express debt being assumed, Staples said the transaction is valued at about 3.1 billion euros ($4.8 billion).

Staples is the world's largest seller of office supplies on the basis of its strength as a retailer in the U.S. market. Corporate Express is the largest distributor, selling only to companies.

"This acquisition establishes Staples as the world's premier provider of office products to businesses of all sizes," Staples said.

Corporate Express had 2007 sales of 5.6 billion euros ($8.8 billion), compared to $19.4 billion (12.4 billion euros) for Staples, which is based in Framingham, Mass.

Amsterdam-based Corporate Express said it has broken off its agreement to buy Lyreco, which is entitled to a breakup fee of 30 million euros ($46 million) as a result.

The Staples deal will be presented to Corporate Express shareholders for approval at a meeting on June 18.

Corporate Express shares rose 1.4 percent to 9.20 euros ($14.23) in early trading in Amsterdam.

Ron Sargent, the chief executive of Staples said the hard-fought takeover was a "win for customers, employees and shareholders."

It was certainly a win for Corporate Express shareholders. The company's stock had been trading near 4 euros in February when rumors of Staples' interest began circulating.

Staples' initial offer of 7.25 euros per share was later raised to 8 euros per share, and last month Corporate Express agreed to combine with Lyreco in what was seen as a move to either evade Staples' embrace or force a higher bid from the U.S. company.

On June 3, Staples raised its bid to 9.15 euros, and two days later Corporate Express said they had entered talks.

The offer closes on June 27 and Staples said it expected the deal to close in July.

Corporate Express Chief Executive Peter Ventress will head Staples' international operations, which will be headquartered in Amsterdam.

Source: The Sentinel Online

Gap to focus on smaller-scale stores

In response to slumping sales, the clothing retailer changes strategy and develops a new real estate plan.

NEW YORK (AP) -- Gap Inc. plans to use its existing real estate to create smaller-scale stores and does not plan to open new stores in the near term, Chief Executive Glenn Murphy said at a conference on Tuesday.

Murphy's comments, made at the PiperJaffray (PJC) consumer conference in New York, were webcast.

Gap (GPS, Fortune 500) has experienced slumping sales over the last several years, although the San Francisco company's profit has been improving since Murphy took the helm in July.

In May, the company said first-quarter profit rose 40%, helped by managing inventory and cutting costs, but sales fell 5% to $3.38 billion. Sales at stores open for at least a year dropped 11% - the company's worst erosion yet during a downturn that has lasted nearly four years. Gap's same-store sales have now declined in 15 consecutive quarters.

"None of us feel good about minus five in sales," Murphy said. "We want to drive bottom-line earnings growth through running a healthier margin business."

One way to do this is by retooling the company's 40 million square feet of real estate, Murphy said.

"We always viewed this as a cost, but it is an asset," Murphy said. "We need to monetize it and maximize it."

Murphy said San Francisco-based Gap has too many stores that are 12,500 square feet, which he deemed too large other than for flagship and signature locations.

"We got carried away," he said. "Stores are larger than we need."

Instead, he said the target size of stores should be 6,000 square feet to 10,000 square feet.

In addition, the company plans to combine previously separate concept stores. Some Gap body, adult, maternity, baby and kids stores will be combined in one, rather than in separate spaces as they have been previously.

Most of the changes will be evident beginning in 2009, Murphy said.

"We will think through whether our 3,100 stores will be repositioned, relocated, remodeled or right-sized," he said.

Meanwhile, company plans to reduce the number of 20,000-square-foot Old Navy stores it has, and focus on stores that are around 14,000 square feet to 15,000 square feet.

It will take about three to five years to get the right amount of stores into that "sweet spot," at Old Navy, Murphy said.

Other initiatives the company is working on include opening outlets in Canada. It also recently launched an online platform where consumers can shop across all four of its brands: Gap, Old Navy, Banana Republic and online shoe retailer Piperlime.

Source: CNN

LeFrak Plots Luxury Retail Evolution on West 57th Street

West 57th Street is to its easterly counterpart what a deer-hunting, RV-driving homeowner is to his McMansion-owning neighbor—an embarrassment.

“There’s no question there’s a disconnect between the retail value on 57th Street east of Fifth Avenue, which is some of the highest in the city, and that which is west of Fifth Avenue, which is not even in the same area code,” said Richard LeFrak, chairman, president and CEO of the LeFrak Organization.

But not for long.

It’s a “historic inevitability” that, within the next few years, West 57th Street will become home to luxury retail tenants more consistent with East 57th Street, said Robert Freedman, president and CEO of GVA Williams.

Mr. Freedman is basing his predictions on the recent maneuvers of Mr. LeFrak, Vornado Realty Trust, and Sheldon Solow, who, over the past few years, have snapped up and consolidated a number of addresses along West 57th.

“I own 30, 40, 50, 29, 31, 33 and, I think, 49,” Mr. LeFrak said.

Mr. LeFrak co-owns 29-33, 49 and 50 with Vornado Realty Trust, a partnership that arose from something of a nonaggression pact.

“We were competing for the same properties, and I’m very friendly with them,” Mr. LeFrak said. “I think we both accepted that if there’s something on the street [we both want], we’ll talk to each other about it.”

Why purchase all these buildings, aside from that insatiable lust that afflicts all big-time New York developers?

“Some of the purchases I made were to protect [40 West 57th Street]—I have a 700,000-square-foot building there,” Mr. LeFrak said. Not only that, but Mr. LeFrak’s offices are there, he’s spent $30 million rehabbing it, and he has brought Nobu 57 and a high-end chemist (could a chemist be anything but?) to the ground floor.

Once the leases on many of his shlockier tenants along the avenue expire within the next five years or so, Mr. LeFrak said we can expect to see more of the same.

“I think you’ll start seeing some of the tenants on 57th Street that really shouldn’t be here go,” he said. “You’ve seen it already. There was a McDonald’s on the north side of the street that was removed. I don’t want to single out anybody, but I bet you could use your imagination.”

We don’t want to single anyone out, either. (It’s not like we can afford a $1,295 Bridle Check Tote from Burberry, at 9 East 57th Street.)

But a recent walk down 57th Street, from east to west, underscored a vast gulf between the two. The thoroughfare between Madison and Fifth avenues boasted, in addition to Burberry, gilded storefronts by Tourneau, Dior and Yves Saint Laurent. The glitz continued between Fifth and Sixth avenues, with Bulgari and Smythson at the foot of the Crown Building, and Club Monaco across from Bergdorf Goodman.

But then, things began to get, shall we say, less extravagant, with cell-phone outlets, hokey jewelry shops, a Strawberry, a Daffy’s, and some decidedly mid-brow eateries. In short, shops better suited for the diamond district or some lesser retail corridor, like, say, 42nd Street.

That, dear friends, won’t last for long.

“You have to consolidate the owners, so you have a fully integrated retail strategy, and it takes time,” Mr. Freedman said. “It’s marinating now.”

Jeffrey Roseman, executive vice president and principal at Newmark Knight Frank, agreed: “I don’t know if it will replace Madison Avenue for luxury, but it’s definitely changing, and for the positive.”

Source: New York Observer

Home Depot: Economic Tides Buffet Big Retailer

"Rowing the boat hard against an outgoing tide" is how Home Depot CEO Frank Blake described running the home improvement chain in the current economy.

At a meeting with the editorial board of The Atlanta Journal-Constitution on Monday, Blake said that despite a commitment to invest in stores, when sales decline, fewer associates are allocated per store.

"I'd like the tide to turn," he said. "It's a lot easier to row with the incoming tide."

But Home Depot has been hit hard by a perfect storm of bad economic news: the sluggish economy driven by higher fuel prices, the housing market downturn and the tight credit markets.

Atlanta-based Home Depot's annual sales showed a first-ever decline in 2007. Under Blake, who started as chief executive in January 2007, the chain has refocused on retail fundamentals. It's a direction that harkens back to the company's roots under co-founders Bernie Marcus and Arthur Blank. The previous CEO, Bob Nardelli, had tried to make Home Depot the world's largest heavy-duty construction supplier. Last year, Blake sold HD Supply for $8.5 billion.

But despite Blake's best efforts, people are spending less on their homes. Blake said Home Depot's sales are driven by three big factors: Housing turnover drives 20 percent to 25 percent of Home Depot's business; home repairs are another 20 percent to 25 percent; but the vast majority, 50 percent to 60 percent, is discretionary spending.

"People are doing fewer big kitchen remodels and more faucet repair," he said.

There are a lot of gradations of discretionary spending, he added, which is influenced by how people feel about their homes. Some view the home as an investment that is appreciating, others as a place to raise their kids. When homes depreciate in value, he said, it can be hard to justify remodeling the kitchen.

"The decline seen in housing values is a new thing," he said.

Despite declining sales, the company is investing $180 million to put more sales associates on the floor and give them better perks, and to hire master tradesmen such as plumbers and electricians to staff the aisles.

The investment, however, came at the price of laying off 500 headquarters employees and 2,000 human-resources employees this year, as well as closing 15 underperforming stores and shelving the development of 50 others.

Blake said it is counter-intuitive to reinvest savings from layoffs and other changes into the company during a downturn --- as opposed to giving the returns to shareholders. "It is an advantage there are lower expectations, and people understand the need to change," said Blake.
He said the current economy has "absolutely" given him more breathing room to turn the ship around. Blake also is seeing opportunities to sell new kinds of products, given record energy prices: Energy-efficient windows, insulation and even solar panels are becoming a hit in some regions.

Still, he's ready to see the upside. In the past 17 months, the stock has taken a beating --- it closed Monday at $26.54, down from $39.32 on Jan. 2, 2007, the day he took the helm.
"If I were writing the story," he said, "the market would start to pick up right about now."

Source: Plain Vanilla Shell

8% of U.S. Women Are Recession-Proof Shoppers

The results of a new survey being released June 12 reveal that women are still fashionably shopping in today's drooping economic climate and spending a lot of money.The online survey was commissioned by Elle magazine. It was conducted in fall 2007 based on a composite scale of price sensitivity and annual expenditures.

Researchers identified a "recession-proof shopper," who is at the median age of 29. She is affluent, with a median household income of $62,000: 65% were in the workforce, and only 52% worked full-time. Elle states they are passionate shoppers with 57% spending over $2,000 or more per year on clothes and 40% spending $750 or more per year on accessories and footwear.

The majority will be willing to splurge on shoes (75%), handbags (70%), beauty (68%), evening/special occasion products (63%), jeans (63%), jewelry watches (57%) and weekend clothes (52%), but not outwear/coats (41%) and workout clothes (18%).

Seemingly, there is negligence when it comes to the price of trendy products. Eighty percent are willing to pay more for the latest fashions and 81% agree that "price is not the most important factor—it's getting just what I want." Also, 79% agree "there are times that I buy clothing without even looking at the price.

"In 2008, 53% of recession-proof shoppers will spend as much or more than they did in 2007, compared to 34% of all other shoppers who will do the same.

About half of the 1,534 women surveyed shop in retail stores to look at, browse or purchase clothes or accessories on a weekly basis.

Elle will present the research, entitled Meet The Recession-Proof Shopper: The Mindset and Motivation of Today's Best Shoppers, on June 12 at the Plaza Hotel in New York. MRI Interactive, using a national population sample of women aged 18-49 from Survey Sample International, conducted the survey and identified that 8% of all women—which equals 5.4 million consumers—are recession-proof shoppers.

Source: BrandWeek

Grocery store liquor sales mulled in N.J.

TRENTON, N.J. (AP) - New Jersey lawmakers are again considering plans to allow beer and wine sales in grocery stores.

While 45 states allow such sales, New Jersey limits supermarket chains to two total liquor licenses. It also mandates that the liquor be sold separately from groceries, usually in an adjoining store.

Major supermarket chains are working to change that, but smaller liquor store owners fear the change would drive them out of business.

"The big guys are going to wipe out the little guys," Jeffrey Warsh, executive director of the New Jersey Wine and Spirits Wholesalers Association, told lawmakers in a December hearing.

Legislators took no action during last year's hearing, but Sen. Raymond Lesniak, the bill's sponsor, expects a vote Monday by the Senate Economic Growth committee. He predicted the bill will pass.

The measure is backed by a coalition that includes QuickChek, Stop & Shop, SuperValu, Wegmans, Pathmark, Whole Foods Market and Albertsons, which owns Acme.

Otto Leuschel, chairman of the Retailers for Responsible Liquor Licensing coalition, said consumers would be assured more convenience and choice with one-stop shopping.

"With the many burdens that New Jersey residents currently face, such as the economic downturn and the rise in gas prices, consumers are looking for ways to improve their hectic days," he said.

The New Jersey law was adopted in 1962 to prevent price fixing and monopolization and to address organized crime.

Fred Leighton, owner of Bayway World of Liquor in Elizabeth, has doubted a need for the bill.

"Do we really need or want more convenience in the sale of alcohol in this state?" Leighton asked. "Do we need it? I mean, we're not in Texas where you have to drive a hundred miles. New Jersey is a dense state -- if you need alcohol, there's plenty of opportunity to find it."

Source: Plain Vanilla Shell

Schumer seeks legislation for rent-to-own industry

Senator wants tighter regulations to protect customers.

U.S. Sen. Charles E. Schumer is calling for tougher regulations for the rent-to-own industry and better disclosure for customers about prices and fees.

But a national trade association representing the industry said Schumer is misinformed and painting an "extreme" picture of the business.

Schumer this week said the rent-to-own industry is targeting upstate New York consumers who lack the disposable income and access to credit cards to buy basic household goods at competitive retail prices.

Rent-to-own customers typically have poor or no credit ratings, he said.

Schumer said those customers pay "astronomical" prices for items such as furniture, televisions, refrigerators, washers and dryers that are in some cases nearly 300 percent higher than their recommended retail prices.

Schumer is urging federal legislation that would require:

•All rent-to-own outlets to disclose the cash price of an item, services offered and the price of each service, among other details.

•Fees assigned to rent-to-own transactions to be considered interest, not leasing charges. In New York, that would limit interest to 30 percent a year.

•A standard cash price of items sold in rent-to-own stores so consumers would know if baseline retail prices are being artificially inflated.

•Early termination fees of no more than 5 percent of the contract price.

Richard May, spokesman of the Association of Progressive Rental Organizations, said less than 25 percent of customers actually rent-to-own the product, choosing instead to only rent the item.

"The customer is in full control of the transaction," choosing payment plans that can be changed at any time without penalty, he said.

Rent-A-Center, the largest rent-to-own operator in the nation, said on its Web site that it provides an "easy, affordable way for people to furnish their homes without incurring a continuing obligation and without needed access to credit."

Industrywide, rent-to-own customers typically lease items on a weekly or monthly basis until they have fulfilled their contract and own the item.

A TV with a market value of about $850 typically costs about $3,327 when the lease is over -- a 291 percent markup, Schumer's office said.

Source: Star Gazette

A.C. Moore Will Close Seven to 10 Stores

BERLIN, NJ-In the past two earnings conference calls in March and May, arts and crafts chain A.C. Moore officials indicated they had launched an initiative to study store-by-store performance with an eye on shuttering under-performing units. That effort took a step closer to completion when officials yesterday said that between seven and 10 stores would close by the end of 2008, and that it involves "exiting certain markets."

A.C. Moore, which operates 139 stores from Maine to Florida, did not reveal where the targeted units are located. A statement from the company said only that they are located in "certain markets where [they] cannot achieve operating efficiencies." The company had closed a total of just three stores over the past two years.

"Store closings are extremely difficult decisions because of the effect on our organization, our associates and our customers," says Rick Lepley, A.C. Moore’s CEO, in a prepared statement. "However, we believe that these changes are necessary for the long-term prosperity of our company.

"Improving our overall level of execution at the store and corporate level, installing state-of-the-art systems and optimizing our 'Nevada Class' store prototype are paramount at this time," Lepley says. "In addition to our real estate strategy, we are confident that continuing these initiatives will provide a solid foundation for future store count growth."

As far as new store openings for 2008, company officials also revealed yesterday that the number would be fewer than originally anticipated. Earlier this year, the intention had been to open 14 new stores this year, but that number has been reduced to "between eight and 12," according to a company statement.

Related to the closings, company officials say they expect pre-tax expenses to be between $7 million to $9 million, with about $4 million to $5 million of that related to lease liabilities and the rest tied to general liquidation costs, fixture relocation, severance and non-cash fixed asset impairment. The company is also continuing to analyze long-lived store assets under Financial Accounting Standards No. 144 to determine whether the carrying value of assets may not be recoverable.

In an unrelated matter, company officials indicated yesterday that they were rethinking their warehouse and distribution expansion plans. "The company is…currently working with state and local authorities regarding a proposed expansion of the…distribution center facility located in Berlin, New Jersey," reads a statement. "If the proposed expansion is finalized, the company intends to forego, in the near term, construction of a second distribution center." Company officials declined further comment.

Source: GlobeSt.

Ace tops retailer customer satisfaction survey

(Jun. 5) Ace Hardware ranked highest in customer satisfaction for the second consecutive year, according to results of the annual J.D. Power and Associates 2008 home improvement retail store study.

The study, in its second year, measures customer satisfaction with home improvement retail stores, based on performance in five factors: merchandise, price, sales staff, sales/promotions and store facility.

Ace Hardware received a score of 791 on a 1,000-point scale, performing particularly well in the sales staff and store facility factors, which are “the two most important factors driving overall customer satisfaction,” according to a statement from J.D. Power.

Lowe’s (784) and Menards (779) follow Ace Hardware in the rankings. Lowe’s performed particularly well in merchandise, while Menards did best in sales/promotions and price factors. True Value also performed above the industry average of 768 with a score of 774.

“Ace Hardware is particularly successful in pleasing customers with their knowledgeable and helpful sales staff,” said Dale Haines, senior director of the real estate and construction practice at J.D. Power and Associates. “While offering a wide selection of merchandise and low pricing are important, customers tell us that being able to get the assistance and advice they need to complete their projects correctly the first time [is important].”

Sears fell just under the industry average with a score of 767, while Home Depot fell into the last slot with a score of 753.

Sixty-one percent of customers say they asked for help from store employees on their last visit to their primary retailer. Customers who say they are highly satisfied with their primary retailer’s sales staff spend an additional 4 percent of their budget at that retailer.

“Not only does providing great customer service benefit retailers in terms of more satisfied, loyal customers, but it also results in increased sales,” Haines said.

The 2008 Home Improvement Retail Store Study is based on responses from 9,770 consumers who purchased a home improvement product or service within the previous 12 months from a store that sells home improvement products.

Source: Home News Channel

No More Mall-ification: Developers Rejig Sites Rather Than Build Anew

LAS VEGAS — Developers are breaking ground — but it's the ground on which they've already built.

It's a matter of necessity with a weak U.S. economy, rising costs, little room left in the country to start up completely new projects, flattening rents and the shutting of retail doors, which leaves landlords with vacancies to fill.

The "intensification" or "densification" or "organic growth" of existing shopping centers, as executives call it, is the top priority in a nation that's overstored, overmalled and in an economic malaise.

And that means finding, then rolling out, new retail formats for selling fashion, and redeveloping tired and underutilized space with food and restaurant offerings that go beyond the traditional food court menu. It also means adding entertainment features, such as theaters and parks, as well as hotels and office and residential space.

"Intensifying the use of property is certainly the major innovation," said John Bucksbaum, chairman and chief executive officer of General Growth Properties, the nation's second-biggest developer, during an interview at last month's International Council of Shopping Centers annual convention here.

At the Cottonwood Mall, in Holladay, Utah, near Salt Lake City, for example, "we've put a lot of emphasis on offices and residential growth," Bucksbaum said. "That's a mall being de-malled." The conventional enclosed mall will reopen in 2010 with a mixed-use format for fashion shops, cafes, restaurants, a specialty grocery, a cinema, condos, town houses, cottages, single-family homes, offices, streets for strolling, riverside trails and a public plaza.

GGP also has an aggressive program to bring farmers' markets to its properties. "Maybe it's time for food to come back to shopping centers," said Alexander Berman, senior vice president at GGP, during one of the convention's panel discussions.

"You need to give people more choices," said Scott Schroeder, vice president of marketing and communications for Developers Diversified Realty. "Nobody wants to make eight stops to get what they need." He noted that the performance of certain specialty retailers and smaller "junior" anchors was an ongoing concern for the industry. "The more we can create a hub that combines value and fashion, the more appeal we have and the more customers we will retain."

"Isn't it time to reevaluate one-stop shopping?" asked Ian Thomas of the Vancouver-based Thomas Consultants, who moderated a panel on international growth.

The one-stop notion is an old format with renewed relevance as mall traffic wanes and gas prices spiral.

In Phoenix, Macerich is studying the addition of two residential towers at the Biltmore Fashion Park, a highly productive open-air center, and in Scottsdale, Ariz., it's looking at putting residential or office space on the site of a former Days Inn in Scottsdale Fashion Square, another upscale center. Macerich is moving forward with a number of projects in the West, including the Oaks Mall in Thousand Oaks, Calif., which will open in phases beginning this fall. The firm also is taking the roof off Santa Monica Place and overhauling the 30-year-old center to integrate it more with the coastal community.

"We are taking a fresh look at projects and asking, is there a demand for other mixed uses?" said John Genovese, executive vice president for development at Macerich. "We take a very patient approach. We want to do the right thing for [our] assets."

"Providing a sense of the outdoors is very important," said Robert Taubman, chairman, president and ceo of Taubman Centers, in describing an industry trend. In one of the few new projects going up, Taubman is developing the mixed-use City Creek Center in downtown Salt Lake City with a retractable glass roof over much of its 700,000 square feet of retail. The project is massive, with 1.4 million square feet of offices planned, along with a Marriott Hotel and a 50,000-square-foot Harmons grocery store, among other features. The project is being done in conjunction with the Church of Jesus Christ of Ladder Day Saints, at a cost sources put at around $2 billion, including $60 million for the roof.

Los Angeles developer Rick Caruso said, "Our main goal is to make the shopping experience feel different and feel special," noting that, at his Americana at Brand center, there are uniformed elevator operators and fountains with water displays choreographed to music. "Even the rest rooms are opulent. When the novelty wears off, we'll introduce new stores, we'll do something spectacular."

Caruso's planned Shops at Santa Anita, slated for 2010, will take the outdoor-village concept one step further, with opulent residences and horse-drawn carriages at the center.

The other big trend is going global. That expansion is happening faster than ever, with Russia, India, the Far East and Eastern Europe prime targets. "The shift to the global focus has rejuvenated the shopping center industry," stated Rene Tremblay, president and ceo of Ivanhoe Cambridge and the outgoing chairman of ICSC, in a keynote speech. "Shopping center development has continued to thrive around the world, though less in North America. In North America, not many new spaces are being built. I never would have imagined the day when we would be doing business in 12 countries."

But there is a big dilemma in going overseas. Can the developers lure the retailers abroad? Macy's and Lord & Taylor revealed that they're interested in exploring overseas opportunities, and Saks Fifth Avenue already has two stores operating in the Middle East, announced a third there recently, has one in Mexico and is planning another in Shanghai.

However, "any department store has difficulties translating across boundaries," said J.C. Penney chairman and ceo Myron Ullman 3rd, who was on stage at the convention for a Q&A. "It's easy to announce international expansion. It's much more difficult to make it work for shareholders."

RETAIL CONCEPTS TO WATCH

According to Taubman executives, Victoria's Secret, Apple and Abercrombie & Fitch are the three most desired U.S. specialty chains in overseas markets. Internationally, Inditex and its Zara chain and Hennes & Mauritz are the best poised for further expansion.

At home, developers said they're closely watching the expansion of Japanese fashion retailer Uniqlo, which opened its first U.S. store in November 2006. Safeway's new concept, called The Market, a 20,000-square-foot box for produce and prepared food and a service deli, is also on the radar, as is Gilly Hicks, the intimate apparel chain launched by Abercrombie & Fitch last winter.

Other retail nameplates of keen interest are Metro Park; Forever 21, which is looking to open larger footprint stores (for more details, see page 16); J. Crew and its two-year-old Madewell division, as well as the even newer VSX, a shop selling activewear and yogawear that was launched by Victoria's Secret in a single site in Easton, Ohio, last year.

Another newcomer from the West Coast, called Love Culture, is gathering steam. The chain has seven stores operating, five under construction, 15 set for next year and another 20 seen for 2010. It's privately owned and sells women's moderate-to-better-priced fashion.

Two chains that have been around for awhile, but continue to impress developers are Puma and Apple.

At ICSC's "hot retail" session, in the food category, Five Guys Burgers and Fries, Pinkberry, Pollo Campero and Stir Crazy took the honors, and women's fashion retailer Apricot Lane, board sports chain Billabong, Tesco's grocery concept Fresh & Easy, L.L. Bean and toy car retailer Ridemakerz were also honored as the best.

"We've seen a lot of innovation in new retail, even with the apparel retailers, which is not easy to do," said ICSC president and ceo Michael Kercheval. "It's great to see, but more importantly, it's imperative in order to keep shopping centers new and interesting."

At other sessions, developers at the conference cited Costco, Wal-Mart and Target as highly desirable tenants in a down economy, largely because of their pricing and their grocery offerings, which have fared well, and the new view that they can be neighbors to upscale stores in the same centers. Westfield Group, for example, will house Target as well as Neiman Marcus as anchors this year in its Topanga center near Los Angeles' San Fernando Valley. DDR has a Costco anchor in its Christown Spectrum Mall in Phoenix, and in the fall, Macerich will open its first in a former Macy's at Lakewood Center, one of the largest enclosed malls in the Los Angeles area. Other mall-based Costcos are in Simon Property Group's Potomac Mills in Prince William, Va.; General Growth Properties' Cumberland Mall in Atlanta, and the Cafaro Co.'s Spotsylvania Towne Centre in Fredericksburg, Va.

"In the old days, it was location, location, location. Now it’s location, location, location and timing, timing, timing.­­"

— Arthur Coppola, Macerich

"The lines are all blurred. The days of saying we won't or can't do a mix don't fly now," said Anthony Buono, CB Richard Ellis' executive managing director of retail services. "Your Target customer is the same as your Nordstrom customer is the same as your Saks customer."

ON THE ECONOMY, RETAIL PERFORMANCE AND CONSUMERS

While concerned about the state of the economy, developers are positive regarding the long term.

"The whole point is you've got to look at things down the road," said Taubman of Taubman Centers, which saw a 3 percent comparable-store gain last quarter. "The country is not technically in a recession. I believe we are in a period of slower growth. It's important the Fed do the things it's done to loosen monetary policy. Things will improve. The economy will continue to have slow growth, but should not worsen.

"You can't ignore the huge engines that are out there," he added, citing emerging economies including China and India, and sovereign funds with huge pools of capital from oil interests that must be invested.

"A quarterly event is really irrelevant. Our thinking is really 10 to 15 years out," said Arthur Coppola, president and ceo of Macerich. However, he added, Macerich "will not build before a market is ready for the project. "In the old days, it was location, location, location. Now it's location, location, location and timing, timing, timing. We will not build before the market is right."

Coppola believes retailers need to "constantly look for ways to keep their brands fresh and to look for brand extensions that drive repeat visits and grow their customer base. But at the end of the day, Americans love to shop, and we're in a position to capitalize on these new brand extensions, delivering prime real estate that can be a platform for retailers."

According to Ullman of Penney's: "Consumers are either buying the lowest possible price — door-busters — or something innovative or new."

"There is no question the Gen-X women's business is not good," said William Taubman, chief operating officer of Taubman Centers. "There is a changing fashion profile toward more contemporary silhouettes and some retail concepts have just not adjusted. Women don't want to feel old or tired."

On the development front, "money is tight. Fewer projects are being announced. People are making sure they're leasing what they've got," said Taubman.

GGP's Bucksbaum said comparable-store sales at his centers were down 1 to 2 percent during the first quarter of this year, and occupancy rates were down 20 basis points. He foresees sales relatively flat for the year overall and occupancy down 50 to 100 basis points by yearend relative to the fourth quarter.

"What's happening is that developers are moving at 80 miles an hour, retailers are doing 60 miles an hour and lenders are going 25 or 30 miles an hour," said David Solomon, president and ceo of NAI Global's ReStore unit. "For most, it doesn't look pretty right now and it will get worse before it gets better."

The average vacancy rate could reach 10 percent by the end of the year, and there likely will be more retail bankruptcies to come, Solomon predicted, before the market settles down.

Some projects have stalled or been called off: Two of Related Cos.' projects have experienced financing holdups. Downtown Los Angeles' Grand Avenue, a $3 billion project to include a shopping center, a supermarket, other stores, high-rise condos and a hotel, had been scheduled to break ground in fall 2007, but the date has been moved to February, with completion in 2012. The second phase of the company's CityNorth project with Thomas J. Klutznick Co. in Arizona has been delayed because potential lenders want to wait until the economy improves. The first phase of the $1.2 billion project is expected to open in October.

THE MOOD

"Developers have become very introspective and defensive," said Gary Mozer, managing director and principal at George Smith Partners, a financial intermediary that raises debt equity and mezzanine financing for commercial real estate. "They're trying to find how to deal with the marketplace in the most productive ways. There are more face-to-face meetings between [developer principals] and tenants, bankers, equity sources, city leaders and contractors. Nowadays, senior guys are cutting deals with senior guys. There is a lot more stress on the business and people are reacting to that."

How else are deals different these days? "There is a lot more equity required up front in transactions. The projects are more about urban infill rather than growth markets, and developers are getting squeezed because of increased construction costs and stagnant retail growth," Mozer said. Asphalt, which is oil-based; steel, and PVC are getting more expensive.

However, overall, he believes, developers are "doing OK right now. They're not going off the cliff."

"Over the last eight months, the deal cycle has lengthened from 60 days to 90 to 120 days," observed John Bemis, executive vice president and director of leasing and development for Jones Lang LaSalle. "Retailers and developers are negotiating leases harder. Lots of retailers are looking for options," such as five-year leases with options to renew.

"Nobody is really panicking. I thought the mood would have been worse," said Vincent Ottomanelli, president of Ferragamo USA, who was spotted walking the leasing floor of the Las Vegas Convention Center. "This is not a garage sale, but traffic is lighter" than a year ago.

The event was busy, but not as robust as in recent years, executives said. However, many sought to present a positive front by unveiling plans for new projects and beefing up existing facilities with an eye on the long term. They see retailers cutting their openings for next year by half of what they might have originally considered and getting back on track by 2010 with more aggressive expansions.

At the malls themselves, "my perception is traffic is off significantly, but we still have a full schedule with people looking to do business," said R. Webber Hudson, executive vice president of Related Urban. "If you buy into the notion that there's been economic turmoil for at least six months, and that typically you see an 18-month downturn, then it's easy to see 2010 as a safe bet for a strong recovery."

According to an ICSC media official, registration at just less than 50,000 was around the same as last year's, though the final tally will be released later this month.

GOING GREEN

GGP's Bucksbaum said his company has many initiatives to help the environment, some noticeable to the general public, others not so. The company has a program to install waterless urinals, for example, which will be obvious. "Ultimately, we will have them at every location," Bucksbaum said. "We have saved 6 million gallons of water this year."

He also said there has been a dramatic reduction in kilowatt usage through the GGP portfolio by using energy-efficient heating and cooling management systems. The company also is testing or introducing alternative sources of energy in certain markets, and as roofs come up for replacement, GGP is making them white to reduce the heat in the malls and cooling requirements.

"Rather than lowering quality of design or budgets, something we have noticed is an inclination of retail developers to explore more green design and new materials," said Kimberly Sheppard, design partner at Gabellini Sheppard Associates. "This is especially the case with some of our larger luxury retail projects like Westfield London, and in Las Vegas, City Center and Echelon."

Some shopping center operators said they were exploring Leadership in Energy and Environmental Design certification for projects in development to achieve long-term cost savings and attract an eco-minded consumer. While retailers picked up a lot of steam on the green front, it generally seems to be more of a catch-up for developers.

"The retailers are really getting into the green movement, and are trying to push that agenda more and more," said Justin Doak of the U.S. Green Building Council. "For big developers, it's easier to take an eco-friendly approach before things are built. Afterward, you typically see resistance, at least until we reach a critical mass of retailers that push for it."

Source: Women's Wear Daily

Bonwit Teller is Being Revived

Iconic fashion retail brand plans to open a New York flagship in 2009

(06-09-2008)

The Bonwit Teller name is coming back. River West Brands Inc. (Chicago) said it will likely open a flagship store in New York by the end of 2009 and a door in Los Angeles after that.

Ultimately, said Andrei Najjar, the interim ceo hired to relaunch the venerable name, the chain could expand to about 20 stores in the U.S.

Bonwit Teller was founded in 1895 and became one of the country’s leading fashion retailers, with a flagship store on New York’s Fifth Avenue and sites on all the prominent shopping streets and in all the upscale malls. It went out of business in 1990.

Najjar is the co-founder and ceo of Social Atelier Brands (Los Angeles), a designer of premium fashion lines aimed at promoting awareness of social issues. He previously held top positions with Abercrombie & Fitch, Hollister, Target, Banana Republic and the Gap.

“Andrei’s unique expertise as an award-winning designer, business leader and entrepreneur makes him exceptionally qualified to bring new life to Bonwit Teller,” said River West ceo Mark Thomann. “A crucial component of our business model is to assemble world-class management teams to incubate and relaunch well-known brands. Andrei’s vision for leading the rebirth of this beloved American classic complements our model and matches our long-term objectives.”

“Bonwit Teller set the standard for the high-end shopping experience for a century,” said Najjar. “I am excited to revitalize Bonwit’s heritage for today’s marketplace. Bonwit once outfitted fashion icons such as Jackie Kennedy and Grace Kelly – the new Bonwit will evoke that sense of glamour, with a modern twist.”

Source: VMSD.com

Home Depot, Praktiker rumors resurface

(Jun. 6) Home Depot CEO Frank Blake shot down rumors that began circulating late last month that the retailer was considering a takeover of Germany's DIY giant Praktiker AG. When asked by an analyst at the company's annual analyst meeting on June 5, and later in the by reporters, about whether Home Depot was interested in taking over a European company, Blake said simply, "No."

Rumors that Home Depot would consider a bid at taking over the German big-box DIY retailer resurfaced May 28 after shares of Praktiker rose 9 percent, ostensibly on the takeover speculation.

Blake said the retailer is focused on expansion opportunities in China and Mexico, but that rumors about an entry into the European market were just that: rumors. He specifically discussed China, and Home Depot's plans to get its 12 stores in that country into a "profitable model" before a larger rollout some time in the future.

Home Depot has been rumored to be considering European acquisitions on and off for years, as far aback as 2001. Names have included Praktiker and Kingfisher, parent of European chains B&Q, Castorama and Brico Depot.

Source: Home Channel News

Goody's Family Chapter 11 filing expected

NEW YORK, June 6 (Reuters) - Goody's Family Clothing is likely to file for Chapter 11 bankruptcy protection amid a slowdown in demand for apparel, according to media reports on Friday.

The clothing retailer, which sells Levi's jeans and Ashley Judd-branded women's clothes at its retail outlets and online, is expected to file for bankruptcy by early next week, according to reports in the New York Post and Women's Wear Daily. The reports cited unnamed sources.

A representative from Goody's did not immediately respond to calls.

Goody's is a privately held company owned by GMM Capital LLC and PGDYS LLC. Prentice Capital Management is the managing member of PGDYS. A call to Prentice Capital Management was not immediately returned.

The Knoxville, Tennessee, retailer of moderately priced family apparel operated 377 stores, primarily in the Southern United States, as of March.

Source: Reuters

Victoria's Secret embracing clearance outlets

Victoria’s Secret, which has relied on coupons and sales to clear discontinued lines, is adding discount stores.

Victoria's Secret hasn't been afraid of discounting its merchandise with coupons or deals at its stores, but the lingerie retailer has hesitated to take the last clearance step - the outlet store.

That has changed. The division of Columbus-based Limited Brands Inc. opened clearance stores in the last eight months in New Jersey, Michigan, Texas and Florida, with plans for a fifth store by year-end.

"Today, there are more upscale outlet centers where we are comfortable that our stores would do well, while maintaining the integrity of the Victoria's Secret brand," Jamie Bersani, Limited Brands' executive vice president of retail real estate, said in an e-mail response to questions from Columbus Business First.

The clearance stores are in malls owned by Columbus-based Glimcher Realty Trust, Bloomfield Hills, Mich.-based Taubman Centers Inc., and two by Baltimore-based Prime Outlets Acquisition LLC.

Bersani said Victoria's Secret uses its discount stores to clear discontinued and out-of-season products.

The company also has eight regular stores in outlet and shopping centers run by Mills Corp., a division of Indianapolis-based Simon Property Group Inc. It plans to open five more of those in the coming months.

New attitude

The combination of a slumping economy and improved outlet malls are making discount stores more attractive for brands that never considered them before.

Same-store sales at Victoria's Secret were down 7 percent in the first quarter of this year and 8 percent last year.

Linda Humphers, editor-in-chief of Value Retail News, said Limited Brands CEO Leslie Wexner was long known as opposed to outlet mall stores, his concern being that deeply discounted products reflected poorly on the brand.

He wasn't alone. Humphers said that attitude was common among some higher brands that viewed outlet malls as a place for lesser products. In their defense, she said, outlet malls had been dominated by such lower brands since their rise in the 1970s, but times have changed.

"There was a huge amount of sensitivity about it," she said. "In the last five to seven years, we've seen more designer tenants. I think the message caught on. This is not just a liquidation channel. It's a profit center."

Howard Davidowitz, head of Davidowitz & Associates Inc., a retail consulting firm in New York, cited Coach Inc. as an outlet success story, noting the chain's 101 factory stores generate better sales than its 287 full-price shops.

"Price is important," Davidowitz said. "Consumers are negative. It seems to me that they're looking for deals and that's where outlets come in."

Not surprisingly, the success of outlet malls runs counter to general retail sales, Humphers said. When the economy struggles, sales at outlet malls rise.

"People don't want to cut quality, but they do want to cut price," she said, noting the average discount at an outlet mall store is 37 percent.

The industry is growing, according to the International Council of Shopping Centers. Outlet store square footage grew an average of 11 percent over the last four years, it said. The number of outlet centers rose to 222 last year from 217, it said, with 35 openings and 18 expansions planned by 2010.

Humphers said some retailers have never given much thought to clearance stores, but that is changing.

"It enables you to tap some different customers. If you're doing the Internet, you might as well do outlets," she said.

Source: Business First of Columbus

Pier 1 seeks to buy Cost Plus

FORT WORTH, Texas and OAKLAND, Calif. (Jun. 9) Pier 1 Imports is looking to acquire all of the outstanding shares of Cost Plus common stock for $4.00 per share. The company said it sent a letter to Cost Plus detailing the proposal and said it believed the transaction could be finished by the third quarter of 2008.

“We believe that the combination of Pier 1 Imports and Cost Plus is extremely compelling and would create significant value for the stakeholders of both companies,” said Alex Smith, president and ceo. “Given our similar customer bases and broadly similar business models, but distinct market positions, we believe Cost Plus is an excellent fit with Pier 1 Imports. We are confident that combining our two companies would create a stronger and more competitive company that is better positioned for future growth. Furthermore, we believe the combination will result in improvements in Cost Plus’s operating margins and significant synergies, anticipated to come from organizational efficiencies in the supply chain management, shared services, store operations and other general administrative costs. Cost Plus shareholders will enjoy significant benefits from the combination, including improved operational liquidity of the combined company as well as a more active trading market for their shares.

In response to Pier 1's proposal, Cost Plus said it would review the offer, and noted that its shareholders do not need to take any action with regards to this proposal.

Peter J. Solomon Company is acting as financial advisor to Cost Plus and Skadden, Arps, Slate, Meagher & Flom LLP and Wilson, Sonsini, Goodrich & Rosati LLP are acting as legal advisors.

Source: Retailing Today

Linear, Principal Make $12.6M Retail Buy

STOUGHTON, MA-A Walgreens-anchored shopping plaza here is part of a two-building package being acquired by Linear Retail Properties of Burlington and Principal Financial Group. The $12.6 million deal includes the 26,000-sf strip center on Route 138 in Stoughton and a 5,500-sf Lenscrafters at 870 Providence Highway in nearby Dedham. Accommodating the sellers, Linear/Principal has agreed to delay closing on the assets until early 2009, prompting the two sides to strike a master-lease arrangement until the deal is consummated. "We effectively have full control of the properties," explains Linear President William Beckeman, whose $300-million fund is focused on convenience-oriented retail throughout New England. The latest purchases brings the number of assets acquired since the fund was launched in 2003 to 48, an assemblage valued at $220 million. Besides a free-standing Walgreens, the Stoughton plaza houses a 2,200-sf Eastern Bank branch, plus a Hertz Car Rental, pizza shop and Starbucks. Linear/Principal will pay $9.1 million for that center, which Linear partner Aubrey Cannuscio terms "a prototypical Linear Retail" investment. "The property offers a strong pharmacy anchor at a key intersection and some additional shop space that, together, offer bullet-proof cash flow and long-term upside," he says. The fund is paying $3.25 million for 870 Providence Highway, which is located at the junction of Enterprise Dr., the prime entrance to Gateway Center, a 650,000-sf entertainment/retail complex that broke ground this spring. Cannuscio calls the latter asset a "strategic buy" for other reasons, including his firm’s previous purchase of an abutting complex, leased to a bridal shop, guitar store and Mattress Giant branch. "Together, these properties offer operational efficiencies as well as long-term redevelopment potential on a very prominent retail center," he says. Unmotivated sellers and the lingering credit crunch have made it challenging to find opportunities this year versus last, says Beckeman. But while terming the first quarter as "dead," he notes that Linear/Principal has five buildings under contract to date in 2008, the same number secured at this time in 2007. As the mid-year point approaches, Beckeman says more properties are finally making their way to market. "It seems to be freeing up a little bit," he reports. In the meantime, the fund’s managers have proactively pursued properties such as the Dedham and Stoughton centers. Seller John DeMatteo says the owners "were not eager" to harvest their assets, but says "Linear Retail countered our reluctance by offering a good price and a deferred closing that allowed the timing of a transaction to work for us." The deal was brokered by Kevin Shaughnessy of Collaborative Retail Strategies of Charlestown. Linear also says KeyPoint Partners of Burlington will provide property management services for both assets. Source: GlobeSt.

The Starbucks Effect

A few weeks ago I wrote about my brother-in-law who'd just decided to buy his first home. While I was on a business trip last week, he gave me a quick tour of his new place: a 1920s row house in Washington, D.C.'s Petworth neighborhood with exposed brick, good bones and lots of space. He was quick to point out the hip restaurants that were opening up nearby, as well as a new upscale condo project rising a few blocks away. Such neighborhood developments, he said, were sure signs that the neighborhood was on the up. But then I asked, "How far is it to the nearest Starbucks?"

While reporting on real estate the last few years, I've been surprised by how often I've heard house-hunters and real estate investors alike talk about the presence or expansion of certain retail chains as a surefire indicator that a neighborhood's home values were set to spike. One real estate pro told me the perfect place to buy a rental property is a town where Home Depot has just constructed a store and Starbucks is about to move in. Blogger Sarah Gilbert offers similar advice, which she calls "the smartest real estate strategy ever." "Buy, immediately, in a neighborhood where a Starbucks is planned," writes Gilbert, who says her own home value doubled shortly after an outlet of the ubiquitous coffeehouse opened nearby. (Of course, since she wrote that in 2006, it's hard to say how much of her home's appreciation exists today.)

People who believe in this logic say that growth-oriented chains like Starbucks and Home Depot do tons of economic and demographic research before moving into a new town, and that their decision to locate a store indicates a big vote of confidence in the area's economy.

Adam Epstein of Site Analytics, a New York-based firm that helps chains analyze data to choose new locations, says he does sometimes observe a "snowball effect," in which the creation of a subdivision gives a particular retailer the confidence to site a store nearby, which in turn boosts demand for houses, which draws in more retailers, etc. Epstein also says that as some retailers (including Starbucks) have begun promoting future locations on their Web sites, more real estate investors seem to be making use of the data. "Among homebuyers, [Starbucks] is seen as the ultimate validation," Epstein says.

This would seem a strange time to talk about Starbucks and Home Depot as leading indicators for local real estate purchases, since both chains have been struggling of late. In April, Starbucks founder Howard Schultzacknowledged that his company is "experiencing some difficulties as a result of some tough operating conditions in the U.S.," and last month Home Depot announced plans to close 15 existing stores and take 50 planned stores off the drawing board as its earnings shrink due to the ongoing housing crisis. Indeed, if Americans have learned anything as a result of the ongoing housing meltdown, one would hope it would be to buy a house because it's a good place to live and not based on the hope that its price will double or triple. Still, despite the current troubles, most buyers can't help looking for a home that seems likely to appreciate, and some buyers still view these companies' site decisions as a leading indicator of sorts.

Consider George Vaughan, an advertising salesman in Portland, Ore., who first heard about the concept he calls "the Home Depot Magic Rule" from his accountant a few years ago. The accountant had another client who'd been buying investment property in towns where Home Depot planned to build new stores. This client had bought a bunch of houses in such a town in Oregon; over eight years they appreciated from $120,000 to $400,000 apiece. Vaughan, whose accountant was urging him to buy some rental properties to improve his tax situation, zeroed in on an Oregon town called Hermiston, about three hours east of Portland, and ultimately bought two homes there.

Source: Newsweek

Sam's Club tests new concept

FAYETTEVILLE, Ark.—Wal-Mart's Sam's Club is testing a new store concept that focuses solely on its small business members.

The new store club concept called Sam's Club Business Center, which is opening in a Sam's Club location in Houston in July, will focus on bulk items such as office supplies and food needed by restaurants, convenience stores, offices and other enterprises.

The store will not carry apparel, certain consumer items and recreational merchandise.

"This building will help teach us something," said Doug McMillon, chief executive of Sam's Club, as he addressed a media gathering Thursday in advance of Wal-Mart Stores Inc.'s annual shareholder's meeting on Friday.

McMillon said "if we like the financials" then the company will convert Sam's Clubs to the new concept in certain locations that cater heavily to small business owners, as does the Houston location.

Sam's Club has been working closely with its small business members, which have been struggling with inflationary pressures on food and fuel.

"We are an agent for our members and our members watch every penny," McMillon said.
With nearly 600 stores nationwide, Sam's had sales of $43.3 billion last year.

Source: The Boston Globe

Despite Market, Retail Sales Encouraging

Stein Jr.

NEW YORK CITY-Even with a weakening economy, retail fundamentals are still solid, said experts at NAREIT's 2008 conference here at the Walford Astoria. But panelists said even with positive sales growth in the first quarter, they are still cautious about the future.

Following introductory remarks from Steven Wechsler, president & CEO of NAREIT, Martin Stein Jr., chairman and CEO of Regency Centers Corp. and NAREIT chair moderated the "CEO Marketplace-Consumed by Retail," luncheon panel, which included remarks from top retail CEOs about the impact of the economy on the retail sector. Robert Taubman, chairman, president and CEO of Bloomfield Hills, MI-based Taubman Centers Inc. said that although May was a good month, consumer confidence is down. "We are in a slowdown, but not yet a recession."

CEO Marketplace Panel

Milton Cooper, chairman & CEO of Kimco Realty Corp., agreed that it is a tough environment, but he said that he is beginning to notice regional differences as far as performance. "The sunshine states--which include California, Arizona and Florida--that had the housing boom then bust, are hurting the most," he said, adding that he is noticing that retail stores that deal with housing merchandise such as furniture, appliances, and linens, are most affected. Supermarkets are doing well because food is essential, he said.

Cooper continued that "you have to be prepared in these cycles for a temporary blip," but he expressed an optimistic view on the long term. "You have to be patient," he said.

John Bucksbaum, chairman & CEO of Chicago-based General Growth Properties Inc., said that things are not as bleak as previously predicted, but they are challenging. "We are in for a long and difficult environment," he said, however he is optimistic for the most part. "May sales were encouraging, but that doesn't mean all is well."

Peter van Rossum, CFO of Paris-based Unibail-Rodamco, agreed with Cooper in that he is beginning to notice some issues with home improvement stores in Spain. "In Europe, there is a lot of talk about consumer confidence going down, but time will tell how that takes affect." He noted that "our business is to rent space to tenants and there isn't a lot of change in that market, yet…" except that retailers are starting to become more selective on location.

As far as how rising gas prices are impacting retail, Cooper said that in the '70s when there were higher gas prices, "people found value in the one-stop-shop, which led to increased foot traffic," which he said was a lesson for today's gas increase. However, he said that nonetheless, when you take cash out of someone's pocket, the "modest shopper" is less excited about going out and spending money.

Rossum said that there are some differences in European malls versus US malls. "In Europe, you find that there are more food anchors than department store anchors." Also, he said, "most malls we own are intercity malls." Rossum also noted that access to public transportation is incredibly important in Europe when looking at assets. His last point of difference was that "when you want to expand of build new properties, permits take quite a long time, and zoning is very difficult."

Bucksbaum said that the "choices are narrowed, and the game has changed dramatically" in reference to capital markets. "We have had some success as we have raised $825 million of equity, but we would have preferred never to have sold that equity. It would have been nice to not have to go about things in that way." He added that financing is there, but the windows of opportunity are smaller. "Lenders are reluctant in regards to real estate."

Rossum said that money is available in the market. "I'm not saying it is easy, but you can do it."

As far as looking globally for investment, Taubman said that each company has to find its own way and take what it has learned domestically and take it elsewhere. Taubman Centers' focus is in Asia, he said. "Abroad, we are investing in iconic projects, are being selective, and are interested in creating a platform." He noted that Taubman spend a year analyzing what it wanted to do, and has been in Asia for four years. "In another five or six years, we hope to have five projects there. We are looking at long-term commitment."

Bucksbaum agreed with Taubman in that "we want to be in places we can create a platform." He noted that "the world has become a much smaller place and retail has become a global business."

Cooper says that the most important thing for his firm is expanding through local partners, citing Peru, Brazil and Chile as example locations. "Our motto is to be sure that we feel comfortable with a local partner that knows the market. We wouldn't do it on our own."

Source: GlobeSt.

Slower sales don't derail Dick's

Sales at Dick's Sporting Goods stores have weakened and may continue to fall for now, but CEO Edward W. Stack views the tough time for retailers as an opportunity to boost the company's market share.

"We see that we execute our business better than the competition," Stack said after the Findlay-based sports equipment seller held its annual meeting Wednesday at the Hyatt Regency at Pittsburgh International Airport.

"We feel the way we are positioned in this industry gives us the ability to gain market share," he said. "I think we will continue to open stores at a faster rate than our competitors will. A number of our competitors have indicated they've slowed their development programs. We continue to open stores."

Dick's Sporting Goods Inc., in fact, remains on track to be operating 800 stores within seven to eight years, Stack said.

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The company's acquisitions of the Golf Galaxy and Chick's Sporting Goods chains last year grew the company to a combined 434 stores, including 340 Dick's.

Golf Galaxy will continue growing, especially in the South, where golfers head to courses nearly year-round, Stack said. The 15 Chick's stores in California are to be converted to the Dick's name through late 2009. In all, 44 Dick's and 10 Golf Galaxy stores should open in 2008.

Dick's is coming off a strong year, when profit grew by 38 percent to $155 million on sales of $3.9 billion, and earnings per share increased 30 percent to $1.33.

Comparable store sales in the first three months of this year dropped 3.8 percent from a year ago. They're projected to be down 4 to 7 percent in second quarter, compared to a 5.8 percent increase a year ago.

Dick's shares closed yesterday at $22.51, down 29 cents.

Source: Pittsburgh Tribune Review

Household wealth drops by $1.7 trillion

Americans' net worth falls for second straight quarter as home and stock prices decline, but it may not hurt consumer spending, experts say.

NEW YORK (CNNMoney.com) -- Americans saw their net worth decline by $1.7 trillion in the first quarter, as declines in home values and the stock market ravaged their holdings.

The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve's flow of funds report, which was released Thursday.

The drop marks the second straight decline in net worth, which fell by more than $500 billion in the fourth quarter of 2007. Until then, net worth had risen steadily since 2003, climbing nearly 31% over those five years. During the bear market of 2000 through 2002, household's net worth dropped 6.2%.

The recent declines, however, may not affect consumer spending, said Michael Englund, senior economist with Action Economics. Americans have actually spent more in recent months, particularly at the gas pump as fuel prices soar.

"These quarterly swings are almost completely uncorrelated with quarterly swings in consumption," Englund said. Americans "are spending everything in their wallet and borrowing more. But because the pump takes so much more of their dollars, they are buying fewer t-shirts."

Source: CNNMoney.com

Neiman Marcus plans to add discounts

If you've been enjoying the discounts at Neiman Marcus stores, the good times may continue for a while.

Neiman Marcus Group management said Wednesday that it was more promotional than it wanted to be in its fiscal third quarter in order to move merchandise.

That led to lower profit. In addition to regular markdowns, the luxury retailer offered special incentives during the quarter, such as a $200 gift card toward one regular-priced item of $500 or more in women's apparel, or "one day only" discounts in menswear that were extended to the next day.

The Dallas-based retailer said it plans to add sale events this quarter too, as it tries to match inventories to weaker demand.
I
t's also buying less for the fall season, even though some early merchandise is selling at full price, said chairman and CEO Burt Tansky.

Mostly, the aspirational shopper is the one pulling back in response to concerns about the economy, Mr. Tansky said, adding that he's confident shoppers will resume their normal spending once this cycle is over.

Markdowns are out of necessity, he said, and Neiman Marcus and Bergdorf Goodman "take pride in not being a leader" in the business of discounting.

Competitors Barneys New York and Saks Fifth Avenue are cutting prices, too.
Last month, Saks Inc. profits missed expectations, and margins were hurt from heavy promotions during the quarter.

Neiman Marcus reported a 7 percent decline in fiscal third-quarter earnings and its first quarterly drop in same-store sales since 2002. It reported earnings of $55.4 million in the period ended April 26, down from $59.5 million last year.

Total revenue for the quarter fell 1 percent to $1.06 billion from $1.07 billion, while same-store sales dropped 2.5 percent. Its May comparable sales rose 0.2 percent, and its strongest results were in Texas and New York.

Online sales were up 7 percent in the quarter, which is a slower pace than in past periods.

Neiman Marcus is exploring international opportunities, and management visited China last year, but there are no plans to expand outside the U.S. for now, Mr. Tansky said.


Source: Dallas Morning News

Saks Looking Abroad

Luxury retailer announces new stores overseas, reports signs of growth to shareholders

Saks Fifth Avenue Inc. (New York) announced it will open a 15,000-square-foot men’s store at The Walk at the Jumeirah Beach Residences in Dubai, U.A.E. The new store will join an existing 80,000 square-foot full-line store that opened in Dubai in 2004.

It will be the fifth overseas store in the Saks chain, joining an existing one in Riyadh, Saudi Arabia, and a new one in Mexico City.

Speaking at the Saks annual stockholders meeting, chairman and ceo Stephen Sadove said the company also plans to open a Saks Fifth Avenue store in Jeddah, Saudi Arabia, in November, and is looking at further opportunities in the Middle East, Shanghai and other markets. (For full coverage of the Mexico City store, see the July 2008 issue of VMSD.)

Saks told shareholders that it’s projecting flat operating margins, mid-single digit comparable store growth, and a modest gross margin rate decrease in fiscal 2008. “This is a difficult environment and the luxury consumer has been cutting back,” Sadove said. “You’re seeing more sales on promotion than full price. The luxury consumer is more affected by stock markets and their net worth than rising gas prices.”

The company ended 2007 with an 11.7 percent same-store sales increase, much better than rivals Neiman Marcus (5.7 percent) and Nordstrom (3.9 percent). In the first quarter of 2008, Saks enjoyed an 8.4 percent gain while Neiman’s and Nordstrom both saw same-store sales decline. “It was a year of great progress for Saks,” he said. “Saks wasn’t making money three years ago. Also, the average Saks Fifth Avenue store does about one-third less in productivity than the average Neiman Marcus store. But, as we increase that to Neiman Marcus’ productivity level, we’ll be closing the profitability level between the two.”

Source: VMSD.com

Williams-Sonoma Continues Growth Strategy

SAN FRANCISCO-Despite e-commerce growth that contrasts with declining comp-store sales, Williams-Sonoma remains committed to a “cautious” store opening schedule, executives said at its first-quarter conference call.

The company will open a total of 51 new units this year across nearly all its brands, while closing 24 stores. No new Williams-Sonoma Home stores will be opened this year. The openings come even as comp-store sales declined 9%. Net revenues decreased 4.2% to $781.8 million. However, e-commerce sales have risen 8.7%, attributed to the natural growth of e-commerce and shoppers migrating from phone sales, not from stores.

“We’re continuing to monitor very closely what happens with customers who come from the web and migrate to retail stores, and retail customers who might migrate to the web,” said Howard Lester, chairman and CEO. “We’ve seen very little shift to the extent that it would affect our ability to pen retail stores. At this time, I don’t see any material change in our long-term strategy.”

Williams-Sonoma operates 603 stores under the Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm and Williams-Sonoma Home banners.

Source: GlobeSt.

Retailers report May results above expectations

Consumers stepped up their shopping in May after tax rebate checks hit mailboxes, giving many of the nation's retailers stronger than expected sales for the month. Still, there were signs that many people are still focusing on necessities such as food and gas.

Discount and lower-priced stores such as Costco Wholesale Corp. and Wal-Mart Stores Inc. were again among the strongest performers.

Analysts had predicted a gloomy May, with consumers contending with a rising cost of living, declining home values and tightening credit. However, according to a preliminary report from Thomson Financial, of 27 retailers reporting, 13 beat expectations, 3 met expectations and 7 missed.

The tally is based on same-store sales, or sales in stores open at least a year; they are considered a key indicator of a retailer's strength.

"It certainly looks as though gas tanks didn't siphon off all of the rebate stimulus," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "Consumers were able to spend in May."

Wal-Mart said same-store sales rose 3.9 percent, while analysts surveyed by Thomson Financial predicted a 1.6 percent rise. Including fuel sales, same-store sales rose 4.4 percent.

The world's largest retailer said it likely saw a benefit from rebate checks. Sales in its food and health categories were strongest, it also had strong sales of entertainment items such as flat-screen TVs and reported the first same-store sales increase in the home category in two years.

Perkins said those results could point to "staycations" this summer, as consumers stay home and purchase electronics or work on home-improvement products instead of taking pricier trips.

Rival Target Corp., which has a somewhat more upscale clientele, said same-store sales fell 0.7 percent, while analysts expected an 0.2 percent drop.

Costco said same-store sales rose 9 percent, ahead of the 6.9 percent analysts were expecting. Results were boosted by food and gas sales, along with the benefit of the weaker dollar, mainly in Canada.

TJX Cos., which operates discount apparel and home furnishing stores including T.J. Maxx and Marshalls, said same-store sales rose 2 percent, edging higher than the 1.8 percent analysts expected.

Mall-based stores such as The Children's Place Retail Stores Inc. also reported results above expectations.

The Children's Place same-store sales rose 10 percent, ahead of the 4.3 percent forecast.

But Limited Brands Inc. said same-store sales fell 6 percent, missing the 5.5 percent drop analysts expected. The company's stores include Victoria's Secret and Bath & Body Works.

Source: Associated Press

Wal-Mart Beats Expectations - May same-store sales rise 4.4 percent

Wal-Mart Stores Inc. said Thursday total U.S. same-store sales during the four-week period ending May 30 rose 4.4 percent due to strong sales of grocery, health and wellness and entertainment products.

Same-store sales, or sales at stores open at least a year, is a key measure of retailer performance, because it measures growth at existing stores rather than from newly opened ones.

Analysts polled by Thomson Financial, on average, forecast a 1.6 percent increase in same-store sales.

Excluding fuel sales, same-store sales for the month rose 3.9 percent.

Same-store sales increased 4 percent in its Wal-Mart Stores (nyse: WMT - news - people ) segment, while same-store sales at Sam's Club stores increased 6.5 percent during the month.

Analysts anticipated same-stores sales growth at Wal-Mart stores to rise 1.7 percent and Sam's Club sales to rise 2.6 percent.

"Our comparable-store sales continue to increase because of our price leadership, merchandising initiatives and operational improvements," Eduardo Castro-Wright, Wal-Mart U.S. president and chief executive officer, said in a statement. "We also believe we're seeing some benefits from the stimulus checks."

At Wal-Mart Stores, entertainment products such as flat-panel televisions and computers helped bolster sales as well as health and wellness products as the retailer expanded its $4 prescription program to over-the-counter medications.

At Sam's Club stores, sales of fresh foods, dry grocery and consumables were strong, the company said.

For the four weeks ended May 30, total sales, which includes Wal-Mart Stores, Sam's Club and international sales, increased 9.8 percent to $31.04 billion from $28.26 billion, a year earlier.

Wal-Mart estimates same-store sales during the five-week June period will rise between 2 percent and 4 percent, excluding fuel sales. The period runs from May 31 through July 4.

Source: Forbes

2 STORES FOR JEANS RETAILER

June 5, 2008 -- Jeans maker 7 For All Mankind could become "7 For All Manhattan" after the retailer inked leases for its first two stores in New York - a flagship in SoHo and another in the Flatiron district.

The 3,600 square foot deal at 394 West Broadway included obtaining the early termination of the Smith & Hawken garden furniture shop. The asking rent was $250 a foot.

The jeans maker also leased space for a smaller store of 2,500 feet, plus 1,000 feet in the basement, at 73 Fifth Ave.

Robin Abrams and Howard Dolch of The Lansco Corp., along with 7's national consultant, Dallimore & Co., found the sites for 7.

Lansco's Yair Staav and Christine Emery worked for the owners in SoHo, while David LaPierre of CB Richard Ellis represented owners of the Fifth Avenue location.

Source: NY Post

Bennigan's owner working on plan to avoid bankruptcy

LOS ANGELES, June 4 (Reuters) - Metromedia Restaurant Group on Wednesday said it is working on a debt restructuring plan, a move that could help the operator of struggling chains like Bennigan's and Steak and Ale avert a potential bankruptcy.

The announcement came on the heels of a Wall Street Journal report that the unit of billionaire John Kluge's privately held Metromedia Co was in talks with GE Capital Solutions and that the restaurant owner had prepared a bankruptcy filing in the event it was needed.

"Metromedia Restaurant Group is currently in the process of formulating a proposal to present to its lenders to restructure its indebtedness," the company said in a statement, which underscored that the company "has neither filed for bankruptcy nor prepared a bankruptcy filing."

The Journal report cited three people familiar with the matter and said the restaurant group had violated several terms of its lending agreement earlier this year, prompting GE Capital to declare a default and accelerate payments.

GE Capital is a unit of General Electric Co (GE.N: Quote, Profile, Research). Metromedia did not answer calls seeking comment. A GE spokesman declined to comment.

Metromedia hired California bankruptcy lawyer Jeff Reisner a few months ago, the Journal said, citing two people familiar with the matter. Reisner did not immediately return a call for comment.

The newspaper said Metromedia Restaurants' chief executive Clay Dover left abruptly last week, citing differences with ownership.

Casual dining chains have suffered because of the U.S. economic slowdown.

Some struggling operators, including Village Inn and Bakers Square owner privately held VICORP Restaurants Inc, have already filed for bankruptcy protection.

Source: Business Week

Boston Wants Year Round Market for Vendors

The city of Boston is considering the creation of a year-round, indoor-outdoor public food market district to rival Seattle’s Pike Place or Reading Terminal Market in Philadelphia.

The Boston Redevelopment Authority is commissioning a study to determine the physical and economic feasibility of locating the new district near the North End parks along the Rose Fitzgerald Kennedy Greenway.

The district would be dedicated to vendors selling locally grown and produced foods, including fruit, vegetables, fish, meats and artisan products such as bread and cheese, seven days a week.

“Boston is a great city, and it deserves to have a public market,” BRA director John Palmieri said. “I’m new to the city, but I can remember back in the ’70s that Quincy Market provided that kind of service to citizens. They had all kinds of locally operated vendors.”

The BRA envisions the market district encompassing the existing Haymarket pushcart vendors who operate on Hanover, Blackstone and North streets, in addition to new vendor areas on Cross Street, Salem Street and the stretch of Hanover Street between the parks.

Indoor vendor space is being eyed for Central Artery Parcel 7 and vendor facilities for Parcel 9.

Parcel 7 is between Congress and Blackstone streets by the Haymarket MBTA station. The Massachusetts Highway Department and Turnpike Authority have developed the parcel, which contains tunnel ventilation shafts and is wrapped with a parking garage and office space on the upper floors. But 29,400 square feet of first-floor retail space must be used for “marketplace” uses under an agreement with the BRA.

Parcel 9 is a vacant 56,500-square-foot parcel owned by the Highway Department and Turnpike Authority. The BRA will develop use guidelines for the parcel this summer, including market-related uses for the ground floor that could include vendor facilities for trash compacting, recycling, cleanup and sanitation.

The BRA’s plans call for maintaining existing farmers markets in other areas of the city, including those at Copley Square and on City Hall Plaza. The BRA will consult with the Boston Public Market Association, founded in 2001 with a goal of creating a year-round Boston food market, as it proceeds.

Source: Boston Herald

CEO Interview: Simon Property Group

DAVID SIMON'S COMPANY owns or co-owns nearly 400 shopping malls, stretching from Camarillo, Calif., to Catania, Sicily. But just steps from its Indianapolis headquarters is one of the company gems: Circle Centre. The mall's 60-foot-high arched, windowed ceiling allows visitors to bathe in natural light, making the atmosphere cheery even if shoppers can't find the perfect pair of jeans. And Circle Centre, built in 1995, was a big step toward reinvigorating a dreary downtown Indy.

But the mall and other gems aren't sparkling as brightly as usual. Consumers are holding on to their wallets as fears of a recession mount. Mall traffic has stalled, and some stores are even going under. All that has taken a toll on the value of Simon Property Group (SPG: 100.65, +1.65, +1.66%), the largest U.S. real estate investment trust, or REIT. Its stock has fallen about 12 percent since early 2007.

For more SmartMoney Magazine features, turn to the June issue.Still, to his critics, Simon, 46, can point out that the stock has returned nearly 700 percent, including dividends, to investors since he became the boss in 1995. Despite weak retail sales generally, Simon's sales and earnings (called "funds from operations," in REIT parlance) were both up 10 percent last year, and the company expects more gains in 2008. Simon makes its money by charging rent to retailers that lease mall space. Those leases typically last seven years, giving the company some breathing room in a consumer downturn. "We don't have to sell the goods," he says.

Under David Simon, son and nephew of the company's cofounders, the company has been on its own shopping spree. It now owns around $50 billion worth of real estate, up from $2 billion at its 1993 initial public offering. And more deals likely are on the way. Simon talked with contributing editor Evelyn Ellison Twitchell about the current retail malaise, the company's growth prospects and his own shopping habits.

People are cutting back on their shopping. How's that affecting the malls?

We're anticipating this year to have a somewhat higher level of store closings. What we're seeing is that some of the better retailers have tried a concept, and it's not producing the results they want. So they're shutting down the concept. Talbots tried Talbots Kids, and they're shutting down that chain. Pacific Sunwear has this concept that they want to shutter. Now, those retailers have leases, so we're going to get paid to let them out.

But you're still charging retailers more to be tenants?

In recent years, as leases have come up for renewal, we've been able to increase rates $7 to $10 per square foot, about 20 percent, which has obviously generated increased cash flow. That is going to be a little bit tougher to achieve, and the spread might not be as great. But I still think it's something we'll be able to do.

Okay, you're making the retailers pay more, so that helps your profits. Why has your stock suffered?

REITs had a huge run-up last year associated with mergers-and-acquisitions activity. There was a big move toward privatization and a lot of capital coming in. That's subsided. Now the momentum guys are out, and the capital markets are a little shaky. It's had an adjustment on valuation. But we strongly believe that the value of our assets is actually greater than our stock price.

How else does the economy affect you?

If the consumer slows down, will we have some potential cash-flow impact? The answer is yes. I think it will be de minimis. Remember, we're in the real estate business. We are somewhat — I know it's hard to believe — but we are somewhat insulated. These times are also when we can do some of our best transactions. When the economy was slipping into recession in 2001, we did one of the best deals that we've done in terms of buying a high-quality portfolio [of malls] at a very attractive price [from] Rodamco. So we're gearing up.

Are you looking at specific properties or whole companies?

We'll do both because we've always done both. There are some companies that have a little more pressure on them financially than we do, because of the way we have financed our growth. So we look at it as an opportunity.

You say you also can expand your business by actually demolishing department stores in your existing malls?

What you're seeing is, you probably don't need four or five anchor department stores; you may need two or three. That enables us to capture one of the stores, chop it up and bring in other smaller retailers, bookstores, restaurants, theaters, to broaden the appeal to the consumer.
What about building malls abroad?

In the U.S., clearly, there's a lot of retail space — about 20 square feet per capita. When you look at other markets, it's 2 to 3 square feet per capita. As we think about the future, we'd like to see more of our business going international. We're building five centers in China now. In Japan we've been successful with our premium-outlet-mall product. And we would hope over time to be bigger in Europe.

What about online shopping? I'm assuming you're not a fan of Amazon.com.

It is something that we've got to be very focused on. What I'm most concerned about is that it's not a level playing field. The dot-com-only stores don't collect sales tax, so they have an immediate advantage over our retailers. Ultimately, though, we believe if we produce the right kind of product and atmosphere, the physical shopping environment is here to stay and will continue to prosper.

So we haven't kissed our mall goodbye, as some predicted?

Yeah, Time magazine wrote that in 1998. I hope that's not on your cover. The mall's been bad-mouthed for almost two decades now. Yet if you look at not just us but other prominent companies in our space, we've all been able to grow our cash flow. Sales have gone up. So the question is, is our real estate good? At the end of the day, retailers come and go, but the mall continues to thrive and will continue to evolve. I think our results speak for themselves.

You seem like someone who has been successful at getting what you want. What do you want right now?

We have a market value of real estate of around $45 billion to $50 billion. I would like to see us become more global, and maybe that $50 billion goes to $100 billion. You've got to do it in a way that accretes to shareholders, but we would certainly like to see a bigger, broader platform. And we want to be excellent, excellent operators. So when people walk into our centers, they see a certain standard of excellence. If we had to emulate a brand, it would be the Four Seasons of the mall business.

So what's your ultimate shopping experience?

Keeping my wife happy! Otherwise, I want a clean product, a fresh product and a diversity of tenants. If I'm a shopper and have those, then I'm happy.

Source: SmartMoney.com

Up close and very personal: Mall kiosks performing grooming services in full view

Remember when personal grooming was, well, personal? Now once-private appearance tweaks are on public display. Just check out the mall. Alongside carts with candles and cell phones, mall kiosks are offering everything from teeth whitening to hair removal -- all performed in the middle of the shopping center for all to see. "People are happy to spend more money on personal care in order to feel good," said Laurel Sibert, portfolio vice president of marketing for Simon New England, which owns 18 malls in New England. "The neat thing is that kiosk carts in the mall allow the vendor to demonstrate their services to people walking by while promoting their product."

Teeth whitening, eyebrow threading, mineral makeup applications, skin exfoliation, hair extension, henna tattoos, massage tables -- if it's in the realm of "personal care," it's ripe for a public mall procedure. "Space becomes the restriction," Sibert said. "Whatever you can do with a confined area of 10 feet by 10 feet, people will do." Ah, imagine the possibilities. Carissa Gonski, 16, of Stoughton really doesn't want to. "I just saw a woman having her mustache threaded in front of everyone," said Gonski, who was at the mall last week during a school field trip.
Gonski rolled her eyes. "I mean, they should have some sort of wall up," she said. "Who would want to see that?" Her classmate, Paige Thornton, 17, was also put off by the man having his teeth whitened via laser at a kiosk at the base of the very busy escalator. "It's embarrassing," she said. "I'd rather go to the dentist." Maybe, but public personal grooming is awfully successful at Simon malls.

"Teeth whitening companies are really successful," Sibert said. "They have three or four chairs and are usually filled up." Aside from space, the only other restriction comes from town bylaws. For example, fake eyelash applications are OK in New York City, but not in the Bay State. "There aren't any nail salons at kiosks because there's no water provided to them, only a telephone line and electricity," Sibert said. Still, Simon malls haven't had to turn any business down for making the private too public. Nathasha Alozada, 20, of Dorchester is willing to look good, even if it means getting a few stares as she has her eyebrows threaded, a Middle Eastern hair removal technique, at South Shore Plaza. "It gives the business exposure and it's comfortable," she said. "I don't care what anyone thinks. And I don't think a lot of people do. You should see this place on the weekends. It's so busy."

Source: Boston Herald

Centro is Thrown a Lifeline

Struggling shopping center operator Centro Properties Group, one of the most high-profile victims of the credit crunch, remains afloat as its creditors this week extended the Melbourne-based listed property trust a lifeline by giving the firm a six-month extension to pay down $2.5 billion in debt. It now has until December 15 to come up with the funds.

On Monday, Centro announced it had finalized a $95 million liquidity facility, what it described as “certain inter creditor arrangements between its financiers.” Centro, which ran into major financial trouble last year because of the huge amount of debt it took on to fund its $6.2 billion acquisition of New York-based REIT New Plan, owes its Australian lending group approximately $2.1 billion and its U.S.-based creditors $450 million.

The extension comes amid speculation that Centro which controls properties containing 106.5 million square feet of space in the U.S. and 22.6 million square feet internationally, is close to selling part of its U.S.-based portfolio to an anonymous buyer, improving the firm’s chances of surviving its current crisis.

“They are trying hard and the banks seem to be playing ball, so I hope that they are going to make it happen,” says Merrie Frankel, vice president and senior credit officer with Moody’s Investors Service, a New York-based credit rating agency.

Centro’s domestic lenders include the National Australia Bank, the Commonwealth Bank of Australia and Australia & New Zealand Banking. Its bankers in the U.S. are J.P. Morgan Chase and the Bank of America.

To maintain the extension, Centro will have to meet three additional conditions by Sept. 30, including satisfying its lenders that it is executing a viable strategic plan, getting the U.S.-based lenders on the New Plan merger, owed $1.1 billion in September, to sign off on the extension and having all of its lenders agree to the terms of any asset sale.

The extension doesn't mean Centro is on terra firma, according to Macquarie Research Equities analyst Callum Bramah. “Given the massive refinancing currently under extension and the variable interest rate exposure, Centro’s cost of debt and therefore interest expense is at risk of blowing out,” he wrote on May 9.

Centro did not respond to requests for comment.

The developments come as Centro is said to be close to selling part of its U.S.-based portfolio to an un-named buyer. REIT Zone Publications editor, Barry Vinocur, says DRA Advisors LLC, a New York-based registered investment advisor was among the bidders, but the portfolio will likely go to another entity.

A week ago, Bloomberg reported the firm was in negotiations to sell 95 percent, or $1.16 billion worth of assets, from its Centro America Fund, which contains properties acquired through its $3.2 billion purchase of Boston-based REIT Heritage Property Trust in June 2006. At the time, the Heritage's U.S. portfolio included 157 grocery-anchored centers totaling 28.7 million square feet, primarily in the Northeast and Midwest. While Heritage properties were considered second-tier when Centro bought them, they are well regarded among U.S. investors and still attract a lot of interest, according to Frankel.

“There are always people looking to buy good product; maybe they will renovate and reposition those properties,” she says. “The Heritage assets are in the Northeast and you may have somebody who wants more properties [there]. I am sure that everybody is taking a look. Whether they put in a bid is another story.”

While Centro works to resolve its financial problems, it also has to deal with a number of legal issues. On May 27, it was slammed with a second class-action lawsuit from its shareholders—one that extends over a longer time period than a lawsuit filed earlier last month. The lawsuit, backed by U.S.-based funding equity Commonwealth Legal Funding, alleges Centro misled shareholders about its financial position and seeks damages on behalf of people who bought Centro stock between Apr. 5, 2007 and Feb. 28, 2008. The lawsuit, which Centro has vowed to fight, seeks $190 million in damages.

Centro faces a similar lawsuit filed by its domestic litigation funding firm IMF Australia Ltd., which represents shareholders who purchased the company’s stock between Aug. 7, 2007, when the New Plan deal closed, and Feb. 15, 2008. That lawsuit seeks $95 million in damages.

Since Centro’s troubles became public in December, its stock has plunged more than 80 percent. As of Tuesday afternoon, it was trading at (U.S.) $0.35 per share.

Source: Retail Traffic

The evolving lifestyle center tenant mix

Lifestyle center tenant rosters are becoming increasingly distinct from those of malls

Lifestyle centers are more and more distinguishing themselves from traditional malls by means of tenant mix, putting an emphasis on women’s apparel stores and restaurants, says an ICSC study of nearly 80 U.S. lifestyle centers.

The report, titled The Remaking of Lifestyle Centers: The Ascendancy of Women’s Apparel and Restaurants, shows that between 2004 and 2007, lifestyle centers boosted their numbers of such retailers as well as the amount of space allocated to them. Over that period, the presence of women’s clothing stores and restaurants at lifestyle centers as a proportion of the overall tenant mix grew from 24.5 percent to 27 percent.

The number of women’s stores increased over the period from 487 stores to 585 (from 12.51 percent of all lifestyle stores to 14.14 percent). No other retail category came close to such an increase except restaurants. In space terms, women’s wear accounted for 10.6 percent of lifestyle center gross leasable area in 2007, up from 9.9 percent in 2004.

This expansion of women’s apparel leasing was instrumental in the increase of space allocated to the apparel and accessories segment as a whole at these centers. This overall segment accounted for 28.6 percent of lifestyle tenant space in 2004; by 2007 that had grown to 29.3 percent, notwithstanding a decrease of allocated space to children’s apparel stores (1.7 percent, down from 2 percent). Family apparel space allocation was flat over the period, at 11.5 percent in both 2004 and 2007.

Regional and super-regional malls experienced a similar upward trend in the space allocated to apparel and accessories stores — 54.2 percent last year, up from 51.1 percent in 2004 — but for different reasons. “For malls, [the trend] was mainly due to family-apparel retailers, which reported a solid gain (of 4.7 percent points) compared with women’s ready-to-wear, which actually declined (2.5 percentage points) over the same period,” the report said. “Family apparel held its share constant in lifestyle centers during that time.”

The increase in the number of restaurants in lifestyle centers was more modest but nevertheless distinct. Restaurants grew in number from 466 inside lifestyle centers to 533 (in terms of proportion of total tenants, this was 12.89 percent in 2007, versus 11.97 percent in 2004).

“The increases are part of a broader trend of the expansion of apparel stores,” said Herston E. Powers, the ICSC research associate who authored the report. “But the expansion isn’t evenly distributed throughout retail property types. Women’s ready-to-wear stores, for instance, are finding a particularly hospitable environment in lifestyle centers.”

These centers are generally positioned to respond faster than larger malls to shifts in consumer preference, such as an increased demand for women’s ready-to-wear, says Joshua D. Poag, CFO of Memphis, Tenn.–based Poag & McEwen, one of the pioneering developers of the lifestyle center concept in the 1990s. “Lifestyle centers are more in tune with what’s going on in consumer preferences, partly because they can be,” Poag said. “Older and larger malls tend to have tenants with 10- or 15-year leases, longer on average than the tenant base of a lifestyle center, so there’s more flexibility in the lifestyle center model in remaking a tenant mix.”

The ICSC report’s findings come as no surprise to Kelly Tackett, a senior consultant at TNS Retail Forward, a Columbus, Ohio–based retail consultant firm. “Women’s ready-to-wear has always been an important component of shopping centers,” Tackett said. A location in a lifestyle center offers an important element of convenience to an already popular kind of store, she says. “Convenience has always been one of the main attractions of the lifestyle concept.”

The increasing popularity of restaurants at lifestyle centers is largely a function of convenience as well, says Poag. “Restaurants depend on one of the fundamental characteristics of the lifestyle center: close parking,” he said. “Parking is the key to the lifestyle center concept. The consumer has to be able to walk right into the store, and when you think about restaurants, parking is crucial in exactly the same way.”

Since ease of parking is so important to both lifestyle centers and restaurants, they work well together. “Traditional malls might have outlots, but that doesn’t blend in with the mall — it’s more like separate retail,” he said. “Restaurants blend into a lifestyle center’s overall flow of the traffic, which is good for the restaurant’s business, and lifestyle center owners have focused on restaurants to drive traffic. Both sides benefit from the location.”

Concurrent with the expansion of women’s wear and restaurant tenants in lifestyle centers has been a slight decline of space allocation for the larger, GAFO category (general merchandise, apparel, furniture and home furnishings). By 2007 space allocated to GAFO tenants in lifestyle centers had fallen to 62.9 percent, from 64.3 percent in 2004. By contrast, GAFO-type tenant space in traditional enclosed malls held steady at 79 percent over the period. “

This isn’t particularly a surprise, since lifestyle centers by definition put relatively more emphasis on non-GAFO-type components such as restaurants and entertainment tenants than traditional enclosed malls,” said Powers.

There is a geographical component, too, to the rising popularity of women’s wear and restaurant tenants in lifestyle centers. In the Northeast, women’s stores accounted for the largest GLA increase between 2004 and 2007, up nearly three percentage points. In terms of restaurant allocation, Northeast lifestyle centers were outdone by centers in the other regions, with the West and the Midwest recording the highest shares in 2007 (15.3 percent and 15.2 percent, respectively), followed by the South (12.4 percent). The Northeast accounted for 9.4 percent.)

The report makes no predictions about future leasing trends at lifestyle centers, though it does say that “examination of the centers built after 2004 may provide a more comprehensive picture of the evolution of this industry and its future.”

Trouble in the economy is an open question. Women’s wear is among the retail segments that have suffered disappointing returns of late. “Chico’s, Talbots, J. Jill, Coldwater Creek — they’ve all been hit recently by the slowdown in the economy,” said Poag. This has not been to the point of major contractions in space, however, he says. “It’s more a matter of slowing down expansion — for six [or] 12 months, or longer.”

Still, once the economy turns favorable to retail expansion again, he says, the growth in women’s wear and restaurant leasing may continue. “Chico’s and the others may have to slow down their expansion in the near future, and lifestyle owners know that and are adapting to the new circumstance,” he said. “But women’s ready-to-wear, and certainly restaurants, will remain critical to lifestyle centers in the long run. It’s hard to imagine that they wouldn’t be."

Source: SCT

The Boomers You Don't Know

An article on the Stores magazine website, Five Things You Don't Know About Baby Boomers, suggests that retail marketers need to take a new open-eyed look and approach to communicating with this important consumer demographic.

The first change marketers need to make when it comes to understanding boomers is to recognize there are vast differences between an individual born in 1946 (the start of the boom) and 1964 (the end of it). While consumers in the front half of the generation are now thinking about traveling and gardening, those on the backend are still involved in raising kids. Interestingly, both younger and older boomers rate Wal-Mart as their preferred shopping destination.

While the majority of boomers are married, 34 percent are currently single. Of these 17 percent are divorced or separated, 14 percent have never been married and three percent are widows/widowers. Married boomers are more affluent, earning an average of $73,380 annually compared to $41,872 for their single counterparts. Single boomers represent a potential swing group for retailers since they are less likely to cite a preference for a favorite store than those who are married.

Boomers are big consumers of media. Ninety-five percent watch television, 87 percent use the internet (93 percent of those use it to do research), 76 percent listen to the radio, 68 percent read a weekly community newspaper and 57 percent read a daily.

While it's reasonable to think of boomers as the current grandparent generation, these nanas and pops do not fit the stereotype. The average age for a boomer grandparent is 53.4 years of age, according to Stores, and their lifestyle has them on the move. Thirty-five percent say they exercise at least three times a week while nearly 11 percent are planning to renovate their home in the next six months. They also plan to spend on their grandkids with toys for younger children and gift cards for older ones.

Finally, there are those people McKinsey researchers described as "U-Boomers." This group, all 24 million of them, is said to be unprepared for their retirement years and perhaps that's because they keep spending. Almost 25 percent of total U.S. consumption by 2015 is expected to come from these shoppers.

An article in Forbes described the U-Boomer challenge and opportunity. "As the economic clout of the cash-constrained, highly discriminating U-Boomers grows, companies will need to rethink how they deliver services while keeping prices down. Web-based tools that lower delivery costs while retaining a sense of personalization and high-end service are part of the solution. One of the fastest-growing usage segments for Skype's Internet videoconferencing is grandparents talking to their grandchildren."

• Five Things You Don't Know About Baby Boomers - Stores
• Make Way For The U-Boomers - Forbes

Source: RetailWire

Lack of Discretion

In this tough economic climate, worried consumers have swapped “wants” for “needs.” As Ross Glickman, chairman & CEO of Urban Retail Properties L.L.C., puts it, “I think people are holding back on their discretionary spending. They’re waiting to see how the market goes.” That will potentially spell some hard times for specialty retailers that thrived during the long economic expansion—those in areas like jewelry, home electronics, clothing and restaurants. Those retailers are rethinking their growth plans for 2008, and retail real estate property owners are following suit.

Although many of their plans will reduce the aggregate number of stores and slow growth overall, one nuance tends to be overlooked: Even some of the hardest-hit national retailers are still opening stores. Talbots Inc. plans to close 100 underperforming locations among its 1,149 Talbots-brand stores and 273 J.Jills outlets. At the same time, Talbots has stated that it may also open 35 Talbots Woman stores and 40 Talbots Premium Outlet locations during the next three years. Similarly, The Gap Inc. is closing 100 locations in the United States. Half of those stores will be Gap outlets, while others will include 30 Old Navy and 15 Banana Republic sites. At the same time, The Gap is also planning to add 100 new locations this year.

These retailers, and the owners of the sites, are clearly looking beyond the current slower spending on clothing. Even if clothing sales slip this year as expected, plenty of pent-up opportunity remains in key markets from coast to coast. California tops the list of states with the most high-potential clothing markets. According to an analysis by Claritas, a CPN sister company specializing in retail-related demographic and marketing research, households in the San Jose-Sunnyvale market spent an average of $3,253 on purchases in clothing stores in 2007. Other California markets in the Claritas top 10 include Oxnard-Thousand Oaks-Ventura, San Francisco-Oakland and Santa Cruz-Watsonville. A pair of Colorado markets—Edwards and Boulder—also landed in the top 10. Rounding out the strongest clothing-store markets are the Bridgeport-Stamford-Norwalk region in Connecticut, New Jersey’s Trenton-Ewing area, the Boston area and Greater Washington, D.C.

Consumer electronics sales, too, are destined for a slide in 2008. The sector’s woes made headlines again last month when Blockbuster Inc. made a surprise hostile takeover bid for troubled Circuit City Stores Inc. Over the last decade, Circuit City has slipped behind Best Buy as the market leader in consumer electronics sales. Whether or not the acquisition succeeds, it will not halt the slide in consumer electronics sales growth. The International Council of Shopping Centers forecasts sales growth in consumer electronics and appliances of only 2 percent this year, down from 3 percent last year and less than one-third of the 6.6 percent growth rate in 2006.

Meanwhile, consumer caution is bringing disappointing results to other discretionary categories as well. “People are just not shopping in department stores,” said David Jacobstein, a senior retail advisor for Deloitte Touche USA L.L.P. and a former president & COO of Developers Diversified Realty Corp. That trend is pinching national giants like J.C. Penney Co., which reported a 12.3 percent slide in same-store sales across its 1,073-store portfolio in March. In response, J.C. Penney is pursuing its expansion plans at a somewhat slower pace. The company has trimmed planned store openings this year from 50 to 36.

Macy’s Inc. is also easing up on the gas pedal. In December, the chain said it would close nine underperforming stores in six states, including Indiana, Louisiana, Ohio, Oklahoma, Texas and Utah. This year, the company will debut five new Macy’s stores, half of last year’s total. And instead of opening two new Bloomingdale’s locations, as it did in 2007, it will renovate several existing stores.

The company’s 2009 development pipeline is somewhat more robust, though, as it plans to open at least six new stores. Also in the works is Arizona’s first Bloomingdale’s store, which is scheduled to start construction this fall and open in the fall of 2009 as part of The Related Cos. and Thomas J. Klutznick Co.’s CityNorth project in Phoenix’s Northeast Valley. Eight of the top 10 clothing store markets also rank in Claritas’ top 10 department store markets. Once again, San Jose-Sunnyvale, Calif., took first place in 2007 with average household expenditures of $4,329.

Given strong enough demographics, retail owners are still bullish about the long-term prospects for upscale department stores. Last month, Simon Property Group Inc. disclosed plans for a major expansion at Copley Place in Boston’s Back Bay. The plan includes a 54,000-square-foot addition to the Nieman-Marcus store, 60,000 square feet of additional retail and 300 condominium units.

Click here for list of charts

Source: Commercial Property News

Crème de la Crème Plans 50% Growth over 18 Months

DENVER-Crème de la Crème Inc., a locally based chain of high-end early childhood learning facilities is looking to grow by 50% in 2008. Company chairman/CEO Bruce Karpas tells GlobeSt.com he is in the process of identifying and securing sites that will grow the number of centers from 20 to 30 locations before the end of 2009.

The prototypical Crème de la Crème property totals three acres, costs $7 million to develop, takes seven months to build and is anchored by a 21,000-sf building with an elaborate build-out that resembles a Victorian village. Inside the building are a computer lab, arts and music studios, library, dance studio, gymnasium and a mock television studio. Outside, there are reduced size tennis and basketball courts, a custom designed mini water park and numerous play areas containing an assortment of toys and playground equipment. Children move to a new area every 30 minutes that is staffed by a specialist in addition to their regular teacher.

“It’s a state-of-the-art, educationally engineered facility that others have said looks like Disneyland inside,” he says. Crème de la Crème Ivy League pre-schools have found a home in upscale suburban lifestyle centers and mixed-use districts situated close to upscale residential communities and major transportation routes. Developers of such centers like the chain because it attracts their kind of demographic and also because it can take spaces toward the back of a center that traditional retailers have shied away from, and also are closed on weekends, when the center is the busiest.

Other developers are treating them more like an anchor tenant. One developer, in North Chicago, put them out front of his center following a front page story about the company in the Chicago Tribune, Karpas says. Another, in a suburb of Dallas, redesigned its center to provide a view corridor from the street to the school, named the center after the school and flanked it with a maternity store and a spa, Karpas says.

Crème de la Crème either self-develops its pre-schools with a subsequent sale-leaseback transaction upon completion--in order to recycle the capital for a new location--or enters into build-to-suit-to-lease deals with the developer.

The company currently has six schools in the Atlanta area, five schools in the Dallas area, four in the Chicago area, and one each in or near the following cities: Philadelphia, Denver, Cleveland, Washington, and Kansas City.

Karpas says the next five locations in the next 12 months, including two more in Chicago, another near Washington, DC, another outside of Cleveland and the first in Arizona in Scottsdale. Five more are expected to open before the end of 2009, including a second school in the Denver area. There are no schools on the West Coast yet because the cost of land has been prohibitive, Karpas says. “That $7-million development cost per store includes the cost of land; if land in a certain market is $1 million an acre, that’s $3 million on just the land,” which doesn’t pencil out, he says.

That having been said, Karpas hopes the current market opens up some new opportunities to break into the West Coast market. “I’m hoping in this current economic environment to see a little bit of a price break,” he says. “We haven’t seen it yet but we are hoping because other retailers are somewhat slowing down.”

The first Crème de la Crème was opened in 1980 in the Houston area. Crème de la Crème Inc. became a licensee in 1997 and opened its first store in 1998 in Plano, TX, with money from family and friends. In 2004, Crème de la Crème Inc. acquired the Atlanta schools and, last spring acquired the ownership rights to the Crème de la Crème Inc. name. Karpas declined to discuss the acquisition cost but did say Crème de la Crème Inc.’s current ownership includes institutional investors.

Karpas says the company’s growth has been funded internally since 2000. To help keep costs down with regard to new development, Karpas says the company is moving away from ground-up development and more toward build-to-suit-to-lease deals, where the developer spends the money to build the facility with a long-term lease commitment from Crème de la Crème. Kimco and Duke as well as smaller developers have built facilities for Crème de la Crème under both models, Karpas says.

As for competition, Crème de la Crème believes it has separated itself from the independent pre-schools and the big national chains like Kindercare and Learning Care by having a higher-end facility, one that costs a few hundred dollars more per month than the national chains. The average tuition for a two-year-old attending the school five days a week for 12 hours a day is $1,200- to $1,400 per month. In addition, the schools offer after-school program for six- to 12-year-olds, and also offer private music and sports lessons.

“We are raising the image, we believe, of any lifestyle center we go into,” Karpas says.

Source: GlobeSt.

International Council of Shopping Centers issues Hot Retailers list

At RECon, the International Council of Shopping Centers announced its 2008 Hot Retailers:

Apricot Lane ( www.apricotlaneusa.com): The shops sell apparel, jewelry, handbags, accessories and gifts. Designer brands include Lucky Brand Jeans and 1921 Denim.

Billabong (www.billabong. com): Founded in 1973 by Australian Gordon Merchant, who developed his own stitching technique for surfing garments. Its products are sold in more than 10,000 stores worldwide, but now the company is opening its own stores selling wetsuits, surfboards, snowboard outerwear and skateboarding apparel.

Five Guys Burgers and Fries ( www.fiveguys.com): The chain was founded in Washington, D.C., in 1986 and is known for its hand-patted hamburgers, fresh-cut fries and made-to-order menu. It has more than 260 units.

Fresh & Easy Neighborhood Market (www. freshandeasy.com): The chain is owned by Tesco, one of the largest retailers in the United Kingdom. The stores carry private label and national brand name products, and freshly prepared meals.

L.L. Bean (www.llbean. com): Founded in 1912, the company has grown from a one-man operation to a Freeport, Maine-based global organization with annual sales of $1.6 billion.

Pinkberry (www.pinkberry. com): Customers can personalize Pinkberry's nonfat frozen yogurt with a variety of toppings. Two Korean-Americans founded the chain three years ago in Los Angeles; now there are over 50 locations in California and New York.

Pollo Campero ( www.campero.com): The world's largest Latin chicken restaurant chain is expanding aggressively in the U.S.

Ridemakerz (www.ridemakerz. com): The nine-store chain lets customers build and customize radio-controlled cars.

Stir Crazy (www. stircrazy.com): This full-service Asian restaurant has 12 locations.

Source: PlainVanillaShell

Regency Sells Seven Centers for $108M

JACKSONVILLE, FL-Regency Centers has sold seven centers in the Mid Atlantic for $108.1 million to Spectrum Partners and Angelo Gordon. Regency owned the centers as part of its partnership with Australia-based Macquarie CountryWide. The centers are located in Delaware, Maryland, Pennsylvania, and Virginia. Tenants include a variety of different anchors, Barry Argalas, Regency’s senior vice president of acquisitions and dispositions, told GlobeSt.com.
Regency and Macquarie put the properties on the market last year as part of their capital-recycling program, along with a portfolio of seven Southeast centers that it sold to DLC Management Corp. in November for $104 million. “It took a lot longer to get this one done,” Argalas says.

Part of the reason for the delay was that Mid-Atlantic portfolio is made up more of value-added, under-performing centers, while the Southeast properties were core assets, Argalas says. Additionally, when the centers went to market before the credit crunch, portfolios were more attractive to buyers. Now, one-off deals are more common. Regency will use the proceeds to fund its development pipeline, which includes about 50 projects. The company currently owns about 450 centers across the country, 163 of which are in the Macquarie JV, which began in 2001. Regency was represented by Bill Kent and Gary Lawrence out of C.B. Richard Ellis’ Washington DC office. The centers sold at a 7.75% cap rate.

Source: GlobeSt.

Borders Group cuts nearly 275 corporate positions

DETROIT—Borders Group Inc. said Tuesday it is eliminating 20 percent of its corporate positions, or nearly 275 jobs, as part of an effort by the nation's second-largest bookseller to cut annual expenses by $120 million. Borders, which is more than a year into a restructuring and is considering selling off the company, said the cuts -- part of a cost-reduction plan announced last week -- represent less than 1 percent of its about 30,000 total work force.

"This is an important step in our company's cost reduction initiative that will improve our profitability and put us in a much better position for long-term success," Chief Executive George Jones said in a statement.

Borders has lost market share both to online retailers and to discounters amid a difficult U.S. economic climate. The company announced in March it would explore strategic alternatives, which could include a sale, and rival Barnes & Noble Inc. has assembled a management team to study the feasibility of a combination with Borders. Borders shares fell 5 cents to $6.14. The company said it is eliminating 156 corporate positions spread across nearly all departments of its Ann Arbor headquarters. And it said it has eliminated 118 corporate posts based outside headquarters. Borders has said it expects to save half of the $120 million this fiscal year. It's part of a broader effort that also includes improving cash flow, reducing debt and enhancing inventory productivity. The company also is working to cut non-payroll costs as part of the $120 million expense reduction target. That includes trimming costs for things such as utilities, travel, supplies and work with outside contractors.

Borders said last week its losses narrowed to $31.7 million, or 53 cents per share, in its fiscal first quarter ended May 3, compared with a loss of $35.9 million, or 61 cents per share, for the comparable period of 2007. The bookseller said revenue fell 0.8 percent to $792.5 million from $798.7 million. The company said headquarters employees were told of the cuts Tuesday. The jobs being cut outside headquarters include primarily corporate employees in distribution centers, the field marketing organization and the corporate sales division. Borders said those employees were told of the plans Monday. Borders said it will offer transition pay, severance packages, job placement assistance, counseling and other services. The cuts -- all from existing jobs, not open positions -- are limited to corporate employees except for what the company described as "less than a handful of positions." The cuts do not involve Borders or Waldenbooks store employees.

Source: Boston.com

Summit makes minority investment in fitness chain

Summit Partners made a minority investment in a growing chain of fitness gym franchises, the private equity and venture capital firm said Tuesday. Boston-based Summit Partners made an undisclosed investment in Snap Fitness Inc., which is based in Chanhassen, Minn. The chain typically uses smaller facilities and currently has more than 1,500 open around the country. It expects to open locations overseas later in the year.

"Our relationship with Summit Partners will allow us to fuel our international expansion operations, fortify our brand, and lay the groundwork for long-term growth," Peter Taunton, Snap Fitness' founder and CEO, said in a statement.

Source: BBJ

Gas prices a risk for casual restaurants, Starbucks

LOS ANGELES (Reuters) - Record high U.S. gas prices threaten a new level of pain for casual dining restaurants stuck between value-oriented fast food and high-end eateries whose customers can afford to shrug off the economy's woes.

Shops and restaurants around the United States are reporting fewer visitors in the face of a credit crunch, mortgage crisis and price and fuel inflation.

Now-common $4-per-gallon gas is a psychological jolt for many, said Bob Goldin, executive vice president at restaurant consulting firm Technomic.

"It's been a tipping point," he said, forecasting fewer visitors and less spending at mid-tier restaurants and coffee chain Starbucks Corp.

While the high-end restaurant segment caters to wealthier people who are less likely to feel the pain of $4 gas and fast-rising grocery bills, casual dining restaurants cater to many of the same people who are being hardest hit by the housing-led economic downturn.

As those diners tighten their belts, they visit casual restaurant chains such as the Cheesecake Factory Inc and Chili's Grill & Bar owner Brinker International Inc less often. When they do visit, they spend less.

"Casual dining and Starbucks definitely are at risk," Buckingham Research analyst Mitch Speiser said.

Some consumers have traded down to fast-food chains, which have found their niche by focusing on value-oriented "dollar menus."

Starbucks, which had previously seemed immune to economic gyrations, reported its first quarterly drop in domestic traffic in November.

The company since has been grappling to revive U.S. sales growth at the same time that consumers are looking for easy ways to cut expenses. At the same time, new competitors are rushing to market with lower-priced coffee drinks.

CEO Howard Schultz has blamed the housing meltdown for weakness in Starbucks' U.S. business and said that customers were cutting back on coffee purchases and not trading down to lower-priced competitors.

Representatives from Cheesecake Factory and Brinker did not immediately respond to requests for comment. A Starbucks spokeswoman declined comment.

Steve West, an analyst at Stifel Nicolaus, said consumer spending is weaker across the board.
"The consumer is hurting on all fronts," said West. Like other analysts, he expects gas prices rise further. "It's going to get tougher," he said.

Not everyone is so sure.

"We're seeing consumers cutting back on their spending like everyone is seeing ... it's not anything more than what we've seen in the" February quarter, said Rich Jeffers, spokesman for Red Lobster and Olive Garden chains parent Darden Restaurants Inc.

"Folks are still making sure they look hard at how they're spending their discretionary dollars," Jeffers said.

Source: Reuters

Staples stores will soon rent DVD movies

Staples Inc., the Framingham-based office supplies retailer, confirmed today that it will begin offering a limited selection of DVD movie rentals at its US stores in mid June.


"A new in-store 'no-return' DVD rental service, called Flexplay, will let customers rent the latest movie titles without having to return them to the store," a Staples spokeswoman wrote in an e-mail. "Ideal for business travelers and busy small business owners on-the-go, Flexplay will offer a fresh selection of hit movies for viewing anytime, anywhere, and uses a patented technology that erases the DVD after 48 hours of opening the inner package. Customers can safely recycle the DVDs with their other plastics."


According to its website, Flexplay Technologies Inc. of Atlanta is a developer and a supplier of limited-life optical media technology; Flexplay time-limited DVDs offer unlimited, perfect quality DVD playback in any standard DVD player, but only within a pre-set viewing window that begins when the use opens the sealed Flexplay DVD package.

Shortly after the viewing period elapses, the Flexplay DVD becomes unplayable and can be safely recycled or discarded, the company said.



Source: The Boston Globe

For $8.5M, Samuels Secures Fenway Block

BOSTON-Now they have the end piece. Continuing an aggressive development and investment campaign near Fenway Park that has already dramatically changed the district this decade, Samuels & Associates has closed on a package of conjoined buildings where Boylston Street and Brookline Avenue converge. The $8.5 million purchase gives Samuels control of a key triangular site, having previously secured several connecting buildings on the parcel that abuts the firm’s signature Trilogy residential high-rise.

Fueled by an $11.2 million loan from KeyBank, Samuels affiliate Fenway Ventures Point Properties LLC purchased 186-200 Brookline Ave. and the adjoining 1395-1399 Boylston St. The Brookline Avenue asset is home to D’Angelo’s Sandwich Shop, and fronts a major intersection at Park Drive leading into the Longwood Medical Area and onto the Jamaicaway. The acquired properties are across from the former Sears warehouse, a hulking art-deco building that now features a Best Buy and other shops, plus 450,000 sf of office space.

The seller of the Fenway buildings is Riverside Properties Inc. of Wellesley, whose faded sign on Brookline Avenue still advertises available space for lease in the low-slung structures. Riverside President Mark Levy did not return a phone call by press deadline. Levy’s firm paid $955,000 for the assets in June 1994.

Some observers predict Samuels will pursue a redevelopment play on the block. "Things are definitely going to change," opines one broker familiar with the new owner, and a spokeswoman for Samuels acknowledges as much, telling GlobeSt.com that the firm aims to "continue the spirit of Trilogy" on the parcel, although she says the vision remains undefined. "At this point, we have no specific plans and no timeframe for when we might submit something to the Boston Redevelopment Authority," the spokeswoman relays.

The $200 million Trilogy was the company’s first major undertaking in the Fenway, as Samuels acquired the site for $8 million in 1999 and constructed 581 high-end residential units in three towers of 12, 15 and 17 stories. Samuels sold 171 of the units to Harvard University for graduate students. The company is now putting the finishing touches on 1330 Boylston St., another mixed-use high-rise mere blocks from Trilogy and the newly acquired properties. The leasing office for units at 1330 Boylston St. is in the rear portion of the block now fully owned by Samuels. The firm purchased those buildings at 1383 Boylston St. and 176-184 Brookline Ave. in 2003 for $2.4 million.

The latest acquisitions by Samuels also follow the recent purchase of a Goodyear Tire operation at 1345 Boylston St on the opposite side of Trilogy. That $10 million deal was reported by GlobeSt.com.

Source: GlobeSt.

Linens Gets $124 Million for Inventory in 120 Stores to Be Sold

CLIFTON, N.J.–Bankrupt Linens ’n Things auctioned off the inventory in the 120 stores it’s closing for $124 million to a joint venture between Tiger Capital and SB Capital, the winning bidders.

The retailer received 96.6 percent of the cost of the inventory, said Paul Traub, a principal at Asset Disposition Advisors, which managed the auction process.

“A lot of times when you see companies in trouble if you have to liquidate inventory at substantially below the cost of inventory, it’s a bad sign,” Traub told HFN. “We got very close to the cost of inventory, which is a good sign.

“It shows that the company is not really in a horribly distressed position because it got good value for their inventory. Hopefully this will encourage the company’s bank [GE Capital] to provide additional credit.”

The $124 million reflects $2.5 million more than Tiger and SB Capital’s original stalking horse bid, Traub said.

The disposition of Linens’ 120 leases is still under way, Traub said.

Source: Home Furnishings News

Retailer looks to build bridge between ultra-wealthy, 'aspirational rich'

Saks Fifth Avenue isn't just for the extreme rich. Or the sophisticated woman of a certain age.

They may be the luxury retailer's traditional customers, but these days, Saks is casting a wider net.

"Saks is about a balance of high-end luxury and accessible luxury, of classic and contemporary," Chief Executive Officer Stephen Sadove says.

It's all part of a retail rejuvenation launched two years ago.

The New York stalwart would too often whipsaw between extremes in its stores, from too traditional to too modern, Sadove said. Saks now offers a merchandise mix with a greater range in price and style.

Its three lines - "Park Avenue" classic, "Uptown" modern and "Soho" contemporary - are aimed at a variety of ages and tastes. Its "good, better and best" price points are aimed at reaching the ultra-wealthy and the "aspirational rich," or those consumers that might be considered entry-level rich.

Sadove wants to reinvent the bridge market - less-expensive fashions aimed at shoppers who want chic, contemporary clothes, although not at top-of-the-line prices. But he says the bridge appeal is also about fit, offering a middle ground between tighter-fitting youth-oriented styles and tailoring for older customers.

"The bridge business has declined dramatically," he said. "It's tended to be more of a missy fit and has missed the customer that's a bit older but still wants styles that are much more contemporary."

Those 'aspirational' shoppers have been a catalyst for growth in the luxury retail scene over the past decade. But these days, they're getting squeezed more than higher-income consumers.
Saks' same-store sales were up 12 percent last year and 8.4 percent in the first quarter of this year.

Sales are down for many less-expensive retailers, but Saks still undershot Wall Street's expectations last quarter because aggressive discounts cut profit margins.

Even luxury retailers are facing pressure to step up promotions in today's ailing economy. Wealthier consumers are generally more insulated from the crush of rising costs, but they're still looking for deals.

With the economic slowdown, Saks is investing its money in remodeling existing stores rather than opening new ones. Its working to lure more designers and brands.

The retailer is also making a push to go more local. Saks shifted 10 percent of its marketing budget from national to local advertising.

"It makes even more sense in this economic environment to focus on the stores that you have, to make them even more productive," Sadove said.

In its recent revamp of the Saks Fifth Avenue at The Gardens Mall, the retailer greatly expanded its jewelry, shoe, handbag and cosmetics departments.

"Saks is very good at developing categories and making them a real winner in these stores," said retail consultant Cynthia Cohen, president of Strategic Mindshare in Miami. "They'll add more of what (a customer) wants in a category versus going into another category. ... The high-net-worth older woman is a lot more loyal than a young fashionista."

Source: Palm Beach Post

Crate & Barrel tries to stay afloat amid retail dive

CHICAGO (AP) - Fresh out of college, Barbara Turf walked into a home furnishing store in Chicago in 1968, seeking a part-time summer job at an upstart boutique called Crate & Barrel.

Four decades later, she's ascended as well as the store morphed to a national chain whose products are contemporary home staples.

The 64-year-old president of the privately held retailer became chief executive this month, replacing founder Gordon Segal, who had held the post since he and his wife opened their first store in Chicago's Old Town neighborhood in 1962.

Turf's new role comes as the Northbrook-based company, now owned by Germany's Otto GmbH, tries to weather an economic and housing downturn that's sending the housewares sector into a tailspin while causing some other retailers to file for bankruptcy protection, close stores or scale back operations.

Howard Davidowitz, chairman of the retail consulting firm Davidowitz & Associates, said Crate & Barrel's product development, attractive merchandise and affordable prices mean it's among the best-positioned chains to ride out the turmoil.

"This company's in the worst segment of retailing, where almost no one is doing well," he said. "(But) I think they are positioned to succeed. I think they're among the best out there, but it's just very hard right now."

The company, which operates 170 Crate & Barrel, CB2 and Land of Nod stores, had sales climb more than 10 percent to $1.31 billion last year and expects those figures to hold steady while it opens eight new locations this year.

In an interview with The Associated Press, Turf acknowledged the effects of the worsening economy on the closely held company's financial results, but said she's confident Crate & Barrel's conservative strategy will help it thrive while rivals stumble.

Q: Can you walk me through what some of your goals are for the company under your leadership?

A: Well, I think there are certain areas of the company that are non-profitable that we need to focus on and pay attention to -- whether it's repositioning a store or repositioning operational issues that can make it more profitable. (We're looking at) growing the business beyond the traditional ways. That means you don't have to put a store in every mall as much as you have to look at how the Internet has changed retail bricks and mortar. ... I think the catalog has to be addressed with the green environment. ... Beyond North America's borders, we're trying Canada right now for September.

Q: With the catalog, do you think you'd ever phase that out?

A: First of all, our direct marketing business is critical. We're not going to ever phase out of the catalog. That's too important. And it means too much the customer. But does it have to be so big? That's what I'm talking about.

Q: What's the status of a possible store in Dubai?

A: We're still exploring it under due diligence, like lots of other retailers are, to see if it makes sense.

Q: Are there other markets that you're examining?

A: We're going to put an international committee together with our partners in Germany to start to look at globalization. Does it make sense to go into China? Does it make sense to go into India someday? What about Europe? We just have to do a whole lot more homework, but I think it's an opportunity for Crate & Barrel along with other retailers to look at borders beyond the United States.

Q: How is the company weathering the economic downturn?

A: Certain pockets are definitely suffering. I'm actually pleased that we're holding as strong as we are. I think the economy is such a challenge right now. Maybe there's just too many stores or too many weak sisters in the playing field and that's what happened to them. Maybe there was too much growth too quickly. We've always been such a conservative growth company in the sense of being able to capitalize and not just do growth for the sake of growth, but to grow more methodically.

Q: Do you expect sales this year to increase?

A: We expect it to be very tough. And I think that's why we need to focus on profitability as well. You're not going to see increased sales jumps like we've been used to for the last 10 years with home furnishing.

Q: Do you believe your company's history of conservative growth insulates you?

A: I don't think anybody's insulated. I think we have a solid financial sheet and I think we're going ahead with plans as usual and hoping for the best. But I think you can't retract yet until you see what's really going to happen.

Q: Do you think that there's going to be more bankruptcies within the home furnishings market?

A: Yes, I do. I do think there was too much growth in the last 10 years with some weak competition. And I think a lot grew too fast.

Q: You don't anticipate Crate & Barrel being among them?

A: No! I really don't.

Q: How do you keep shoppers coming into stores?

A: It's a challenge. I've had so many people describe the joy of being in the store. And I think sometimes, even when you're a little bit depressed about your economic status, if you go in and buy four yellow placemats at $3.95, that's going make you feel better. So I guess I feel we're still a fun place to be.

Q: Do you think that you're going to slow down your (expansion) pace to deal with the economy?

A: I think that will be under discussion depending upon how things go. I just think we have to be very careful about where we put our bricks and mortar in the next couple of years. Because of the Internet, we really have to think about making that more synergistic with the store and making it easier and more seamless for the customer to shop both channels.

Q: How do you think Crate & Barrel will be different in the future?

A: We have always been a company that has evolved and we will continue to evolve, reflecting the American lifestyle -- whether it's healthy eating, or it's storage, or being more environmental. Whatever is addressing America, we will try to reflect that.

Q: The green living and green products seem to be in right now. Is that just a fad?

A: No, that's not a trend. It's here to stay. I think everyone with education really realizes that the planet is definitely in trouble and we need to worry about it more. And I think it's coming down the mainstream.

Q: Are customers willing to pay more for a product that's green?

A: I would absolutely say yes. I think people will be committed to it.

Q: How long do you think you're going to stay on as CEO?

A) My legacy will be to the put the next generation in place. Because both Gordon and I are committed to keeping this company going for the next 20 years. And I certainly won't be around when I'm 80. I definitely feel my commitment is to put the next leadership generation in place.

Source: Plain Vanilla Shell

Luxury retailers realize it's a new shopping scene: When times get tough, even top-shelf retailers break out their red tags and clearance signs

Walk through a high-end department store these days and it's hard to tell where you are. As the month of May came to a close, the floors of Saks Fifth Avenue on the Magnificent Mile were dotted with red placards touting 40 percent off designers from Christian Dior to Christian Lacroix. Neiman Marcus, which traditionally restricts markdowns to its famous "Last Call" sale, was selling racks of Prada, Marc Jacobs, Jean Paul Gaultier and Manolo Blahnik at half price. And Nordstrom kicked off its semi-annual sale a month early. Welcome to the new world of luxury shopping.

While wealthy consumers have the financial means to weather the housing downturn and soaring gas prices, their confidence in the economy has fallen along with the masses. Consumer confidence hit a 16-year low in May with a steep decline in particular among higher income brackets. The shift has prompted luxury retailers to break the steadfast practice of restraining promotions to twice-a-year clearance sales and jump on board the bargain bandwagon. It's all part of the changing American shopping landscape where Vera Wang appears at discount chain Kohl's, Ralph Lauren shows up at J.C. Penney and Norma Kamali teams up with Wal-Mart.

"Before, you would never think of luxury markets being promotional or on sale," said Sara Albrecht, owner of Ultimo, a designer boutique on Oak Street in Chicago. "That's what made them the luxury market."

After growing at about a 10 percent clip for the last several years, the luxury market, except for pockets at the very highest end, has slowed dramatically. In April, total retail spending, excluding autos, increased 4.5 percent, while luxury spending rose only 2.8 percent, according to MasterCard Advisors SpendingPulse, which calculates retail sales based on aggregate sales activity in the MasterCard payments network coupled with estimates of cash and check purchases. Even with gasoline stripped out of the equation, retail sales rose 3.2 percent, still better than the luxury market. At the same time, luxury pricing power has eroded, according to Michael McNamara, vice president at SpendingPulse. Average prices for luxury goods increased 6 percent to 7 percent a year in 2006 and most of 2007, he said. The pace slowed to 3 percent to 4 percent late last year and has remained about flat for the first quarter of 2008.

"Price has never been as important to the consumer's shopping level as it is today no matter what the income level," said Matt Katz, a New York-based managing director of AlixPartners, a consulting and financial advisory firm. "We've studied 5,000 consumers annually for the last 15 years, and for the first time in the history of our study, price is the most important driver for a purchase decision."

Blake Nordstrom, president of the Seattle-based specialty store chain of the same name, told shareholders earlier this month at the company's annual meeting, "These are character-building times." He compared clearing out inventory while it is still fresh to being a farmer who has to sell produce before it goes bad. "Who would have thought that Nordstrom would be touting price comparisons," said Kelly Tackett, a consultant at Columbus, Ohio-based TNS Retail Forward, who last week noticed signs at her local Nordstrom pledging "Never pay more. We will not be undersold."

"They are one of the strongest adherents to the semi-annual sale," she said.

Several factors are at work that likely will leave a lasting mark on how the luxury market operates, experts say. At the core, the blurring of luxury and moderate and discount lines has created a savvy shopper who moves between Target and Barneys New York with ease and is proud to crow about finding a deal--even if it is a $765 Christian Louboutin fishnet platform pump marked down to $574. Meanwhile, so-called aspirational shoppers, typically young professionals making six-figure salaries but without many assets, have restrained splurging on designer goods as the economy slowed. Their Baby Boomer parents, the biggest bubble in the population, are approaching retirement age and are more interested in spending on vacations and experiences than a new wardrobe or redecorating the house. And there is an undercurrent in American culture that is dampening the allure of materialism and status as environmental and social concerns take center stage. Whether that shift will last is up for debate, but luxury analyst Pamela Danziger believes it is here to stay. In fact, she has identified a new type of luxury customer she calls the "temperate pragmatist." These folks, which she estimates make up about 20 percent of the luxury market, are affluent, mature and could care less about living the luxury lifestyle.

"There are far more households in the luxury market today than there used to be," said Danziger, president of Unity Marketing, a Stevens, Pa.-based luxury market research firm. "It's the fastest-growing segment of the consumer market. Most of these folks are coming from a middle-class background. The old conventional wisdom is that they were immune to the ups and downs of the economy, but they feel it just as much."

Unity's luxury consumption index, a quarterly survey of 1,250 consumers with an average income of $173,400, dropped 9.1 points to a record low of 54.4 points in the first quarter, Danziger said. The doldrums in the luxury market are expected to continue at least until the presidential election, when a change in leadership could provide a lift going into the holidays, experts predict. To be sure, the ultra-luxury retailers are holding their own in large part due to new wealth in China, Russia and the Middle East, analysts said. Among the companies posting robust sales and profit growth this spring were Tiffany & Co., Burberry Group PLC, Hermes International and LVMH Moet Hennessy Louis Vuitton, all retailers with substantial international followings. But back in the U.S., the psychological effect of the economic downturn is hard to escape.

"I was having a discussion at a dinner party about how in the last recession the way out was people could borrow equity out of their houses," said Colombe Nicholas, a New Yorker who has run such companies as Anne Klein Co. and Christian Lacroix-USA. "That's gone. Then there was refinancing. That's gone. Do you think that after that conversation I was going to go to Saks and buy a new dress? I don't think so."

Source: PlainVanillaShell

Sharper Image to close remaining 86 stores

Gadget retailer The Sharper Image plans to close all of its remaining stores, its new owners announced Sunday.

The company expects to sell $50 million in inventory as it shutters 86 stores across the United States, joint owners The Hilco Organization and Gordon Brothers Group said in a statement.

The group, which purchased the gadget retailer's assets in a bankruptcy auction Thursday for $49 million, said it has developed a licensing strategy for wholesale, retail, direct-to-retail, e-commerce, and catalog businesses.

The Sharper Image filed for Chapter 11 bankruptcy protection in February, with plans to shut about half of its 184 stores and reorganize. The San Francisco-based company said it had lost more than $135 million since early 2005. The company put itself up for sale in April.

Source: CNET

Cato's growth strategy includes new concept

The Cato Corp. is banking on its large-format retail store called It's Fashion Metro for future growth.

The Charlotte-based retailer expects the strategy will boost sales even as the economy slows.

"Our plans for this year are to accelerate It's Fashion store openings primarily through the development of our It's Fashion Metro concept," said Chief Executive John Cato last week at the company's annual shareholder meeting.

The Cato division of the company has been the primary focus of growth, but that focus is shifting to It's Fashion and It's Fashion Metro. Last fall, Cato opened the first two It's Fashion Metro stores, one in Charlotte and another in Natchitoches, La. Since then, it has opened 11 more locations. By the end of the year, it plans to open 30 It's Fashion Metro stores in the Southeast.

The It's Fashion Metro concept is an expanded version of the It's Fashion store that offers urban-inspired, nationally recognized brands for the entire family. It's Fashion Metro stores average about 12,000 square feet while the traditional It's Fashion stores are about 3,000 square feet.

"The It's Fashion Metro stores are a focus and the primary growth vehicle in the It's Fashion division because of the opportunity we see for its growth," Cato says. "We believe it is a customer base and a market that we know well."

While Cato is expanding in the Southeast, it's pulling back in the Midwest and Northeast because stores aren't performing as well as it had hoped. Cato says it will continue to test and evaluate locations there to improve sales.

Part of that testing involves using a new site-selection tool. Over the last 10 to 15 years, Cato has focused on strip-shopping centers anchored by a national discounter or large grocer. Cato is testing stores in larger shopping centers anchored by two or more big-box chains that generate more traffic. The site-selection tool helps gather demographic information to identify potential store locations.

"It should ultimately help us open more stores in more profitable locations," Cato says. "And we will continue our standard practice of closing underperforming stores."

During the first quarter ended May 3, Cato opened 19 stores and closed 11. The company's first-quarter net income fell to $16.9 million, or 58 cents per diluted share, from $18.7 million, or 59 cents per diluted share. Revenue rose 1% to $225.8 million from $224.1 million, while sales at stores in operation for at least a year decreased 2%.

The company expects earnings of 80 cents to 95 cents per diluted share for the full year, up from a prior estimate of 72 cents to 93 cents. Cato earned $1.03 per diluted share in fiscal 2007.

"Cato remains in good shape financially," wrote Patrick McKeever, an MKM Partners analyst, in a recent research report. "The company's financial performance was significantly better than it could have been had management not taken an aggressive approach to managing inventories down and reducing markdown exposure."

At the end of the quarter, Cato had no debt and $127.2 million in cash and short-term investments.

The retailer thinks the economic stimulus rebate checks will boost sales. "We certainly hope our customers will spend some of their stimulus checks with us," Cato says. "We have heard anecdotal information from our stores that they are seeing some stimulus money being spent."

Source: Charlotte Business Journal

Tiffany Debuting Smaller Format in Fall

NEW YORK CITY-Tiffany will open the first of its new downsized stores in the United States in Glendale, CA, in October, executives said at the company’s first quarter conference call. The move comes as the chain reports softness in the US, but sales and store growth internationally.

Overall, the chain will increase its store count by 13% worldwide, opening about 24 new stores, including six in the Americas. “While we’ve always said that Tiffany’s business is not recession-proof, the global nature of our business is showing the mitigation effect it can have,” for regional weakness, said Mark L. Aaron, vice president of investor relations.

Traditional stores also will open in Pittsburgh and Columbus, and a holiday store at the Mohegan Sun casino in Uncasville, CT, will be converted to a permanent unit. Growth will also occur in Asia and Europe, which has seen stronger sales. Units will open in Madrid, Brussels and Dublin this year, Aaron said.

Worldwide net sales increased 12% from last year to $668.1 million. Comparable-store sales rose 8% and 3%, respectively. Net earnings from continuing operations rose 20% from last year to $64.4 million. Comps in the United States were flat, while they rose 4% in the Asia-Pacific region and 12% in Europe.

Tiffany operates 192 stores and boutiques worldwide.

Source: GlobeSt.

Fortifying the Flagships: Growth Engines Getting Big Bucks in Tough Times

In a year of cutting back on store openings, inventories and staff, there's one place where some retailers aren't scrimping: the flagship.

From Bloomingdale's 59th Street to Saks Fifth Avenue and Macy's Herald Square in Manhattan, retailers are pumping millions into their core stores to upgrade product presentations, reinvent key departments and capitalize on strong selling categories like accessories and shoes.

Bloomingdale's 59th Street has initiated the beginnings of a sweeping renovation of its 75,000-square-footmain floor, B-way and all, that will be accomplished over the course of a few seasons.

"This is a two-year project, covering the entire main floor," Bloomingdale's chairman and chief executive Michael Gould told WWD. "We've done handbags and elements of cosmetics before, but we have never done the whole floor."

The strategy has intensified since last fall when department store executives started sensing consumers holding back in many regions, except at those core flagships in gateway cities. They became their salvation. Tourists from overseas, taking advantage of the weak dollar and assortments offered at steep markdowns, flocked to the sites, helping retailers compensate for struggling branches elsewhere around the country.

Even competitors are taking notice. "The big flagship department stores are picking up huge benefits from tourists," observed J. Crew's chairman and ceo Millard "Mickey" Drexler, during a conference call last week.

Bearing in mind that flagships even in tough economies generate huge revenues, every aging nook and cranny are under examination. Brooks Brothers intends to rebuild its 120,000-square-foot Madison Avenue flagship, which it bought last year, in advance of the location's 100th anniversary in 2015. Nearby, the 646,000-square-foot Saks flagship generates close to $700 million in annual volume, while the 859,000-square-foot Bloomingdale's flagship generates an estimated $650 million.

At Bloomingdale's there already have been significant investments — often partially funded by vendors. In the past three years, bridge, lingerie, shoes, YES contemporary sportswear and contemporary men's wear, among other departments, have been overhauled or reinvented. In February, Bloomingdale's Metro level was remerchandised with young men's contemporary sportswear and premium denim, and rebranded No. 59 Metro. The bridge floor was renovated and rebranded The New View in 2005.

Bloomingdale's main floor project is the chain's biggest renovation at least since Gould became chairman and ceo 17 years ago. It's also the most critical, as the main floor sets the tone for the entire store.

Gould said it was too early to provide details of the project, which are still being worked out with designers and vendors. The mission is to capture greater selling space, create a cohesive and easier-to-shop floor, showcase designer brands and pump up an already energized floor and its slick, contemporary upper East Side aura. Currently, the main floor is tough to navigate and congested. But everything from the B-way for cosmetics and fragrances to designer handbags, fine leather goods and men's furnishings will get renovated at a cost that architecture sources conservatively estimate at $250 to $300 a foot.

However, it's not just about bricks and mortar. "This is a total branding exercise," said Gould, who is known for his marketing acumen, having recast Bloomingdale's into an upscale, contemporary national brand, at a price niche above Macy's and below Saks and Neiman Marcus.

With the right marketing hook, a renovated floor can cast a halo over the entire store and sharpen its image. Saks, for example, generated enormous buzz last year with its revamped shoe floor. It was rebranded 10022-SHOE and billed as "so big, it has its own zip code." With high-styled shoes encompassing most of the eighth floor at the flagship, which is on Fifth Avenue between 49th and 50th Streets, Saks seemed to one-up the competition. It's considered the city's biggest shoe assortment, aside from Macy's Herald Square. Even an express elevator right up to 10022-SHOE was rigged. The shoe concept will be replicated at several Saks branches, including Beverly Hills, San Francisco, South Coast Plaza and Houston.

Saks now sees additional branding opportunities stemming from other floors. "You will see some angles coming up as it relates to bridge, and as it relates to cosmetics — probably several. Not all right now but in '08 and '09, absolutely," said Saks chairman and chief executive Stephen I. Sadove.

"New York is doing extremely well. We are touching six of the 10 floors over the next year," Sadove added. A major piece is the third floor for designer collections, which Sadove said would be an 18-month project, opening in phases, with 35 new shops for designers to be created.

Most of the main floor's handbag shops are being redone this year. So are pieces of the sixth floor for men's including adding Kiton. On the fourth floor recently, space for evening collections was redone.

"It's not just renovations for renovations' sake. It's about adding vendors. It's about creating an environment. It's about creating a buzz," Sadove said.

Lord & Taylor is considering downsizing its Fifth Avenue flagship, situated between 38th and 39th Streets, from 10 to six selling floors. But the retailer also is bolstering its product assortment. On the drawing boards are Fortunoff jewelry and home floors, as well as possibly a bridal department and a restaurant. L&T's parent company NRDC Equity bought Fortunoff out of bankruptcy last February. NRDC is interested in Kleinfeld's, the bridal retailer, and in pursuing other retail acquisitions.

"When you are dealing with stores of this scale, it might seem as if you are in a constant state of renovation. In fact, we are," said Jim Gold, president and ceo of Bergdorf Goodman. "There is always another project around the corner. To keep the store current and special, it's important to reinvest in the physical plant. We are forging ahead."

About a year and a half ago, Bergdorf's renovated its contemporary floor and named it 5F. "We made the decision to put a branding effort behind our contemporary business," said Gold. "We think of that business differently than the rest of our business, from every perspective — advertising, merchandising, visual presentation, staffing, events. Bergdorf Goodman can be, for those clients who aren't familiar with the store, very intimidating. This was an effort to make us more accessible, to open up people's eyes to the breadth of what we do. We already had a nice contemporary business, but we felt we weren't getting enough credit for being in the business. It's not the first thing that comes to mind when you think of Bergdorf Goodman."

By Labor Day, Bergdorf's hopes to have 4,000 square feet on the 57th Street side of its main floor renovated to house "modern" handbags, jewelry and accessories at designer price points, Gold said. "It's been a mix of accessories and not clearly defined. But we developed a very specific merchandising strategy and once we put that in place, we will design an environment that would reinforce our product strategy."

Combined with the recently renovated 58th Street side of the flagship, Bergdorf's, said Gold, has "a much more powerful statement about the importance of jewelry. It's become a destination for designer and precious jewelry."

The new space, however, is not expected to pose the same kind of unique marketing opportunity for a "subbrand' that 5F presented. "We are not going to have seven or eight subbrands," Gold said. "You have to pick your shots where it makes sense."

This month, Macy's Herald Square, which does an estimated $800 million in volume in its 1.1 million square feet of selling space, will be opening bridge and fashion jewelry shops in June, luggage in September and last month opened new mattress, men's and sunglass areas.

Macy's, which has long been criticized for poor housekeeping, fitting rooms and rest rooms, is upgrading service departments such as MBA personal shopping and bridal, according to Ron Klein, chairman and ceo of Macy's East.

Macy's has seen some resistance from consumers who shopped various regional nameplates converted to Macy's, so upgrades are as critical as ever. According to Klein, the Downtown Crossing store in Boston, formerly Filene's, is remodeling cosmetics, adding FAO Schwarz, as are many other Macy's units. Also, taller windows on the Washington Street side were added. "The windows look into our cosmetics department so we wanted to create an exciting environment for our customers not only on the inside but from the outside who are passing by."

At the former Marshall Field's in Chicago on State Street, men's is being remodeled. And the former Hecht's in Metro Center in Washington is expanding better sportswear and suits.

"We are committed to making capital investments at our major metropolitan stores based on their performance and sales trends," said Klein. "New York, Boston, Chicago, Philadelphia and Washington have and will continue to see renovations that will upgrade the shopping experience for our customers. In cities such as Philadelphia and Washington, Macy's is the only department store in the downtown area, so these destination stores in downtown will see new concepts, merchandise and continuous renovations and improvements."
Source: Women's Wear Daily