NRF study forecasts another year of slow sales

NEW YORK (Aug. 28) The National Retail Federation said it expects retail sales to remain slow well into 2009 with shoppers flocking to discount stores for lower prices.

During an Aug. 28 conference call with analysts, NRF spokesman Scott Krugman said high gas prices, inflation and the housing slump should continue to produce a tough environment for retailers. He said the NRF is forecasting a 3.5 percent increase in total growth for 2008 following a 3.7 percent increase in 2007.

“And those numbers aren’t as good as they sound because we’re coming off a year of easy comps,” said Krugman.

The NRF won’t release its holiday sales forecast until September but it’s not likely to bring good news. “We don’t see a turnaround until, at the earliest, the second half of next year and even that may be optimistic,” said Krugman.

The NRF also re-affirmed its forecast for back-to-school spending, which predicts families with children in kindergarten through 12th grade will spend $599.24 compared with $563.49 in 2007, with parents focusing on essential items. It forecasts a 7 percent drop in spending for back-to-college students with an average of $599 per student compared with $641 last year.

NRF data also shows the number of people shopping at discount retailers increased 7 percent this year, as shoppers hunt for lower prices.

Source: Drug Store News

Walmart Converts More Than 1,700 Garden Centers Into Game Time(SM) Headquarters

Retailer Huddles to Provide Savings on Local Team and Tailgating Necessities

BENTONVILLE, Ark., Aug. 28 /PRNewswire-FirstCall/ -- Walmart today announced its game plan to completely transform more than 1,700 of its Garden Centers into "Game Time(SM) Headquarters," customized for supporters of local college or professional football teams. Beginning this week and running through September 30, Walmart will feature everything from team merchandise and decor to favorite game-time snacks and beverages at unbeatable prices. According to tailgating.com, 42 percent of tailgaters spend more than $500 each season on food and supplies. Walmart can help tailgate enthusiasts prepare for six home games this season with enough food and gear for a "special team" of four for about $66 per game -- savings of more than $100 for the season. Suggested items* for the tailgate set-up include:

* 4 NFL® or NCAA® Hats (prices start at $5.00)
* 4 NFL® or NCAA® T-shirts (prices start at $6.00)
* 4 NFL® or NCAA® Armchairs ($19.88 each)
* 1 Uniflame® 18.5" Charcoal Grill ($17.00 each)
* 6 bags of Kingsford® Charcoal ($6.97 each)
* 1 NFL® or NCAA® 24-Can Softside Cooler ($13.88 each)
* 6 packs of Ball Park® Beef Franks (2 for $5.00)
* 6 packs of Tyson® Boneless, Skinless Chicken Breast ($6.00 each)
* 6 packs of Sara Lee® Hot Dog Buns ($1.97 each)
* 3 bottles of Hunt's Ketchup ($1.50 each)
* 6 Lay's® or Doritos® XXL Chips (2 for $5.00)
* 6 T.G.I. Friday's® Cheddar & Bacon Loaded Potato Skins ($4.88 each)
* 6 fresh Vegetable Trays ($9.88 each)
* 15 2-Liter Bottles of Pepsi® Drinks (5 for $5.00)

"With 36 million tailgaters in the U.S., the kick-off to football season is now one of our favorite all-American pastimes," said Janet Bareis, vice president of Walmart Corporate Marketing. "But we know our job on the team is to make sure tailgaters don't spend a dime more than they need to -- that's why we've put together some winning prices all in one place in the store."

For fans who want to watch the big game at home or celebrate while the team's away, on August 29, Walmart will launch the Game Time(SM) tailgate planner. This widget, created just for football enthusiasts, allows fans to download their favorite team's schedule, and create and send e-mail invitations to friends for game day events and tailgating parties. And for fans looking to coordinate a backyard gathering for a small group or for the entire neighborhood, http://www.walmart.com/gametime is a great place to access free tools to help them manage their guest list, plan their menu, download a shopping checklist, and calculate costs for everything the perfect tailgate requires. The site also offers several recipes and tips for better organization.

Source: Yahoo.com

Apple Stores Generally Mirror U.S. Population Density

The locations of Apple's U.S. retail stores closely track the U.S. Census Bureau for the highest density population centers, according to ifoAppleStoreon Thursday. However, there are a few notable exceptions.

"Apple claims that over 90 percent of the country's population is within 15 minutes of an Apple retail store, and a population analysis seems to confirm their statement," according to ifoAppleStore, a site that closely watches Apple's retail store activity.

However, there remains some notable exceptions: "Spokane (WA); Boise (ID); the eastern seaboard of Florida north of Miami; a large area of eastern Pennsylvania, Delaware and New Jersey; metro Cleveland; areas of Massachusetts and Rhode Island; and a corridor from central North Carolina south to Atlanta and Alabama."

Apple also looks at the overall wealth of the zip code and other factors when making a decision about store locations. That could explain the delay in the launch of certain locations in Idaho, North Carolina, and Alabama.

ifoAppleStore's map is large, easy to read, and offers an illuminating view of Apple's store location strategy. It may also explain why an Apple store isn't coming to your city any time soon.

Source: the Mac Observer

Mid-Tier Retailers Try New Brands On for Size

Chains Look to Stand Out In Crowded Marketplace

This back-to-school season will go down as the Battle of the Brands.

Kohl's launched six new lines of clothing this summer with a star-studded advertising campaign featuring celebrities from Lenny Kravitz to Hayden Panettiere. JCPenney introduced another half-dozen labels, the department store's biggest crop of new brands, with looks including urban rock and all-American. And Dillard's is chasing soccer moms with a line designed by Sheryl Crow that hit stores this month.

It's all part of the no-holds-barred fight among middle-market retailers for consumers' hearts and wallets this back-to-school season, the second-biggest shopping bonanza of the year. Lacking the cachet of luxury stores and the discounters' trump card of price, mid-tier retailers have been struggling to stand out in an increasingly crowded field. Now, the economic downturn has raised the stakes, and the battle is likely to last well into the holiday season.

"In this environment, when consumers are more discriminating with their purchases, we've recognized the importance of ensuring that our merchandise is compelling," Ken C. Hicks, president and chief merchandising officer of JCPenney, said in a recent conference call.

According to research from NPD Group released this month, department stores ranked third as back-to-school shopping destinations. Discounters topped the list, with 81 percent of consumers planning to shop there. More than half of consumers listed value and necessity as driving their purchases.

Wal-Mart has been the big winner this season, with July sales at U.S. stores open at least a year up 3 percent and second-quarter earnings up 17 percent. The store also debuted its own lines this summer and purchased exclusive rights to the tween brand l.e.i., which was formerly found in department stores.

Meanwhile Kohl's same-store sales dropped 10 percent in July, while profit fell 12 percent during the second quarter. JCPenney was down 7 percent in July and earnings plummeted 36 percent. Dillard's posted a 2 percent increase in sales in July but yesterday reported a loss of $38 million during the second quarter, compared with a $25.2 million loss the previous year.

"They're in a tougher position because they don't compete on price," said Stacy Janiak, U.S. retail leader at Deloitte, a consulting firm. "But they also have other tools at their disposal to try and lure the consumer."

For Kohl's, that has come to mean branded, exclusive merchandise. The Wisconsin-based retailer once was a Wall Street darling posting double-digit sales increases with its no-frills stores and "racetrack" layouts that helped customers easily find what they were looking for -- proof that there was money to be made in the middle of the market. But in recent years, Kohl's has made some merchandising missteps and become hamstrung by mediocre inventory gathering dust on the clearance rack.

Now the economy is taking its toll even as Kohl's attempts to refresh its assortment of apparel. Nearly 43 percent of sales during the second quarter were of private-label products. Chief executive Kevin Mansell, during a conference call with analysts this month, called its Elle collection of clothes and accessories that debuted last year "an overwhelming success" and said he was pleased with initial sales of the new Abbey Dawn line for juniors inspired by pop-rock singer Avril Lavigne.

Mid-tier retailers are counting on such proprietary labels not only to create buzz, but also profits. Margins are higher for merchandise that they've developed, giving them more room to slash prices as needed -- a strategy Kohl's plans to use through the fall and holiday seasons.

The retailer has also decreased merchandise in each store by about 15 percent, which cuts down on both clutter and markdowns. Although Kohl's has identified more than 1,400 locations for new stores, the company said the credit crisis and weak consumer spending makes the future uncertainns Look to Stand Out In Crowded MarketplaceJCPenney has suffered this retail roller coaster for years, with a strong comeback last back-to-school season making this year's comparisons particularly tough. It is hoping to boost sales through a mix of fresh merchandise and aggressive promotions torn from discounters' playbooks.

This summer, it debuted a sporty line named Le Tigre from designer Kenneth Cole and diva urban-apparel Fabulosity by Kimora Lee Simmons. JCPenney developed private-label brands Decree, which focuses on denim, and two lines for young men: American Living, with trendy jackets and jeans, and White Tag, a rocker line of denim and arty T-shirts. Finally, it launched a collection of home decor for young adults called Dorm Life. Hicks said sales of these new brands were strong despite challenging sales overall.

To boost volume, the retailer has turned to discounts. Last weekend, the final days before Washington region students headed back to school, JCPenney rolled out a promotion for 88 cents on the second purchase of key items such as baby-doll tees, hoodies and cropped pants. "Lowest prices for back to school," boasted the advertising circular -- that is, until this week, when JCPenney returned with another clearance sale offering 75 percent off.

"While customers are choosing to spend carefully, when they are shopping, we're taking our share," chief executive Myron E. Ullman III said during the conference call.

Janiak said that retailers across the spectrum have likely benefited from shoppers seeking more bang for their buck, middle market stores included. At off-price retailer T.J. Maxx, which sells designer names from department store and manufacturer overstock, new shoppers have been walking through the doors as housing prices fall and gas prices rise, company spokeswoman Laura McDowell said.

"We believe that we're attracting a new customer in this tougher consumer environment," she said.

T.J. Maxx, whose parent company TJX also owns Marshalls, has the sales figures to prove it. Sales at Marshalls and T.J. Maxx stores open at least a year were up 3 percent during the second quarter and grew more than 6 percent for parent company. TJX also raised its forecast for annual sales. McDowell said she is confident the retailer can keep those customers even after the economy improves. T.J. Maxx is careful to emphasize quality and trends first in its messaging, she said.

"They know we're going to have low-price merchandise," she said. "But it's what the low price is actually on."

Despite the pressures on the middle, those retailers still claim a significant chunk of market share and their own loyal shoppers. They just have to work harder to find a winning formula, Janiak said.

"It might be tougher right now, but I don't think it's ever a bad time to be in that spot," Janiak said. "Otherwise, they wouldn't still be with us."

Source: Washington Post

Mrs. Fields to Emerge from Chapter 11

2008-08-27 — Mrs. Fields' Original Cookies Inc. received bankruptcy court approval of all of its first day motions, including approval to:

* Continue to pay employee salaries, wages, and benefit programs;

* Pay vendors in the normal course of business for goods and services provided to the Company; and

* Maintain uninterrupted delivery of products and services to the Company's franchisees and customers.

Included in today's approvals was court authorization to access the necessary funds from the $90 million in previously restricted deal proceeds to fund business operations during the Chapter 11 process. The company also is pursuing a $10 million credit line that will be used, in conjunction with cash flows from normal operations, to support all of the company's go-forward operations and working capital needs upon emergence from Chapter 11.

"We were very pleased with the court's positive response to our first day motions. Receiving approval so quickly places Mrs. Fields in the best possible position as we move toward completing our restructuring. We fully expect to receive court approval of our reorganization plan at the scheduled October 2, 2008 Confirmation Hearing and to emerge from these proceedings a stronger, more viable company with a drastically improved balance sheet. With our first day motions behind us, we can now focus our attention on finalizing post-emergence plans leveraging our new financing and equity structures to drive results for our franchising, gifting, and branded retail businesses," says Michael Ward, interim Co-CEO.

On August 24, 2008, Mrs. Fields and certain of its subsidiaries filed voluntary bankruptcy petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. As part of the filing, the Company has also filed its prepackaged Plan of Reorganization. The prepackaged bankruptcy will significantly improve the Company's balance sheet by exchanging approximately $195 million in bondholder debt for cash, new bonds and a controlling equity stake in the reorganized company.

Source: QSR Magazine.com

Retailers Give It the Old College Try

Some Schools Open Campuses to Brands' 'Pop-Up' Stores, But Others Decry Commercialization

Despite pushback from some schools, fashion brands plan to sell directly on campuses this fall to reach the lucrative college crowd.

Starting in September, flip-flop maker Havaianas, a brand owned by Sao Paulo Alpargatas SA, plans to set up a temporary "pop-up" store on five campuses in the U.S. To generate buzz, the Brazil-based brand will run competitions involving its footwear, awarding trips to Brazil as prizes.

Victoria's Secret's Pink, a young women's clothing brand of Limited Brands Inc., this fall is opening its own pop-up store at about 12 schools, up from 10 last spring. The store opens for a day, selling merchandise, handing out promotional items and collecting used clothing for charity. Sustainable-clothing brand RVL7 is installing a bamboo-clad temporary ministore at six to eight campuses this fall, including the University of Colorado at Boulder and Arizona State University.

The race to introduce brands via these short-duration marketing and selling events is likely to accelerate. American Collegiate Intramural Sports, which sells sponsorships for college intramural programs and fitness centers, is seeking a fashion brand to sponsor fitness centers and host pop-up stores at 100 campuses in the next year.

Companies generally make a donation to the school, campus bookstore or student organization that sponsors their visits, which means hosting the stores can help raise funds for student groups.

Brands' growing presence has more colleges balking at these campus marketing events and stores. The University of Florida recently rejected a request from Pink to visit this fall. The university doesn't allow companies to do business on its campus. "There would be no end to it -- you would have the whole campus covered with them in no time," says school spokesman Steve Orlando. "We don't want our faculty and students overrun with commercialization."

The University of Minnesota and the University of North Carolina at Chapel Hill, meanwhile, have decided to quit allowing their names to be used on Pink's new line of college-themed merchandise. Pink sells fleece pants and hoodies, among other items, bearing the names of 31 participating schools and says it will add at least five more by year end.

College students have long been a target for marketers looking to build brand loyalty. But only in the past few years have companies set up these temporary stores on campus, recruited students for paid positions to aggressively promote their products and hosted their own campus events. In the past, they would buy ads in college newspapers, hand out fliers or freebies, or co-sponsor larger campus events. Stores generally were located off campus, in college towns or spring-break hangouts.

The focus on college campuses comes as both the number and spending power of students have grown sharply. Roughly 18.3 million students will enroll in U.S. postsecondary institutions this fall, up 26% from 14.5 million a decade ago, according to the National Center for Education Statistics. The discretionary spending of 18- to 30-year-old students is estimated to reach $53 billion this year, 10% more than last year and 29% more than in 2005, according to the latest College Explorer study by Harris Interactive for Alloy Media and Marketing.

While pop-up stores are primarily a brand-building tool, they also generate revenue. A Pink pop-up store at Penn State University rang up sales of about $20,000 in a single day during this past school year, a spokeswoman says. Kiehl's Since 1851, a skin and hair-care company owned by L'Oréal SA, says its college pop-up stores performed "on par with what our normal store would do" in daily sales per square foot, according to a spokeswoman.

Schools sometimes reject the pop-up stores for scheduling reasons or because they don't want the brands to compete with their own stores. San Diego State University recently said "no" to Havaianas because it didn't want to lose sandal sales at its own store. Pink, which visited the University of Alabama in February, was told it couldn't come back during the football season partly because its fleece clothing and sweats would compete with clothing sold by the school's store, though it could return in the spring.

Some schools allow marketers to set up temporary shops only when sponsored by a student group. Pink, for instance, got the nod for a pop-up store this past January at the University of Tennessee because it was sponsored by a sorority. "A lot of things get approved," says JJ Brown, associate dean of students. Many of the campaigns also have an educational or academic element, such as lessons about sustainability from RVL7 or interviews for internships at Pink, says H. Tony Berger, president of New York event-and-marketing firm Relevent, which helps organize campus campaigns. The result, he says, is that schools and students view the visits as having "added value."

Source: WSJ

Real Estate Recovery Expected in 2011

The nation is in for more than a year of stagnant job creation and tepid economic growth that will set the stage for marked improvement in 2011, according to two of academia’s respected authorities on the economy and commercial real estate.

In separate forecasts presented this month, economists in Georgia and Texas expressed dour expectations for national job growth in the coming year. Because commercial real estate depends on employment growth to drive the demand for space, the forecasts suggest that demand will be weak for the foreseeable future.

Dr. Rajeev Dhawan, director of the Business Economic Forecasting Center at Georgia State University, blames the credit crunch for pushing the economy into a recessionary state. In a forecast published Wednesday, Dhawan says the credit crunch has damaged the economy’s growth prospects until 2010.

“Some banks are on the brink of failure and it will be up to the FDIC to bail them out,” Dhawan says, expounding on the nation’s economic predicament. “Should they run short of funds, look for the government to bail out the FDIC, leaving taxpayers with the tab.” That’s why Dhawan is projecting real gross domestic product growth at a rate of 1.4% in 2008, decelerating to 0.5% in 2009 before beginning an anemic recovery to growth of 2.2% by 2010.

That lackluster economic growth means net job losses that have averaged 66,000 per month so far this year will grow to 90,000 losses per month in the second half of 2008. Expect less severe losses averaging 15,000 job cuts per month in 2009, Dhawan says. “The job market will emerge from the twilight zone in 2010, when the economy will add jobs at a monthly rate of 100,000.”

Recent and anticipated job losses are a serious challenge for the commercial real estate industry, according to Dr. Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University. “In the real estate business we don’t care what GDP is,” Dotzour quipped in a forecast presented to members and guests of the Real Estate Council of Austin on Aug. 18. “All we’re interested in is job growth, and we’ve had negative job growth in the U.S. now for about eight months. I call that a recession.”

Dotzour says the credit crunch has begun to thaw for global banks and has become a balance sheet crunch for commercial real estate lenders. Investors are amassing funds to invest in real estate, he says, and the challenge now is for lenders to clear devalued loans from their books so they can provide financing for new deals.

Both economists harbor heartening expectations for relief from high oil prices, which Dhawan expects will drop to $89 per barrel in the fourth quarter this year and average about $107 per barrel throughout 2009. Oil prices have already retreated 25% from the summer’s record highs near $150 per barrel now that American consumers have stepped back on consumption.

Less expensive oil would help the economy regain its footing before the Federal Reserve clamps down on inflation by raising interest rates. The Fed would prefer to keep interest rates low to stimulate the economy until banks have had more time to recover liquidity, economists say, but persistently high oil prices could thwart those efforts to let banks heal. “If the price of oil does not retreat below $100 per barrel by October on a sustained basis, worries of inflation will cause the Fed to raise rates much earlier than expected,” Dhawan says.

Consumers and manufacturers may find their dollars buy more this fall, which would help the economy limp through the winter. Dotzour believes the prices on steel, cement and other materials vital to commercial real estate construction will come down this fall along with oil prices.

Why? Dotzour theorizes that China’s extraordinary efforts to prepare for the Olympic Games spurred that country to accelerate construction programs for transportation infrastructure and residential and commercial space, and to stockpile commodities such as diesel fuel. Now that the Olympics have ended, Dotzour expects China’s demand for those products and materials to slacken for several months, giving global producers an opportunity to catch up with demand and bring prices down.

“It’s going to be interesting to see what happens to the price of copper and steel and all the construction materials,” Dotzour says. “If [China’s] demand does slow down, we’re looking at the possibility of a pretty dramatic decline in construction materials costs in the coming months.”

Dotzour points out a source of hope for commercial real estate investors, who would certainly welcome an unexpectedly stronger economy next year. Due to the credit crunch and economic uncertainty associated with the presidential election, Dotzour believes a number of U.S. companies and consumers have put off major decisions to spend or commit to space this year.

By March 2009, he says, businesses will have a better understanding of their financial standing and tax burdens under the new president, and may cut loose with a swath of business deals, leases and real estate purchases. “It’s possible we could have a very pleasant surprise around April.”

Source: National Real Estate Investor

Whole Foods asks FTC to not use official as judge

WASHINGTON, Aug 27 (Reuters) - Organic premium grocer Whole Foods (WFMI.O: Quote, Profile, Research, Stock Buzz) has asked the Federal Trade Commission, which is assessing whether its merger with rival Wild Oats is legal, to use an administrative law judge to hear the case, not a commissioner already on record as questioning the merger.

The FTC has named Commissioner Thomas Rosch to oversee the case, but Whole Foods said he should recuse himself, citing the fact that he was one of the commissioners who voted in June 2007 to investigate the merger as one that potentially violates antitrust statutes.

"The commission should recuse itself and appoint an independent ALJ (administrative law judge) to preside over the trial of this matter," Whole Foods said in a motion filed with the FTC on Aug. 22. It was posted on the FTC website on Wednesday.

The next hearing is a scheduling conference set for Sept. 8.

The commission had sought to challenge the merger last year, but Judge Paul Friedman of the U.S. District Court for the District of Columbia refused to issue a preliminary injunction stopping the merger. It was finalized in August 2007.

But the U.S. Court of Appeals for the District of Columbia ruled on July 29 that Friedman erred when he turned down an FTC request for an injunction to block the deal, essentially reviving the government's case.

Source: Reuters

Sears profit drops 62%, outlook weak

Sears Holdings Corp., citing the deteriorating economy's chilling effect on consumer spending, reported fiscal second-quarter earnings that were down by a worse-than-expected 62 percent.

The Hoffman Estates retailer's results would have been even gloomier had Sears not recorded a one-time gain related to a legal dispute.

In the quarter ended August 4, Sears earnings dropped to $65 million, or 50 cents a diluted share, down from the year-ago quarter's $173 million, or $1.15 a share. Per-share results benefited from a 15 percent decline in the number of diluted shares outstanding.

Revenues declined 4.1 percent to $11.76 billion from $12.26 billion a year earlier.

The second-quarter results "reflect the continued effects of a slowing economy, which contributed to the earnings declines we have experienced since the third quarter of 2007, said interim Chief Executive Officer W. Bruce Johnson.

While it was a "difficult quarter," Johnson said, the company has lowered its inventory levels by $500 million,which should lead to less promotional pricing, and improved profit margins, in the year's second half.

Sears' earnings were helped by the reversal of a pretax $65 million reserve the company had earlier been obliged to take in connection with a jury's verdict in a bond-redemption dispute. Without the help of that onetime item, earnings would have been 21 cents a share -- well below the 33 cents that analysts had been anticipating.

Both of the holding company's operating segments saw a decline in "comparable-store" sales, which measure sales at outlets open at least twelve months. At the parent''s U.S.-based Sears stores, comparable-store sales showed a punishing 6.7 percent decline; at the company's lower-end Kmart segment, comp-store sales drooped 6.2 percent.

As bad as they were, the declines were less damaging than the 9.8 percent dropoff Sears stores suffered in the first quarter, or the 7.1 percent first-quarter decline Kmart's stores experienced.The August quarter's results "reflect increasing competition and weakness in the general economy," the company said, and sales were off "across most major categories.

"Consumer electronics sales showed an upturn, Sears noted, but sales of home appliances and tools were down in response to the U.S. housing market's implosion. Sales were also pressured because consumers are being obliged to spend significantly higher proportion of their expendable income on staples such as food and gasoline.

In the latest quarter, Sears spent $437 million to buy back 5.6 million of its common shares; its share-buyback authorization has now dwindled to $206 million. Since the program was first instituted in late 2005, the company noted, Sears has spent a total of $4.8 billion to buy back 38.7 million of its shares.

Source: Chicago Tribune

Talbots' 2Q Loss Swells to $25 Million

Talbots Inc. said Wednesday it lost $25 million in its second quarter ending Aug. 2, nearly doubling year-ago losses as sales fell 8% and restructuring charges mounted. Talbots lost $13.3 million in the year-ago quarter. Excluding losses on its Talbots Kids, men’s and U.K. businesses and restructuring charges, the retailer would have lost $18.3 million in the latest period.
Revenue fell 8% to $528 million from $572.3 million a year earlier.

"This was a challenging quarter to drive top-line sales, predominantly due to the change in our Talbots brand annual June clearance strategy, coupled with a difficult macro environment," said Trudy F. Sullivan, president and CEO, in a statement.

"While a year-over-year shortfall in retail sales impacted the quarter, results were largely offset by the Talbots brand merchandise gross margin expansion," she added. "However, given the heavy inventory position of the J. Jill brand, we took aggressive markdowns during the quarter, which hurt gross margin and our second quarter total company operating performance."

Same-store sales fell 12% in the quarter. Sales for Talbots brand items fell 11.7%, and J. Jill brand sales fell 13.2%.

Source: Chain Store Age

Borders Hits Store-Opening Goal

Borders Group’s new store openings for this year are essentially complete, as the company has cut capital expenditures to focus on strengthening its bottom line. But it will expand its new web site in-store, executives said at the company’s second quarter conference call. All but one of 14 new superstores (including two relocations) planned for this year have opened, said Ed Wilhelm, senior VP and CFO. All are in the company’s new concept, which reduces the space allocated to music, giving that space to children’s and bargain books. “We continue to be very pleased with the performance of our new concept stores,” Wilhelm said. “We will be applying what we learn from these to the rest of the chain where appropriate.”

The company opened four new Borders superstores in the United States during the period -- all of them new concept stores -- and ended the second quarter with a total of 518 domestic superstore locations. The number of Waldenbooks stores was reduced from 532 at the close of the second quarter 2007 to 468 at the end of the quarter. In coming months, the company’s new Borders.com e-commerce site will be introduced via kiosks to the superstores to become a true “cross-channel retailer,” according to CEO George Jones. “We made a true decision to get back into that business.”

“There continues to be a lot of opportunity in that area, and it will be a key driver for cash flow for us going forward,” Jones said. Consolidated sales from continuing operations were $749.2 million, down 6.9% from the same period last year. At Borders domestic superstores, comparable-store sales decreased by 8.9%, in significant part because of exceptional sales in the second quarter of last year, when the last Harry Potter book was released. Excluding the Potter factor, comp-store sales would have declined 5.1%. Waldenbooks’ comps declined 7.0% factoring in Potter, 1.4% without. But profitability has improved: the company lost $11.3 million, down from a loss of $18.1 million in the same period last year.

The international segment continues to downsize: During the quarter, Borders completed the sale of its Australia/New Zealand/Singapore businesses. It continues to examine strategic alternatives for its London-based Paperchase business, Jones said. Three Borders superstores in Puerto Rico and the company’s franchise operations in the United Arab Emirates and Malaysia remain.

Borders Group operates more than 1,100 stores worldwide primarily under the Borders and Waldenbooks brand names.

Source: GlobeSt.com

Centro Takes Another Hit

A month after selling a 5.1-million-square-foot chunk from its U.S. portfolio, Centro Properties Group reported that one of its domestic units, Centro NP, experienced a second quarter loss of almost $300 million, rekindling questions about its viability as a going concern.

The Australian listed property trust has been trying to unload the bulk of the assets in its U.S. portfolio amid a sluggish market in order to repay $1.1 billion to its U.S. lenders by Sept. 30 and A$2.3 billion to its Australian lenders by Dec. 15. It also needs to repay $450 million to its U.S. private placement note holders by Dec. 15. The company took on billions of dollars in debt with its 2007 acquisition of New York-based shopping center REIT New Plan.

Centro had planned to raise cash through massive asset sales in both the United States and Australia. After agreeing to sell 29 of its choice properties from its 106.5-million-square-foot U.S. portfolio to a private real estate advisor for $714 million in July, it now has to dispose of its weaker assets in an environment that does not favor sellers. The properties sold in July, which came from the Centro America Fund, were purchased at a 10 percent discount to the assets’ previous book value.

“It’s already tough to sell assets in this environment, and having a weak portfolio is difficult,” says Rich Moore, an analyst with RBC Capital Markets. “I think it will affect their ability to sell.”

Last week, in a U.S. Securities and Exchange Commission filing, Centro NP, one of Centro Properties Group’s U.S. divisions, said it lost $299 million in the quarter ended June 30. The loss resulted in a $95 million impairment charge to its properties. With its asset value off almost 9 percent in the first half of the year, the report noted there is “substantial doubt about the company’s ability to continue as a going concern, given that the company’s liquidity is subject to, among other things, its ability to negotiate extensions of credit facilities.”

The news does not mean Centro NP faces imminent demise, notes Merrie Frankel, vice president and senior credit officer with Moody’s Investors Service, a New York City-based credit rating agency. Given that Centro is under constant scrutiny because of its credit problems, the firm had to include that statement in the report for accounting purposes, she says.

Centro MCS Manager Ltd., the entity responsible for Centro Retail Trust and Centro Retail Ltd., will report its 2008 results to the Australian Securities Exchange on Friday.

The development with Centro NP raises serious concerns about whether the firm will be able to sell the remainder of its U.S. assets for a sufficient amount of money to meet its loan obligations.

Centro, on its Web site, stated Monday it will not be able to meet those deadlines and has started talks with its bankers about a new extension. A statement from Centro company secretary Elizabeth Hourigan, reads: “Discussions with the lenders are at a preliminary stage and no assurance can be given that further debt extensions will be achieved beyond the expiry of the current debt extensions on September 30.”

Centro officials could not be reached for comment.

Even before the latest write-down, Centro was aware it would face some challenges in selling the rest of its U.S. properties. The firm chose and marketed the properties from its Centro America Fund as a portfolio because most of them continued to bring in solid results and were located in the Northeast, says Bernie Haddigan, national director of the retail group with the Encino, Calif.-based brokerage firm Marcus & Millichap Real Estate Investment Services.

Now, however, the firm is marketing most of the remaining assets on an individual basis, Haddigan notes.

“Centro America Fund properties were of higher quality than Centro’s [other] U.S. property [portfolio], which was valued in December 2007 on a 6.95 percent cap rate,” wrote Callum Bramah, analyst for Macquarie Research Equities, last month. “This leads to our belief that on any further U.S. asset sales, cap rate expansion of more than 70 basis points is likely.”

On Monday, Centro shares fell 9 percent to A$0.20.

Source: Retail Traffic

Urban Outfitters Fashions Growth Plan

Amid the worst consumer-spending slump in years, Urban Outfitters Inc. has been racking up big sales and earnings gains without putting much on sale.

The Philadelphia-based parent of Urban Outfitters, Anthropologie and Free People stores, which recently reported a 79% jump in fiscal second-quarter net income, has been attracting shoppers with an eclectic mix of full-price clothing and home goods in stores where employees create their own displays.

Now, Chief Executive Glen Senk faces the challenge of meeting the company's goal of at least 20% annual sales growth, at a time when the economy is battering many other retailers. The company plans to open 45 stores this fiscal year, ending Jan. 31, 2009, bringing its total to nearly 300 across its divisions. Mr. Senk plans to open the first Anthropologie stores in Europe as early as next year, will continue with an international expansion of the Urban Outfitters chain, and is rolling out new store and merchandise concepts domestically.

In its fiscal year ended Jan. 31, 2008, Urban Outfitters rang up sales of $1.5 billion, with healthy growth from both new and existing operations. Net sales in the fiscal second quarter ended July 31 rose 30%, including a 13% rise in same-store sales and a 42% increase in direct sales. Efficiency improvements also helped boost profit.

Rather than saturate the market with cookie-cutter stores, Mr. Senk plans to cap growth for each division at approximately 250 stores. The strategy is in keeping with a notion laid out by Chairman Richard Hayne, the company's founder, that "big is the enemy of cool."

Instead, he aims to expand through new retail concepts. In April, Urban Outfitters opened its first Terrain store, a gardening and antique center aimed at baby boomers. The company also launched a high-end women's apparel line this year called Leifsdottir that is now sold through stores like Bergdorf Goodman. Mr. Senk believes Leifsdottir may eventually have retail stores like the company's older wholesale brand, Free People.

Mr. Senk's expansion comes amid a broader industry move toward a faster rollout of new store concepts. Just a few years ago, retailers generally believed they could open between 800 and 1,000 stores without cutting into same-store sales growth, according to retail consulting firm TNS Retail Forward. Increased competition and slowing consumer spending, however, are causing retailers to revise planned store counts downward by the hundreds, TNS says.

A 14-year company veteran, Mr. Senk says Urban Outfitters needs to launch two to three stand-alone concepts in the next several years to continue its growth. "It would be easy to just keep opening up Anthropologie and Urban Outfitters, but we are not going to open up more than we believe is right for the brand...so we have to have new brands for the parent company to grow," he said in a recent interview at the company's headquarters, which are dotted with raw wood benches, sinks that serve as planters, and other touches similar to its stores.

Some investors worry that Terrain is "outside the realm of what they traditionally have done" because it involves selling perishable plants, notes Christine Chen, an analyst with Needham & Co.

Mr. Senk says Terrain is a concept that Mr. Hayne was behind and it diversifies and protects Urban Outfitters against what he calls a possible "fashion against fashion." The company plans to open two stores next year at the most.

Mr. Senk, a casual high-end dresser and competing equestrian whose homes have been featured in design magazines, must also stay ahead of competitors like J. Crew Group Inc. and Metropark USA Inc. that analysts say are adding merchandise flourishes and window displays, or carry merchandise that seems inspired by Urban Outfitters or Anthropologie. A Metropark spokeswoman had no comment and officials from J. Crew couldn't be reached to comment.

The 52-year-old Mr. Senk assumed the helm of Urban Outfitters a little over a year ago, after leading the expansion of Anthropologie from a single-store prototype to a 115-store division with a catalog and Web site, and helping transform Free People from a brand into a retail chain.

In previous years, Urban Outfitters had loaded up its stores with 1980s-style clothing like leggings too far ahead of the time the trend finally took off. Years of rapid expansion and a headquarters move also produced growing pains.

Mr. Senk put systems in place that allow buyers to track sales by color, sleeve type and other attributes so they can order new stocks more accurately. He made supply chains more efficient, created new jobs and hired new talent. Kimberly Greenberger, a Citigroup Inc. analyst, estimates that about 80% of the company's second-quarter profit growth was driven by improved profitability of existing stores and of direct and wholesale divisions.

Urban Outfitters could stumble if economic woes deepen sharply, particularly if a spike in unemployment occurs, making job hunting difficult for new college graduates who make up a significant portion of Urban's customer base, says Ms. Greenberger.

Mr. Senk says his best defense is to focus on improving the stores' shopping experience and products. While executives can't control the economy or oil prices, they can dictate what they sell, along with the shopping experience.

Still, he says, "I really do live in a constant state of terror that the shoe is going to drop."

Source: Wall Street Journal

Mervyns Receives Final Approval of Its Debtor-in-Possession Financing

HAYWARD, Calif., Aug 26, 2008 (BUSINESS WIRE) -- Mervyns, the leading mid-tier department store chain in California and the Southwest, today announced that the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") granted final approval of the Company's $465 million debtor-in-possession (DIP) financing facility. The DIP financing was approved by the Bankruptcy Court with the support of the Creditors' Committee and all objections were resolved or withdrawn. The facility is being provided by a group of lenders led by Wachovia Capital Finance Corporation (Western) as agent. The Company previously received interim approval of the DIP financing facility from the Bankruptcy Court on July 31, 2008.

The DIP financing and cash generated from operations will be used to continue to pay vendors and employees, as well as to provide operational and financial stability as Mervyns proceeds with its restructuring. The Company is currently in compliance with all of the terms and conditions of the DIP financing agreement.

"The Court's approval of our DIP financing is a significant step in our reorganization process and one we are pleased to have accomplished," said John Goodman, Chief Executive Officer of Mervyns. "Our DIP financing provides Mervyns with the liquidity and stability it needs to continue serving our customers and meeting our obligations to vendors. With this final DIP financing in place and our financial position now strengthened, we are able to maintain our operations while continuing our discussions with creditors as we focus on emerging from bankruptcy."

Mr. Goodman concluded, "We appreciate the ongoing support of our loyal customers, trusted vendors, and hard working employees as we progress through our restructuring."

As previously announced, Mervyns will close 26 stores by late October or early November this year, with closing sales scheduled to begin on August 28, 2008. Mervyn's LLC (which operates the Mervyns business), together with Mervyn's Holdings, LLC (parent of Mervyn's LLC) and Mervyn's Brands, LLC (subsidiary of Mervyn's LLC), filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware on July 29, 2008. The lead case has been assigned case number 08-11586.

Source: Plain Vanilla Shell

Logan's high-flying food courts

Upgrades help airport improve the bottom line as airline travel wanes

Think fancy food court is an oxymoron? Not at Logan International Airport.

After a $5.5 million upgrade of Terminal C's food court, its Dunkin' Donuts now is the largest one at airports nationwide - and the only one with a trendy lounge. Burger King displays its menu on wide-screen LCD monitors. And Au Bon Pain has arches that create sunflower-petal shadows on the terrazzo floor.

Designers persuaded seven restaurants - also including Currito Burritos Without Borders, Ryo Asian Fusion, Famous Famiglia, and Jerry Remy's Sports Bar & Grill - to splurge on expensive countertops and eye-catching architecture. The intent, the designers say, is to pique passengers' curiosity so they'll check out the concessions - and then stand in the checkout lines.

"Everyone's rushing through an airport. You want to grab their eye," said Steve Dumas, senior vice president of retail design for Westfield Corp., whose subsidiary manages Terminal C's concession program. The food court, with its airy architecture and open kitchens, has gradually unveiled its eateries since the spring and will be complete next week with the opening of Remy's, co-owned by the namesake sportscaster.

The additions helped Terminal C's concession sales rise 12 percent in June, to $3.9 million, from $3.5 million in June 2007. Airportwide, concession sales for the fiscal year ended June 30 increased 7.5 percent to $145 million, up from $135 million the year before. That's good news for the Massachusetts Port Authority, which runs the airport and pockets about 11 percent of concession revenues, or $15.9 million in the last fiscal year. Jack Hemphill, Massport's aviation business general manager, bets total concession sales will keep improving as food court renovations continue. Terminal B's upgrade was finished earlier this year, and a yearlong modernization of Terminal E's dining area will begin in October. Logan was the North American airport with the fourth-highest food and beverage sales per arriving or departing passenger in calendar 2007, according to the annual list that Airport Revenue News plans to release next week. Last year, each Boston flier spent $5.77 on food and beverages, on average, up from $5.50 in 2006.

Increasing per-passenger concession revenue is important for Massport as fewer flights and travelers use the airport due to high jet fuel costs and concerns about the economy. Logan's yearlong dip in passenger traffic continued in July, with 152,277 fewer fliers, a 5.7 percent drop from the previous July, said Massport spokesman Richard Walsh. And airlines have scheduled 7.9 percent fewer seats for Logan flights in both October and November, compared to the same months last year. Seat capacity will rebound a bit in December, but still be down 1.2 percent compared to a year earlier, Walsh said.

Massport started envisioning Terminal C's eating options more than two years ago. Hemphill's mouth watered at the idea of establishing venues for cable TV celebrity chefs, including Masaharu Morimoto, Bobby Flay, and Emeril Lagasse. "My dream would be to have a Food Network food court," Hemphill said. One of Logan's concession management companies proposed the idea to Food Network, but it didn't pan out, Hemphill said.

Still, the Terminal C food court attracted impressive-looking tenants. Au Bon Pain built its only open-air eatery and topped it with a sunflower trellis. It was costly to construct, so the wavy arches soar above only part of the eatery, said Ed Frechette, senior vice president of marketing.
Dunkin's cafe features a warm cocoa-colored wall and softly glowing sandy-orange drop-pendant light fixtures that create a calming lounge for weary travelers, said Jimmy FitzGerald, the Canton-based chain's vice president of concept innovation. Its sign has brushed stainless-steel letters instead of plastic ones. The Dunkin' Donuts beckoned 18-year-old Jeremy Eichenlaub and his parents to unwind at a table on Monday, sipping coffee and nibbling English muffin sandwiches. It was a comforting place for the Needham family to recover - and even shed a few tears - after bidding Eichenlaub's India-bound twin brother adieu.

Eichenlaub, a Dunkin' loyalist who every week has eaten at the chain's store across from his high school, likes this venue's revamped look better. "It's warmer, more relaxing."

But Kenneth Zou, a Boston financial analyst, said the lack of a ceiling and four walls creates awful acoustics. "This is a little loud," said Zou, 44. He also wanted the planters bordering the seating area to rise to eye level to increase privacy and screen off the commotion at the airline counters.
Suddenly, his cellphone rang. His business partner was looking for him. Zou waved, making eye contact without getting up. "Maybe it's good it's open," he said.

Source: Boston.com

Big Lots Reports Increased Sales and Improved Operations

The worst of economic times can yield the best of times for value-priced retailers, especially when the retailer has also improved operational efficiencies.

On Tuesday, Big Lots reported increases in net sales, same-store sales and income. In the second quarter, the close-out retailer’s net sales were up 1.9% to $1.105 billion compared to $1.084 billion for the year-ago period. Same-store sales increased 2.8%, which was on top of an impressive 5.2% increase in same-store sales for the same quarter in fiscal 2007. Net income for the most recent quarter was $26 million vs. $23.4 million last year, and year-to-date net income topped $60 million vs. $52 million in the previous year.

Additionally, Big Lots realized a 30% improvement in operating profit for the second quarter: $43.5 million, or 3.9% of sales, vs. $33.4 million, or 3.1% of sales for the year-ago period.
Big Lots attributed the gains to the 2.8% increase in same-store sales, improved margins and expense control resulting primarily from efficiencies in operations at its stores and distribution center.

The company reported significant improvements in inventory management as well, ending the second quarter with a 2% reduction in inventory, $698 million vs. $714 million last year, which resulted largely from a 1% reduction in average store inventory and a 1% reduction in store count.

At the end of the second quarter, Big Lots had 1,355 stores in 47 states, down from 1,375 stores at the close of fiscal 2006. The company’s total revenues in fiscal 2007 were $4.656 billion.

Source: Chain Store Age

Chico’s Cautious on Growth

While expecting sales improvement in the second half, Chico’s FAS remains cautious about expansion, executives said at the company’s second quarter conference call. The company expects to open between seven and nine net additional stores in the third quarter, but it anticipates no net new store openings (only net closures of approximately seven to nine stores) in the fourth quarter, and to relocate/expand between eight and 10 stores over the balance of the year.

Chico’s will open eight stores, White House/Black Market (WHBM) will open 11 units and Soma will open one store. “I’m not hearing good news from many people, and it makes sense to be cautious,” said Kent Kleeberger, EVP, CFO and treasurer.

Net sales for the quarter decreased 7.1% from the previous year to $405.2 million. Net income was $6.7 million, compared to net income of $38.7 million in the same period last year. Same store sales decreased approximately 19% for the Chico's brand and approximately 12% for WHBM.

However, the company is optimistic, stressing the successful reintroduction of its signature Travelers brand in Chico’s stores, and other “notable improvements” in previously troublesome product areas. “We expect to see an improvement in trends and to be profitable in the second half,” said Scott A. Edmonds, chairman, president, and CEO. Chico’s operates 1,079 stores in 49 states, Washington, DC, the US Virgin Islands and Puerto Rico operating under the Chico's, White House Black Market, and Soma Intimates names.

Source: GlobeSt.com

More Stores to Close, But Vacancy Declines

Store closings are on the rise, according to a recently released survey from the International Council of Shopping Centers, but densely populated urban areas will continue to thrive, says real estate investment services firm Marcus & Millichap. The first half of 2008 saw announced closings of 2,831, compared with 1,522 announced closings in the first half of 2007. However, those numbers pale in comparison to 2001, when 7,041 store closings were announced. Not surprisingly, apparel stores represented 34.7% of the announced closings, followed by home entertainment stores at 28.8% of the total. ICSC projects that 144,000 establishments will be closed in 2008, a 7% increase from 2007. A recent spate of retail bankruptcies (including Boscov’s) should not be a major cause for alarm.

“Store bankruptcies are going to increase, but that doesn’t necessarily lead to store closings,” said Bernard J. Haddigan, managing director of Marcus & Millichap, Atlanta. And even those units that close stores continue to pay rent until the unit is re-leased. Still, expect more closings, Haddigan warned. “The food industry is softening, and small shop space is virtually dead,” Haddigan said. “Plus the industry is still developing new product.”

That has led to an increased vacancy rate across the country, according to Marcus & Millichap Research: at midyear, vacancy in the United States was 10.7%, up from 9.7% in 2007. The firm projects that at yearend 2008, vacancy will hit 11.1% nationally. More telling is where shops are staying open: Densely populated urban areas are doing well, as people seek to cut back on the cost and inconvenience of driving. “There’s a larger trend with the District [of Columbia] and Atlanta: people are tired of the long commutes and are moving to the urban core,” Haddigan said.

At mid-year, according to Marcus & Millichap, Washington, D.C. had a vacancy rate of 4.7%, well below the U.S. average, topped only by San Diego’s 3.6% vacancy. Philadelphia posted a 6.9% rate at midyear. Meanwhile, Sunbelt cities such as Orlando (9.5%) and Dallas/Ft. Worth (15.1%), and Chicago (9.5%) fared less well. Yet rents for the most part remained steady, increasing of the shuttered stores continue to pay rent, with major metro areas mostly reporting minor rent increases, the survey said. A comeback likely won’t occur until 2010 or 2011, Haddigan said. Until then, secondary markets and locations will struggle. “There’s been significant development,” Haddigan said. “If space is not pre-leased there will be issues.”

Source: GlobeSt.com

Consumer confidence bounces

NEW YORK (Reuters) - U.S. consumer confidence recovered more than expected in August as fears over inflation eased, while financial markets combed through housing data for reasons to hope the worst is over for the moribund sector.

Sales of newly built U.S. single-family homes in July were lower than economists expected but rose from a June pace that was the slowest in nearly 17 years, while the glut of homes on the market also eased, a government report showed on Tuesday.

Another report said U.S. home prices in metropolitan areas were down 15.9 percent from a year earlier, a record drop. Still, the monthly rate of decline slowed from May, which suggested the decimated housing sector may be stabilizing, according to the S&P/Case Shiller report.

The Conference Board said its index measuring consumers' mood jumped to 56.9 this month from July's 51.9 for the highest reading since May, while a decline in inflation expectations should please Federal Reserve officials worried about an unwelcome rise in price pressures this year.

The data by no means suggested the stagnant U.S. economy was vaulting to recovery, though some analysts said it showed embryonic signs of stabilization that could herald a slow turn for the better if maintained.

"Confidence is still quite depressed, but it's a glimmer of hope from the lows we saw in June," said Dana Saporta, economist at Dresdner Kleinwort Securities LLC in New York.

"I attribute the increase to the drop in gasoline prices, which offset a deteriorating labor market."

Stocks initially rose after the release of the consumer confidence data but lost momentum and were little changed from opening levels in late afternoon trading.

The dollar gained against other currencies while U.S. government bonds, which benefit from weak economic conditions, added to earlier losses.

The improvement in consumer sentiment came during a month when oil prices retreated further from July's record highs but consumers' evaluation of their present situation still fell to its lowest in five years in the survey.

Much of this may reflect job-market insecurity. The index of "jobs hard to get" rose to 32.0 from a revised 30.2 in July, pushing the gauge to its highest since October 2003.

"Consumer confidence readings suggest the economy remains stuck in neutral, but may be showing signs of improvement by early next year," Lynn Franco, director of the Conference Board Consumer Research Center, said in the report.

The Conference Board, an industry group, said its gauge of inflation expectations fell to 6.7 percent, its lowest since 6.1 percent in March, from July's revised 7.5 percent.

It hit a record high of 7.7 percent in May and June and was originally reported at 7.6 percent for July.

Source: Reuters

Starbucks whips up a better-for-you breakfast comeback

SEATTLE — Starbucks (SBUX) is on the brink of rolling out a serious reinvention of its breakfast food.

Details of the chain's long-anticipated move into better-for-you food — so hush-hush that it had its own code name, Morning Source — will be unveiled Tuesday. It comes as Starbucks' U.S. stores are struggling with drops in traffic and comparable sales growth as many cash-strapped consumers hesitate to shell out $4 for their java fix.

The more nutrition-friendly food — fewer calories, more protein, fiber and fruit — will show up Sept. 3 on the breakfast menu at most of the 11,570 locations in the U.S. and Canada. Six new items include hot oatmeal, an energy bar and a whole-grain apple bran muffin with fruit pieces.

Starbucks plans to revamp its lunch and dinner menus, too, in 2009. The goal is to lure back core customers who are visiting its stores less often and spending less when they do.

"Food has been our Achilles' heel," says corporate founder and CEO Howard Schultz in an interview in his office. He calls better-for-you food, part of Starbucks' evolving health and wellness program, a "billion-dollar" idea. Says Schultz, "This is as big an initiative as anything we can do."

Even so, Starbucks is late to the better-for-you food trend. It's made modest efforts in recent years to bolster the nutritional value of its beverages and foods, such as removing trans fats from its foods and switching to 2% milk. But for the most part, the company has been content to sit back and rake in profits.

The effects of an ailing economy on its sales have left Starbucks little choice but to up the ante on food quality. The move also comes as more cities require fast-food chains to post nutrition information on menu boards.

This year has been a nightmare for Starbucks — and for Schultz, who forcefully took back the CEO job in January. Since then, he's overseen closing 600 U.S. stores, laying off thousands of store and corporate staff, shuffling top management and scaling back domestic growth plans.

Still, Starbucks' stock is down nearly 25% this year. Schultz hopes better-for-you breakfast food targeted at its core customers breaks the bad-news cycle.

But Schultz, 55, concedes to a second driver for the menu upgrade: his own health.
During a physical exam last year, Shultz was strongly advised to lose weight and lower his cholesterol. He immediately replaced his usual breakfast at home of a bagel with butter and black coffee with a homemade protein shake. (He still drinks several Starbucks coffees daily, he says.)

Also, because of achy knees, Schultz recently gave up the pounding of rough-and-tumble basketball for lengthy bike rides.

He's lost 12 pounds since February and looks svelte. His cholesterol is down. He says he feels great. He's also had private consultation with Dr. Mehmet Oz, known for his Oprah appearances. Schultz says that Oz has helped him to view pursuing health and wellness as less a chore than a positive way of life.

He says the menu overhaul will give folks a chance to make "healthier" decisions inside — not outside — Starbucks.

Wooing the regulars

Industry consultant Malcolm Knapp says, "Starbucks is following a fundamental trend: People want to eat better-for-you food that tastes good."

He says Starbucks' real motive is less about selling more food than it is about luring back core customers to sell more highly profitable coffee.

He says it also will help Starbucks better distinguish itself from McDonald's, which now sells premium coffee and plans to install McCafé coffee bars in many of its 14,000 U.S. locations in the next year.

Frequent Starbucks critic and New York University nutritionist Marion Nestle embraces the new menu: "This sounds groundbreaking. If it works, it will influence the whole industry."

For customers such as Lynn Schilaty, mayor pro tem of Snohomish, Wash., it comes not a moment too soon. On a recent afternoon, she took a homemade energy bar to Starbucks, where she sat with a friend drinking iced tea. She says she wouldn't mind paying for baked goods at Starbucks but doesn't find much that appeals to her.

"I come here because I love the coffee," she says. But she says she'd probably go more often if she also loved the food.

Jeff Pettit, a project manager for Boeing in the Seattle area, says he likes Starbucks' food — but not the high calorie count of some items. "I won't touch the doughnuts or scones," he says, noting he checked online and found one scone was close to 500 calories.

Starbucks has heard from lots of customers like these. On its mystarbucksidea.com website, better-for-you food is a top request, says Sarah Osmer, director of health and wellness.

Making the cut

Even before that website went live five months ago, Starbucks regularly heard the request from both customers and employees, says Schultz. The problem: Starbucks' options were limited because Starbucks relies on outside suppliers to make its food.

With more than 70 suppliers nationwide, inconsistent quality also was an issue, Schultz says. To get consistency in the new food, the supplier list has been whittled to fewer than 12, he says.

Before the cut-down, Starbucks challenged all suppliers to help create the new menu. Of 200 food items considered over two years, says Lesley Zavar, director of the food category, these six were selected:

•Oatmeal. The whole-grain Perfect Oatmeal is served hot in a cardboard to-go bowl. For $2.45, buyers also get to pick two of three mixes for the oatmeal (served in separate packs): dried fruit, nuts or brown sugar.

Executives expect the instant oatmeal to be the most popular new item. It will roll out with the promotional tag line: Make Morning Good Again.

Schultz says they "cracked the code" on oatmeal, and its aroma does not detract from the coffee aroma in stores.

Nestle, the nutritionist who's not a fan of Starbucks coffee, says she'll try the oatmeal. But she wishes it was served with fresh, not dried, fruit. "I don't see why they couldn't do that."

•Apple Bran Muffin. The $1.75 muffin with 330 calories is made with whole-wheat flour, oats, wheat bran, apples, cherries and honey. It replaces the current bran muffin.

•Multigrain roll. The $1.60 roll has 280 calories and seven seeds and grains. It's served with almond butter or strawberry preserves.

•Energy bar. The $1.75 Chewy Fruit & Nut Bar is made with oats, dried fruit, nuts, seeds and honey. It has 250 calories.

•Power Protein Plate. The $4.95 Power Protein Plate has a hard-boiled egg (from uncaged hens), a small whole-wheat bagel, a 70-calorie pack of peanut butter, a cheddar cheese wedge, apple slices and grapes. It will be sold at stores that have cold cases.

•Fruit pastry. The $1.75 Berry Stella started rolling out last month. The whole-grain pastry is made with seasonal fruits.

These will be offered in the same place that also still sells a 24-ounce Double Chocolaty Chip Frappuccino (with whipped cream) loaded with 670 calories.

Starbucks executives say it's about choices, which now will include better-for-you grub.
"One year from now, the entire food case will look different than it does today," says Michelle Gass, senior vice president over all Starbucks business categories.

It's working on new beverages, too. Out in July was Vivanno, a $4 fruit smoothie — Banana Chocolate or Orange Mango Banana. Based on early success, more flavors will come in 2009, says Schultz, who drinks two a day.

But organic food is not in the plan. Organic has not been a top request from patrons, Zavar says.

The Baby Boomer factor

The biggest market for the new food may be Baby Boomers "who want to extend their lives without sacrificing taste," Zavar says.

One such Boomer is Beth Hamlin of suburban Seattle. Though a frequent buyer of Starbucks coffee, "Breakfast at Starbucks hasn't been an option for me because of the choices."

Her husband regularly gets its breakfast sandwiches, but she won't touch them because she says they're "too fattening."

With some skepticism, she recently sampled oatmeal being tested at a Starbucks outside Seattle. She was surprised to find she liked it and says she'd buy it.

That's music to Schultz's ears. And, perhaps, future money in the till.

The way he sees it, the health and wellness program will let Starbucks act as a better-for-you food and beverage "editor" for customers. He says the company is being approached by many makers of high-quality foods that want to sell them at Starbucks.

If the new food is a hit, Schultz says, the day will come when he no longer will hear this most common of Starbucks complaints, one he visibly loathes to even say out loud: "The food's not as good as the coffee."

Source: USA Today

Towns recycle abandoned stores

Wisconsin Rapids, one of Wisconsin's old paper-mill towns, had never fought to keep Wal-Marts and other big-box retailers out. Quite the opposite. The city was so welcoming that it got a state grant to meet Wal-Mart's parking needs in the 1980s.

By the late 1990s, however, Wal-Mart outgrew the space and moved to the outskirts of town. Downtown Wisconsin Rapids was left with a 120,000-square-foot shell and a giant parking lot. A neighboring shopping center suffered.

Today, the old Wal-Mart has new life as the Centralia Center for senior citizens. "Had we not (done so) … today it would still be sitting there blighted," says Mayor Mary Jo Carson.
America's big-box experience is entering a new phase.

Some towns continue to block megastores because they object to their economic impact on local merchants and the traffic congestion they can create. But thousands of other towns across the USA that welcomed them face a growing challenge: What to do with the cavernous spaces left behind by retailers such as Home Depot, Wal-Mart and Kmart when they downsize or expand elsewhere.

Big-box stores leave huge spaces behind — many carry deed restrictions that prevent other retailers from moving in — and filling the space can be difficult. So cities have become creative and some are turning these hubs of capitalism into centers of civic life.

A Kmart in Hastings, Neb., is a Head Start Early Childhood Center. Kmarts in Buffalo and Charlotte and a Wal-Mart in Laramie, Wyo., are charter schools. After Hurricane Katrina's devastation in Louisiana, the St. Bernard Health Center opened in government trailers in the parking lot of a closed Wal-Mart.

Among the most unusual uses: An old Kmart in Austin, Minn., is the site of Hormel Foods offices and a museum dedicated to Hormel's famed meat product, Spam; the Peddlers Mall in Nicholasville, Ky., is a flea market and antiques mall where a Wal-Mart once was.

Profting from abandoned spaces

Julia Christensen spent six years documenting the trend in Big Box Reuse, a book to be published in November. She details how 10 communities turned vacant big-box stores into schools, a courthouse, church, museum and other civic organizations. "We have a bunch of empty buildings all over the country," says Christensen, an artist who teaches at Oberlin College in Ohio.

Most cities don't know what other cities are doing with abandoned big-box spaces, she says.

"I hope this project will give us a platform so that we can make informed decisions," Christensen says. An exhibit of Christensen's photos that appear in the book opens this week at the Miller Gallery at Carnegie Mellon University in Pittsburgh. "Hopefully, we can raise awareness," she says.

Wal-Mart owns more than 3,400 stores among its Supercenter versions, Sam's Clubs and others, says Jennifer Evans-Cowley, a city and regional planning professor at Ohio State University who has written about how communities can prepare for the short life span of mammoth stores.

"Every year, Wal-Mart closes stores," she says. "There are 15 major retailers. Multiply that by 2,000 stores each with a 20- to 25-year life cycle. It's not unreasonable to expect that closure would happen during that time."

Cities adopt new standards

More communities are introducing policies that require big-box retailers to help redevelop the spaces they leave behind. Some require them to tear down the stores if they're empty more than a year. Others have introduced design standards that require landscaping and more than one main entrance so that the building can accommodate multiple tenants in the future.

A retailer the size of Wal-Mart can make or break a town like Wisconsin Rapids, which has about 18,000 residents. "It changed us," Wisconsin Rapids Mayor Carson says of Wal-Mart's decision to leave downtown and build a superstore on the edge of town. The move eventually helped, she says.

"We, as a city, now have a central location for our seniors that's better than having it on the outskirts of town," Carson says.

About 20,000 square feet of the old store were knocked down to make way for a community garden and benches. Inside, seniors now enjoy a library, meeting rooms, a walking track, pool tables and state-of-the-art kitchen and computer center. The center also holds aging and disability centers for two counties.

"Local officials today have to be problem-solvers to survive," Carson says. "It might help local public officials to think as far out of the box as they can."

Source: USA Today

Curtain will close on two cinemas

National Amusements Inc. said yesterday that it will shutter two theaters in the Boston area in September because the locations are no longer financially viable. The Dedham-based movie chain plans to close the Showcase Cinemas Lawrence 1-6 on Monday and the Circle Cinemas in Brookline will close for business after the last show on Sept. 7. The private company said it would try to find positions at its other locations for the 51 employees affected by the closings.

"We watch all of our theaters closely," Wanda Whitson, the company's spokeswoman, told the Globe yesterday, "and make every effort to keep them as viable operating businesses. Once they are no longer viable, we make the decision to close them."

The closings come at a time when many Massachusetts movie theaters are hurting as a result of competition from DVDs and the rise of home movie theater systems. According to the National Association of Theatre Owners, there were 112 movie theaters in Massachusetts last year, down from 117 locations in 2005. To attract moviegoers, some theaters are adding more amenities. For its part, National Amusements is trying to turn some if its theaters into entertainment complexes where people come to do more than just watch movies. Earlier this month, National Amusements opened the Showcase Cinema de Lux at Patriot Place, a 14-screen upscale theater in Foxborough that offers a lounge with a full bar and in-seat dining. Another theater following this same concept is being built in Dedham at Legacy Place and is slated to open next year. And a 12-screen theater is being built at the vacated Macy's building at the Westgate Mall in Brockton.

National Amusements, which operates more than 1,500 theaters worldwide, including 15 locations in Massachusetts, also plans to expand overseas. Employees at the two theaters that are closing received a short, four-sentence memo Friday about the closings. In the memo passed out at Circle Cinemas, Jose M. Perez, the theater's managing director, wrote with a "heavy heart" about the closing of Circle Cinemas.

"Please note that this decision is in no way a reflection of the hard work and dedication you have all shown over the years," Perez wrote. The six-screen Showcase Cinemas Lawrence 1-6 opened in June 1965, and is located a short distance from its counterpart, Showcase Cinemas Lawrence 7-14. The larger, eight-screen theater will remain open. Circle Cinemas, which has seven screens, opened in November 1965. Circle Cinemas employs 21 workers and Showcase Cinemas Lawrence 1-6 has 30 employees. "Our employees are very important to us, and this is not a decision we make lightly," Whitson said.

Source: Boston.com

Starbucks tries brew with a more premium price

Chain testing new coffee machine in Dunkin's backyard

Starbucks Corp.'s luck could change with the help of a clover, but not the four-leaf kind. Instead, the Seattle coffee giant is seeking a boost from the Clover brewing system, a sophisticated machine that turns out customized cups of coffee at a premium price. The system is being tested in Boston and Seattle, but the company is expected to say today that it is rolling out more Clovers in the two cities and will introduce them in San Francisco.

About 30 Starbucks shops in the Boston area will get the machines, compared with 10 in Seattle and an undisclosed number in San Francisco. They will debut Sept. 9 in Boston and today in Seattle. The San Francisco date has not been finalized. The Boston market is of special importance because it allows Starbucks to test Clover against its major competitor, Canton-based Dunkin' Donuts, said Darren Tristano, executive vice president at Technomic Inc., a Chicago consulting firm. Starbucks has about 200 stores in Massachusetts, while Dunkin' Donuts has about 1,100. Dunkin' Donuts declined to comment.

"Everyone else is starting to offer better quality of coffee," Tristano said. Coffee made one cup at a time, he said, can help Starbucks stores distinguish themselves "through their experience and the barista and their knowledge and their ability to interact with the customer." Still, the move to promote a more expensive beverage comes as some consumers are cutting back on spending because of the shaky economy, and less than two months after Starbucks said it would close 600 underperforming stores, including seven in Massachusetts. If the company has any doubts about Clover's timing, however, it isn't making them known.

"We are making bold moves toward transforming our business for the long term and at the same time making the tough decisions to ride out this extremely challenging economic environment," said Joe Dallacqua, Starbucks' vice president of regional operations. "The Clover delivers a one-of-a-kind brewed coffee experience that fits with Starbucks' long history of coffee expertise."
Clover customers will be able to choose from a new collection of small-batch coffees, some of which may be rare and available for a limited time. It takes about a minute to brew a cup, depending on the type of coffee and customer preferences.

The price can vary from store to store, but the Starbucks at 1 Charles St. - one of the Boston pilot stores - charges $1.65 for a regular "tall" coffee and $2.25 for a Clover brew of the same size. In general, Clover coffee ranges in price from $2 to $4, the company said. Many independent coffee shops were using the system before April, when Starbucks acquired the Clover system's maker, Coffee Equipment Co. One of them, Velouria Espresso in Jamaica Plain, said the machines may actually boost his business. "I have an opportunity to compare my product, the coffee itself, to the Starbucks product," said owner Justin McCarthy. "I'm waiting for the opportunity for people to compare them and decide for themselves."

With a Clover machine, brewers can set the time and temperature of the selected coffee to accommodate the characteristics of the bean selected. Vacuum-press technology pulls the coffee through a 70-micron filter in which "every hole is like a hair's breadth," said David Latourell, formerly of Coffee Equipment Co. and now a Starbucks employee. The Clover "really brings coffee back into focus" for Starbucks, Latourell said. The Clover's "unique sort of extraction" allows flavors to come out of the coffee, said Anthony Carroll, who selects coffees for Starbucks.
"The flavor is already there. Clover really helps just accentuate them," Carroll said. "You're going to discover a whole bunch of different flavors in their coffees that you didn't know would or should be there."

Jess Torres, 26, a Starbucks customer who has tasted several Clover brews, said he doesn't mind paying a little more for "much better coffee. It's better than the way they usually brew their coffee," Torres said, "but if they had better and some lighter roasted beans it would be even better."

Source: Boston.com

Ann Taylor Execs Banking on Loft Outlets

AnnTaylor Stores Corp.’s new Ann Taylor Loft Outlet units could be a major growth vehicle in the future, executives said at the company’s second quarter conference call. In July, the company opened 10 Loft Outlet units, with four more to open in the second half.

“While it’s still very early, initial indications are very favorable,” said President and CEO Kay Krill. "We expect this business to represent significant future growth for us."

For the year, the company expects to open 66 new stores, consisting of 25 Loft stores, 23 Factory stores, 14 Loft Outlet stores and four Ann Taylor stores. As part of its strategic restructuring program, it also expects to close 25 Ann Taylor stores and 39 LOFT stores. The company declined to comment on 2009 store openings. Overall, the company plans to close 117 stores over the next three years, including the 64 to close this year. Net sales in the second quarter of fiscal 2008 were $592.3 million, down from $614.5 million in the same period last year. Comparable-store sales for the quarter declined 10.8%, with Ann Taylor down 14.3% and LOFT down 8.6%. Net income was $31.2 million, or $0.54 per diluted share, in the second quarter of 2008, compared with net income of $32.2 million, or $0.51 per diluted share, in the second quarter of 2007.

Ann Taylor Corp. operates 959 stores in 46 states, the District of Columbia and Puerto Rico, consisting of 345 Ann Taylor stores, 519 LOFT stores, 85 Ann Taylor Factory stores and 10 LOFT Outlet stores.

Source: GlobeSt.com

Sammons' speech to Rite Aid associates very positive

BALTIMORE (Aug. 25) Rite Aid is looking up, Mary Sammons, Rite Aid chairman, president and chief executive officer, told Rite Aid associates last week at the 2008 Rite Aid Management Conference and Supplier Exhibition. “The momentum is with us to have positive comp sales in all of our stores in Q3,” she said, noting that the Brooks/Eckerd assimilation was nearly complete. All systems conversions were completed in May; each of the six distribution centers is online; and Rite Aid’s planograms have been ceded into all former Brooks/Eckerd store fronts.

And to help fuel that momentum going forward, Rite Aid has generated hundreds of thousands of new prescriptions out of its “Fill Up and Fuel Up” program—in shich customers transferring prescriptions receive a $30 Rite Aid gift card and a chance to win a year’s worth of gas.

And to entice even more seniors to shop Rite Aid, the chain is continuing to promote its Living More senior loyalty card program and will introduce a new health and wellness program in September.

Source: Drug Store News

Pharmacy drives higher percentage of grocery store numbers

FORT WAYNE, Ind. (Aug. 25) Drug stores are the traditional sources for all things pharmaceutical, but grocery stores are moving in to challenge their dominance, according to The Journal Gazette of Fort Wayne, Ind.

As prescription sales grow in proportion to overall sales, supermarkets have begun positioning themselves as health shops, as well. Cincinnati-based Kroger, for example, hopes to edge itself into the market with a cholesterol-reducing milk sold under its Active Lifestyle private label while also selling anti-cholesterol medication.

According to the Food Marketing Institute, drug sales at supermarkets increased by 3.4 percent, to 9.4 percent, between 1997 and 2007. Also, between 1996 and 2006, the number of supermarket pharmacies increased from 6,155 to 10,163, according to the National Association of Chain Drug Stores.

Source: Drug Store News

Online sales continue to set the growth pace in the first half

How much faster are online sales growing than offline sales? Recent numbers reported by the Census Bureau of the U.S. Department of Commerce don’t tell the entire story.

The Census Bureau reports that online sales reached $34.6 billion, on a seasonally adjusted basis, in the second quarter, up 9.5% from $31.6 billion in Q2 a year ago. Total retail sales were $1.034 trillion, up 2.5% from $1.009 trillion a year earlier. By that measure, online sales grew at about four times the rate of offline sales.

But the disparity in growth between online and offline is greater when gasoline and food sales are subtracted from the Commerce Department numbers, analysts note. Prices have been going up rapidly for gasoline and food, and gas is never bought online and food only rarely, so those price increases result in higher offline sales.

An analysis of retail spending minus food and gasoline shows first half growth in total retail sales of 0.35%. If fuel sales, which represent home heating purchases and also are unlikely to occur online, are further subtracted from the Commerce Department numbers, retail growth was an almost non-existent 0.06%.

Meanwhile, e-commerce sales were up 11.2% in the first half of the year, to $68.25 billion from $61.35 billion a year earlier. By that measure, online sales are growing far more rapidly than offline. In fact, growth in total retail sales minus food and gasoline was $6.25 billion in the first half, while growth in online sales was $6.90 billion.

“Inflation is occurring in categories not bought online, namely food and gas,” says Gian Fulgoni, chairman of web measurement firm comScore Inc. “You’ve got to eat and drive, and you’re going to make those purchases offline. So inflation is holding up that offline retail number.”

Consumer spending on gasoline was up 20% in the first half from a year ago; on fuel sales, 23%; and on groceries, 5.7%.

Source: Internet Retailer

S&B Holdings to acquire Steve & Barry's

PORT WASHINGTON (Aug. 25) Steve & Barry's LLC announced that BHY S&B Holdings LLC, a newly formed affiliate of investment firms Bay Harbour Management and York Capital Management, has received Court approval to acquire to acquire substantially all assets of Steve & Barry’s. The acquisition is scheduled to be completed on Aug. 25.

Under the terms of the $163 million purchase agreement, the majority of Steve & Barry's 276 stores will continue to serve customers nationwide. BHY S&B Holdings has made no decisions concerning which Steve & Barry's stores will close or when, although an announcement is anticipated in the next week, the company reported.

In addition to acquiring merchandise inventories and transfer rights to Steve & Barry's store leases, BHY S&B Holdings will acquire all Steve & Barry's intellectual property rights, including its celebrity and brand licenses, and the company's key facilities, including its Port Washington, New York headquarters, Columbus, Ohio distribution center, and certain overseas offices.

Source: Retailing Today

The war on drugs

Pharmacies on front lines as supermarkets fight to draw customers

You’re already at Kroger to pick up a prescription to lower your cholesterol, so you pick up some cholesterol-reducing milk.

At least that’s how the supermarket giant hopes it goes. The milk, released last year, is sold under an expanding in-house brand, Active Lifestyle, and is part of a growing industry effort to reach health-conscious consumers.

As prescription sales grow in proportion to overall sales, supermarkets and superstores are increasingly positioning themselves as one-stop health shops.

Almost half of food retailers provide health seminars, disease management programs, health-focused store shelf tags and tours featuring healthy products in at least some stores, according to an industry survey released last month.

The portion of supermarket business that comes from drug sales increased from 6 percent in 1997 to 9.4 percent last year, according to annual surveys by Food Marketing Institute. The trade association surveyed 55 food retailers operating 4,978 pharmacies for its most recent report. Its surveys found sales per pharmacy have increased, boosting overall store sales.

But not everyone is getting medication at the same place they’re buying groceries. Standalone pharmacies, which outnumber supermarket pharmacies by a 4-1 ratio, tout their focus on medications as an asset to customers. Independent pharmacies, in particular, market their superior customer service.

As a group, stand-alone drugstores – chains and independents – have seen drug sales rise at a faster rate than supermarket pharmacies.

But supermarkets are working hard to sell themselves as an advocate for the health-conscious consumer, and their in-store pharmacies are central to that strategy.

“Pharmacies are strategically essential to food retailers,” Catherine Polley, the institute’s vice president of pharmacy services, said in a statement. “The health and fitness initiatives that many supermarkets emphasized are anchored in the pharmacy. Pharmacists bring expertise and credibility that help these initiatives succeed.”

The traffic pharmacies attract spills over into other departments.

Scott Lahren, pharmacy district manager at Wal-Mart, said he’s seen total prescriptions and store traffic increase since the superstore launched its $4 generic drug program, which expanded into Indiana in 2006. Lahren declined to provide specific figures on prescriptions filled or total pharmacy customers.

In May, the discount generics program expanded to offer 90-day supplies of prescriptions for $10 and several women’s health medications, including drugs to treat breast cancer and hormone deficiency. The store also lowered the price of more than 1,000 over-the-counter drugs.

The Bentonville, Ark.-based retail giant reported record earnings last quarter, a net income of $3.45 billion for the period ended July 31. That was up 17 percent from $2.95 billion a year ago.

Superstore and supermarket officials say being a one-stop destination for everything from medications to banking (offered through in-store tenants) is appealing to consumers who want to spend less on gas. By the way, gas is also sold by many of these stores.

Food, fuel, pharmacy and financial services are the four retail anchors, Kroger spokesman John Elliott said.

“Pharmacy is a critical piece of that,” he said.

Pharmacists dispense medications and advice on healthy food choices for customers, Elliott said. Customers visit grocery stores often, making it easier for them to develop relationships with staff, he said.

Elliott said the supermarket chain has a dietician on staff in Indianapolis. The dietician reports through the advertising department and contributes pieces for publication, healthy recipes and nutritional advice.

In May, Kroger announced it was expanding its generics program, following Wal-Mart’s move to do the same.

Cincinnati-based Kroger added 11 prescriptions – six medications, some offered in varying dosages – including the cholesterol-lowering drug Pravastatin. Those drugs cost $4 for a 30-day supply or $10 for a 90-day supply. It also increased the number of women’s health medications offered at a discounted price.

Just like Wal-Mart, it saw increased traffic and prescriptions as a result. Elliott declined to disclose figures but called it “a very strong trend.”

In Kroger’s most recent earnings report, David Dillon, the company’s chairman and chief executive, touted its expanded generic drug and discount gas programs.

The supermarket chain reported net earnings of $386 million for the first quarter ended May 24, up 15 percent from $336.6 million during the same period a year ago.

Overall, U.S. prescription sales by food stores were $22 billion in 2007, according to IMS Health, a health care information company based in Norwalk, Conn. That’s down slightly, about 1 percent, from $22.3 billion in 2006, but up from $21.4 billion in 2005.

The number of total supermarket pharmacies has actually dropped somewhat in recent years, according to the Food Marketing Institute’s latest report. There were 9,859 last year, down from a high of 10,867 stores in 2004, according to information IMS Health provided for the report.

But a longer view shows strong growth.

The number of supermarket pharmacies increased 65 percent in 10 years, from 6,155 in 1996 to 10,163 in 2006, according to estimates by the National Association of Chain Drug Stores.
The estimates were based on data from IMS Health and the National Council for Prescription Drug Programs.

Polley, of the Food Marketing Institute, speculates that might be why the median number of prescriptions dispensed daily by supermarket pharmacies decreased from 139 in 1997 to 126 in 2007. It takes time for new pharmacies to build their customer base, she said.

Still, many consumers choose to get their medications at standalone pharmacies or through the mail.

In 2007, chain drugstores recorded $98 billion in U.S. prescription sales, up from $79.1 billion in 2003.

Mail-order services, which are known for deeply discounted prices, saw an even larger proportionate increase in drug sales from $28.9 billion to $44.6 billion during that period. Even independents pharmacies, which have been plagued by closures in recent years, saw sales rise as a group from $31.8 billion in 2003 to $38.7 billion in 2007.

Independents face stiff competition from supermarket pharmacies and larger chains, but they compete with service, said W. Howard Bell, owner of the Pharmacy of Canterbury.

The pharmacy on St. Joe Road is the only one in Fort Wayne that delivers medicines to sick and shut-in patients, he said. Those who come to the store are assured one-on-one attention, time to bond with their pharmacist, he said.

Bell gets complex cases from doctors who trust his work.

“We do a lot of specialty medicines,” he said.

Consumer Reports drugstore surveys conducted since 1998 show consumers consistently rank independents above other types of stores. Pharmacists at those stores get high marks for being accessible, approachable and easy to talk to and knowledgeable.

Though they don’t generally rate as high as independents, supermarket pharmacists should – in theory – have time to build close relationships with patients, Consumer Reports says. That’s because “druggists in supermarkets fill fewer prescriptions per day on average than in other types of stores,” the consumer publication reported.

Whether supermarket pharmacies will get a bigger piece of the pie remains to be seen. But industry insiders say they have the capacity to bring in more business for other store departments. And having other departments can offset hits from drug reimbursement changes and other variables that affect pharmacy profits.

Supermarket pharmacies have continued to post strong results despite pressures related to increased competition, including mail-order drug sales, and Medicaid and Medicare reimbursement rates, Polley said.

Source: Fort Wayne Journal Gazette

My Healthy Access Announces Grand Opening of Wal-Mart Based Telemedicine Clinic

Telemedicine Clinic Jointly Operated by My Healthy Access and NuPhysicia LLC

HOUSTON--(BUSINESS WIRE)--My Healthy Access, Inc. (OTC:MYHA - News) and NuPhysicia, LLC are pleased to announce the grand opening of their jointly operated “Walk-In Telemedicine Health Care” clinic located within the Wal-Mart (NYSE:WMT - News) Supercenter located at 10500 Broadway, Pearland, Texas 77584. A grand opening celebration has been scheduled for today, August 20, 2008, at 10 am. Among those expected to attend the grand opening are Tom Reid, Mayor of Pearland, Texas and Alicia Ledlie, an executive with Wal-Mart Stores, Inc.

Pearland location of “Walk-In Telemedicine Health Care” is the first retail health clinic to utilize a Telemedicine based healthcare delivery system. Under the Telemedicine model, physicians serve patients using proven remote Telemedicine systems and protocols through paramedics who welcome and examine patients under direct supervision of a physician.

Source: Yahoo Finance

“Changing to a Telemedicine based health care delivery system allows us to substantially decrease out per patient overhead, while simultaneously increasing the level of care each patient receives,” said Kathleen Delaney, President of My Healthy Access, Inc. “We are thrilled at the positive response that we have received from our physician directed Telemedicine services, and I have no doubt that this delivery system is the future of retail health care.”

Cost Plus scales back expansion plans

Cost Plus Inc. said Thursday it was reducing the number of stores it plans to open in the fiscal year as the nation's economy slows.

The specialty home retailer said it expects third quarter sales of $217 million to $228 million. It did not provide an earnings per share estimate.

Analysts surveyed by Thomson Reuters expect the owner of Cost Plus World Market stores to lose 84 cents per share on revenue of $222.2 million.

Same-store sales -- which measures sales at established stores -- could fall as much as 2 percent or rise 2 percent, the company said.

"The Company has reduced the number of stores planned to open in fiscal 2008 from 17 to 15 and will not open any more new stores this year," Cost Plus executives said in a statement Thursday.

Separately, Cost Plus said its second quarter loss widened as weak dollar, higher energy costs cut into profits.

For the three months ending Aug. 2, the home decor retailer said it lost $26.6 million, or $1.21 per share. That compares to a year-ago loss of $18 million, or 81 cents per share.

The company said its second-quarter results were weighed down by a $2.8 million expense incurred by the unsolicited buyout offer from Pier 1 Imports Inc. and increased energy costs, higher health benefit expenses and the weak dollar.

Excluding the impact of those expenses, the company said its operating loss was $25.2 million, or $1.14 per share.

Revenue rose 5.6 percent, as sales climbed to $221 million, up from $209.3 million during the same period last year.

Shares of Cost Plus, which operates 296 Cost Plus World Market stores in 33 states, fell 6 cents Thursday, or 3.4 percent, to $1.73.

Source: BusinessWeek

Ahold unveils new-look logo for Stop & Shop, Giant stores

QUINCY, Mass. (Aug. 21) Stop & Shop’s long-standing logo will soon become a thing of the past.

The supermarket chain announced Thursday that it would redesign its logo and introduce new in-store features and technologies, saying it would “offer a peek into the grocery store of the future.” The changes will appear throughout the chain over the next year.

New technologies will include a hand-held scanning device that allows customers to scan and bag groceries while they shop, stations in the produce department for pricing and bagging fruits and vegetables and ordering kiosks in the deli section.

Another banner, Landover, Md.-based Giant Food, is also making changes, altering its logo and rolling out new store offerings. The changes will take place over the next two or three years; the first store affected will be in Bethesda, Md.

The Dutch company Ahold operates both chains. Giant Food operates 181 stores in Maryland, Virginia, Delaware and the District of Columbia. Stop & Shop, based in Quincy, Mass., operates stores throughout New York, New Jersey and the New England states.

Source: Drug Store News

CVS to open high-end beauty stores

CHICAGO, Aug 22 (Reuters) - CVS Caremark Corp (CVS.N: Quote, Profile, Research, Stock Buzz) will begin testing a high-end beauty store concept this year, looking to tap into growing demand for skin care and cosmetics seen at outlets like LVMH's (LVMH.PA: Quote, Profile, Research, Stock Buzz) Sephora chain.

The drug store chain operator plans to open a store called "Beauty 360" by the end of the year next to existing CVS stores on the U.S. East Coast and another on the West Coast shortly thereafter, CVS spokeswoman Eileen Howard Dunn said on Friday.

She declined to say where the stores would be located. But Women's Wear Daily, which first reported the news, said the first would be opened in Washington, D.C., and the second in Sacramento, California.

The "prestige beauty" stores would carry 32 lines of skin care and cosmetics plus a number of fragrances, Dunn said. She declined to name the brands.

CVS's expansion efforts in recent years have been in the health-care realm, notably with the acquisition last year of Caremark, a pharmacy benefits manager.

Dunn said the company has also focused on building up beauty product offerings in its stores with research showing demand on the higher end.

"Beauty has always been a core part of our front-of-store offering, so this is the next evolution," she said.

CVS will have more than 6,800 stores if it completes its planned purchase of Longs Drug Stores Corp (LDG.N: Quote, Profile, Research, Stock Buzz). That geographic reach is one weapon it can bring into prestige beauty battle with Sephora, Dunn said.

She also stressed that the company does not plan to build a Beauty 360 shop next to every CVS store.

Aside from the first two stores, the company plans to test a few more, Dunn said.

Source: Reuters

Gap Cutting Square Footage By Up to 15%

SAN FRANCISCO-With declining comps but soaring earnings due to cost-cutting, and its real estate analysis now complete, Gap has dropped the number of store openings this year and will cut its overall square footage 10% to 15% over the next three to five years, executives said at the company’s second quarter conference call.

In July, the company completed an analysis of its 3,170 stores, seeking to assess the role of each store in its market and the appropriate size for each unit. The results showed that Gap’s chains had too much space, says Glenn Murphy, chairman and CEO of Gap Inc.

“We’ve never had a clear real estate strategy,” Murphy explains. “We now have that information, and it will allow us to make quick decisions. The real estate comes down to the quality of the mall and the quality of the real estate.”

The company will first approach its landlords regarding dispositions, as they may have knowledge of tenants who will want or need the space, he says. Gap now plans about 100 new stores for the year, primarily in the Banana Republic division, a reduction of 15 stores. Store closings remain steady at about 115. Those numbers include store repositionings, which count both as an opening and a closing. Net square footage is expected to remain roughly flat for the fiscal year.

In other news, the company named Tom Wyatt president of its Old Navy division; Wyatt had been serving as interim president since February. Old Navy will begin a remodel program in 2009.

Second quarter net sales were $3.5 billion, compared with $3.69 billion for the second quarter of last year. Overall comparable store sales decreased 10%, with Gap North America, Banana Republic North America and International reporting 6% comp declines, while Old Navy North America posted a 16% comp drop. Online sales however, rose 11%. Net earnings increased 51% from the previous year to $229 million. The company does not expect a major change going forward, while vowing to be aggressive in efforts to drive more shopper traffic.

“There’s nothing new from our perspective for the second half,” Murphy said. “The environment is still challenging. We see no reason for optimism and are managing our business accordingly.”

Source: GlobeSt.

NJ: 435,000-SF Mall Sets Opening

TINTON FALLS, NJ-The nearly $160-million project had languished for several years because of legal challenges that were tied to traffic patterns, overpass construction and storm water management. But Jersey Shore Premium Outlets finally had its official groundbreaking in late 2007, and above ground construction started earlier this year. Now, developer Chelsea Property Group has set a formal opening date of Nov. 13, 2008 for the center, and has simultaneously released the tenant roster for the first time.

“We will announce the stores’ names to coincide with a large job fair several months before the opening,” Michele Rothstein, SVP of the Roseland, NJ-based Chelsea told GlobeSt.com earlier this year. Altogether, the 435,000-sf outlet center is slated to have 120 stores, and Rothstein this week released a list of 100 retailers that have signed on at the project.

Burberry Ugg, Kate Spade and Juicy Couture head the list of stores that have signed leases. Others on the expansive list include Calvin Klein, Ecko Unlimited, Cole Haan, DKNY, Perry Ellis, Sony, Theory, Kenneth Cole, Le Creuset, Nike, Michael Kors, Adidas and Brooks Brothers, to name a few. The center will also have a food court with about a dozen eateries.

“Today’s savvy shoppers want high-quality designer and brand-name merchandise,” Rothstein says in a statement. “But they don’t want to pay a fortune. This is a market of sophisticated customers, making it perfect for the kind of upscale outlet centers that we develop.”

The surrounding market consists of central Monmouth County, with the 60-acre site specifically at the intersection of Route 66 and Essex Road, just off the Garden State Parkway. The single-level, village-style center is the third in New Jersey bearing the Premium Outlet brand for Chelsea, which is a division of the Indianapolis-based Simon Property Group. The company’s two other Premium Outlet properties are in Flemington and Jackson.

Source: GlobeSt.

Sales Decline, but Cost-Cutting Helps the Gap

SAN FRANCISCO (AP) — The apparel retailer Gap Inc. said on Thursday that despite a decline in sales, its second-quarter profit rose 51 percent, helped by cost-cutting and tight control on inventory.

Profit for the three months ended Aug. 2 rose to $229 million, or 32 cents a share, from $152 million, or 19 cents a share, a year earlier.

Analysts polled by Thomson Reuters had predicted a profit of 30 cents a share, and the company had forecast earnings of 30 or 31 cents a share.

Revenue fell 5 percent, to $3.5 billion, from $3.69 billion last year. Analysts had expected revenue of $3.52 billion.

Sales in stores open at least one year, a main measure of industry performance known as same-store sales, fell 10 percent. In North America, same-store sales fell 6 percent at both Gap and Banana Republic and fell 16 percent at Old Navy. International same-store sales also fell 6 percent.

Gap also reaffirmed earnings guidance of $1.30 to $1.35 a share; analysts expect a profit of $1.34 a share.

The company said it would open 15 fewer stores, mainly Banana Republic, than previously expected during the year. It said it now expected to open 100 stores.

Earlier on Thursday, Gap named John T. Wyatt, a 30-year retail veteran, as president of its Old Navy chain.

Mr. Wyatt, 53, had served as acting president of Old Navy since February, when Dawn Robertson stepped down after struggling for 16 months to turn the division around.

Source: NY Times

Now, two is a crowd

This is no time to be number two in the retail world.

Fewer shoppers, each spending less money, are bracing facts of life in stores everywhere. A few companies catering to cost-conscious consumers, like BJ's Wholesale Club Inc. of Natick, are exceptions, but most retailers are under the gun. Retail companies that published business results this week reported mostly lower same-store sales that ranged from disappointing (Target Corp.) to disastrous (Saks Inc.).

Retailers that hold the second-largest market share in many big categories are facing an uphill struggle in this kind of market. Three that immediately come to mind: Borders Group Inc., Linens 'n Things Inc., and Circuit City Stores Inc.

All three ran into trouble before the current retail funk, and their sad stories are different in the details. But they are all struggling desperately to stay alive in this market, never mind catching up to the leaders in their fields - Barnes & Noble Inc., Bed Bath & Beyond Inc., and Best Buy Inc.

Borders is selling off pieces of its business around the world to keep paying the bills. Linens 'n Things is cutting stores, but probably not enough of them, to climb out of bankruptcy, and Circuit City stock is trading like the lights will go out before long. "To me, Circuit City is a dead man walking," says Britt Beemer, chairman of America's Research Group.

All three of those companies are extreme examples, but they illustrate the serious problem of number two retailers in many fields today. "If you're number two or number three, watch out," says Howard Davidowitz of Davidowitz & Associates Inc., a national retail consultant and investment banking firm in New York.

"You need a lot of critical mass to survive," he says. "It's going to be very tough, and those people who can deliver value will win."

The core problems: buying power and the ability to support big overhead when customer traffic slows down. It becomes harder to pay the rent and carry inventory. A big retail company can no longer support as many underperforming stores as it once did. The leader in any retail segment holds the advantage in conditions like these.

So what about Staples Inc. of Framingham and its two office superstore competitors, Office Depot Inc. and OfficeMax Inc.? Will one of those companies finally have to face the music?

That's hardly a new question. People have been suggesting for years there wasn't enough room for three companies in the office superstore category. It was an obvious conclusion that never happened. There's a good chance it will now.

Business at all three stores stinks. The office superstores measure the pulse of small business economics and it's weak.

Staples, the market leader, said this week that same-store sales in its latest quarter were down about 7 percent. The company, which endured seven quarters of negative comparable-store sales in the 2001 slump, is in the midst of its fifth quarter of declining comp sales now.

Office Depot, second in market share, reported a decline of 10 percent in same-store sales during its most recent quarter and appeared to be losing market share to Staples. OfficeMax is laying off thousands and last month wrote down good will and other intangibles on its balance sheet by $1 billion, a big number for a company with a stock market value of $888 million.

Those kinds of numbers suggest three may finally turn out to be a crowd in the office superstore business. "To me, there never should have been more than two," says Beemer. "One of them is going to be a casualty. With the exception of the office superstores, there is no category with three major players. The category is not growing to support three."

Stock market investors are trading the stocks like they agree. Staples shares are up 3.6 percent so far this year and closed yesterday at $23.91, which is about $3.50 per share from its all-time high reached in December 2006.

Office Depot shares have been cut in half this year, losing 71 percent of their value over the past 12 months. OfficeMax stock is down 43 percent so far in 2007 and has lost two thirds of its value over the past year.

Staples has long enjoyed a substantial advantage in stock market value, an important edge, and now that gap has become a chasm. Staples shares are worth $16.8 billion, more than eight times the value of Office Depot stock. OfficeMax shares are worth a total of $888 million.

What does that tell you? "I don't think we need three," says Davidowitz.

I doubt three will make it this time.

Source: Boston Globe

Circuit City Still Looking to Sell

Circuit City Stores Inc. (Richmond, Va.) said it is still considering a sale of the company, four months after it first announced it was reviewing its options to improve shareholder value.

"The board continues to pursue strategic alternatives for the company that offers the best possible results for our shareholders in the long term," said ceo Philip Schoonover, announcing the appointment of James Marcum as the company's vice chairman. Marcum was one of three directors elected to the retailer's board in June to defuse a proxy battle with investor Mark Wattles, who controls a 6.5 percent stake in the company.

In May, Circuit City hired Goldman Sachs & Co. to explore its options and opened its books to Blockbuster Inc. (Dallas), which had made a takeover bid of more than $1 billion, proposing a plan for a 9300-store chain to sell electronic gadgets and rent movies and games. Two months later, Blockbuster withdrew the bid.

Circuit City has seen only one profitable quarter since the second quarter of 2007 but has continued to defend its multi-year turnaround plan despite some acknowledged missteps and has asked shareholders for the time necessary to leverage the company's future.

"We are confident that we possess the keys to a successful turnaround,” said Marcum, “the support of our vendors and other business partners, access to sufficient liquidity under our asset-based credit facility and the dedication of our experienced management team."

Source: VMSD.com

Western MA: Big Y announces plans to move

PITTSFIELD — Big Y Foods Inc. of Springfield, one of New England's largest independent supermarket chains, has signed a lease with the owners of the Pittsfield Plaza to build a new supermarket on West Housatonic Street, according to documents on file at the Middle Berkshire Registry of Deeds.

Claire D'Amour-Daley, Big Y's vice president for corporate communications, said the company intends to move its Pittsfield supermarket from 200 West St. to the former plaza at 434-460 W. Housatonic St. But the move won't take place immediately, and probably won't occur for at least two years.

"It will take a good couple of years," D'Amour-Daley said yesterday. "There's a lot of work to do in the interim."

As part of the lease agreement, Big Y has borrowed $1.8 million as part of a mortgage plan. D'Amour-Daley declined to comment on terms of the lease.

Weissman Real Estate purchased the 46-year-old Pittsfield Plaza for $2.8 million in February 2007, but the 105,625-square-foot shopping center is in an extreme state of disrepair. Known locally as Pittsfield Plaza Members LLC, Weissman Real Estate did not receive final approval from the city of Pittsfield to renovate the shopping center until March.

According to D'Amour-Daley, Pittsfield Plaza Members LLC is also interested in renovating the West Street supermarket to establish more than one retail space.

Source: Berkshire Eagle

Nike Sportswear Opens First Store in SoHo in New York City

Nike Sportswear Opens First Store in SoHo in New York City Nike yesterday announced the opening of its first Nike Sportswear retail store at 21 Mercer Street in SoHo, New York City, offering exclusive access to premium products, an elevated retail experience, and a new customization experience called Nike Sportswear Bespoke, where consumers can work with Nike designers to customize premium Nike Sportswear footwear.

“The NSW collection is steeped in Nike’s sports heritage and remixed with cutting edge engineering, craftsmanship, and modern design,” said Dermott Cleary, Vice President, Nike Sportswear. “We’re putting the best of our entire collection under one roof, in New York City, so consumers from all over the world can access it.”

Opening August 22^nd, this stand-alone store will be the only location globally to carry the complete Nike Sportswear NSW collection, which includes seasonal exclusive 21 Mercer products.

Global Product Exclusives

The store will feature product exclusives including: The Flywire Windrunner, Air Max 90 Flywire and the 21 Mercer Nike LunaRacer. It will also offer limited quantities of other iconic Nike Sportswear product exclusives in footwear and apparel, including the made-to-order Air Force 1 Low Lux, a NSW collection Patchwork M65 jacket, as well as a Nike Sportswear 21 Mercer Tee collection.

Nike Sportswear Bespoke

A new and innovative by appointment design experience, Nike Sportswear Bespoke, offers consumers the opportunity to work one-on-one with Nike Designers to customize select Nike footwear styles. Taking individual design to new heights, Nike Sportswear Bespoke is globally exclusive to 21 Mercer and launches in Fall 2008 with the iconic Air Force 1 sneaker.

Recapturing and Controlling Space: A Primer for Retail Landlords on Tenant Bankruptcy

Q&A with Attorney Cheryl Van Steenwyk of Newmeyer & Dillion Addressing Retail Tenant Issues in Bankruptcy

During these first eight months of 2008, the retail real estate industry has seen bankruptcy filings continue to pile up. Filings over the last few months include retailers that together have the potential to pack quite a punch to the vacancy of many landlords' malls and shopping centers; such as Linens 'n Things, Steve & Barry's, Mervyns, and Boscovs.

The bankruptcy filing of discount fashion apparel retailer Steve & Barry's in particular appears to have triggered concerns over retail bankruptcies. The company filed Chapter 11 on Jul. 9 and at the time, operated 276 stores in 39 states. The retailer grew fast over the past few years, known for backfilling large, hard-to-lease spaces at B malls across the country. On August 4, Steve & Barry's accepted a "stalking horse" asset purchase agreement with BH S&B Holding LLC, a newly formed subsidiary of investment firm Bay Harbour Management. Under terms of the agreement, Bay Harbour would acquire Steve & Barry's store leases, merchandise, and intellectual property rights for $163 million.

Bay Harbour said it intends to keep Steve & Barry's store network and distribution facilities operating as normal, but put direct pressure on landlords, saying it would only continue to operate stores where "an appropriate package of renegotiated leases and other conditions" are accomplished.

Bay Harbour is an investment advisor known for purchasing distressed companies with the intention of a turnaround, but its well-known retail industry involvement is limited to Barney's New York.

Since Steve & Barry's filing and the identity of its potential buyer were announced, Landlords have banded together to raise certain objections with the bankruptcy court including whether or not the new buyer will be able to pay off rent debts, its ability to continue to operate the stores, keep stores open through the holidays, limiting liquidation signage at the stores, and other issues.

To help clarify the issue and discuss the typical outcomes landlords face in a retailer bankruptcy, CoStar conducted a Q&A with Cheryl Van Steenwyk, a partner specializing in business and real estate law at Newport Beach, CA-based Newmeyer & Dillion, LLP. For 20+ years, Van Steenwyk has been part of groups handling landlord / tenant issues, including past tenant bankruptcy issues for landlords including Westfield, Macerich, Developers Diversified Realty, and more.

CoStar Advisor: How does the start of a retailer bankruptcy usually look to landlords?

Generally, a retailer will become delinquent in rent. If they're getting notices to pay rent or quit, they'll usually try to make that landlord happy and stall other landlords. However, tenants often won't pay rent on stores they're likely not planning to keep, even if they are getting notices.

Depending on where they file - a lot of times a tenant will file on the second day rather than the first of the month, because some courts hold that the rent was due on the first and if a tenant files on the second it doesn’t have to pay the rent that month. Under bankruptcy code, the landlord is only entitled to get paid current rent during a retailer's bankruptcy proceedings, until the tenant makes a decision on whether it will assume or reject the lease.

Prior to the most recent bankruptcy law changes, a tenant only had 60 days to assume or reject leases, but could file endless 60-day motions to extend. Now they get 120 days to assume or reject and that can only get extended, with good cause, for an additional 90 days; the decision can only be extended beyond that if the landlord agrees in writing.

CoStar Advisor: What happens if the tenant assumes a lease?

If the Tenant decides a particular lease is valuable and assumes it, the tenant is obligated to cure all defects. That could mean they have to pay that pre-bankruptcy rent in a lump sum or they have to come to an agreement with the landlord to a timeline of paying that rent.

CoStar Advisor: What happens if the tenant rejects a lease?

If a tenant rejects a lease, that rent owed pre-bankruptcy becomes part of the landlord's unsecured claim. Generally a retailer, and especially the larger ones, has secured creditors that are going to receive payment prior to unsecured creditors. Landlords are unsecured creditors -- even the Simon's and General Growths, etc.

CoStar Advisor: If a lease is rejected, does the landlord’s back rent claim get paid?

Yes. Part of it depends on what the retailer is ultimately doing. If the retailer is going to reorganize and try to continue on, a landlord holding a rejected lease can file a claim for rejection damages, which is usually the greater of one year's rent in charges or 15% of the owed rent plus charges over the balance of the term, not to exceed three years.

With regards to payouts, a system is set up where everybody who is owed money -- landlords, unsecured vendors, etc - goes into a group of unsecured creditors and the debtor and/or its consultants will figure out the lump sum of the unsecured claims it has and will decide the total money that is potentially available to give to the unsecured creditors after they pay off all their secured creditors.

They'll do a mathematical formula that says each unsecured creditor gets 5% or 10% or of their claim, for example. And yes, getting 5% to 10% is not uncommon. Sometimes landlords will get pennies on the dollar or a little more than that. It’s a rare circumstance when they get their full damage claim.

CoStar Advisor: How long does it usually take before a landlord find out how much they'll get paid on their claim?

For most bankruptcies it’s probably 12 to 18 months before you receive payment. However, it can be longer or shorter.

There are some unusual circumstances where a retailer started as Chapter 11 and then reverts into Chapter 7 liquidation and sometimes trustees will go after people who lent money and maybe made false representation - then, money can come trickling in several years later.

In addition, there is a presumption that the bankruptcy debtor was insolvent for 90 days prior to its filing. Some lawyers representing retailers or trustees will go back against those who received significant sums of money in the 90 days preceding the bankruptcy filing and file preference actions to recover some money back into the estate. This can add to the time it takes for creditors to get paid off.

CoStar Advisor: How does the lease assumption / rejection process typically go?

The decision on whether or not to assume or reject a lease is more based on the particular retailer's criteria. They know what their stores have done year-to-date, what those stores did previously and whether it’s a good or bad location. Factors going into that are, with the larger anchor retailers...Do we own the land or lease it? Is this a market where there's been a lot of new development and we're in an older location or center? Is our building fresh or not fresh? What's our parking? Who are our competitors? Is this an area that's growing or declining? It's really a decision made on a location-by-location basis, based upon how that retailer sees their potential future.

Most retailers will go to their landlord and say they're going to have to reject their lease unless the landlord reduces their rent. There will be intensive negotiations going on. Whether or not a landlord will agree to rent concessions or any other type of concessions will generally depend on the landlord's view of what they want to do with their property. Using Mervyn's as a potential example, If the landlord wants to control 65,000 square feet in their shopping center, Mervyn's isn't likely to get concessions.

CoStar Advisor: Let's say the landlord turns the tenant down on their request for concessions and then the tenant rejects the lease. Does the landlord still have the same rights to their claim?

Yes. The only issue is that they now have a rejected lease and a fixed claim amount versus a potentially operating tenant and getting less income.

CoStar Advisor: In what situations does a landlord typically seek to take back control of a bankrupt tenant's space?

Larger anchor tenants generally either own their own stores and the land surrounding them, or they pay very low rent to occupy such space because they're perceived as being a draw to the shopping center. To the extent that a landlord can recapture space and control space, especially within a regional enclosed mall; they're going to attempt to do that because it gives them a lot more options.

If they don't control that property, the bankrupt tenant could potentially put it out to the highest bidder. However, anybody who buys the property has to comply with the covenants, conditions and restrictions that are part of the overall shopping center agreement. But the owner of an enclosed regional mall typically doesn't want an unknown entity coming in.

Note: In February 2008, before Mervyns filed bankruptcy, Macerich acquired a portfolio of 43 Mervyns stores for $430 million in a 20-year sale-leaseback transaction. The company said they specifically made the acquisition because they didn't want a traditional buyer to become the owner of Mervyns stores in its centers. For more on that, follow this link.

If a landlord has a retailer that is looking for somebody to buy them, an investment company for example, the landlord doesn't always know if they're going to buy their leases and operate as that same retailer...landlords may rather take control of the space, perhaps have it go dark for a period of time, rather than have an operator they don't want in there.

With some of these locations, landlords have tenants who prior to their filing were deemed to be desirable, top-notch tenants that have spaces in key locations of a shopping center. In the case of a mall where the space might be right near the center court, for example, the landlord may rather want to set that up as a potential concierge or gift wrap -- especially over the holiday season, than have a discounter retailer in there, for example.

The landlord's decision of whether to gain control of a store is a fine line to walk. It depends on the center and the landlord's plans for the center. There are probably a lot of developers who prior to this downturn had remodeling plans laid out for the next 3-5 years and those have been pushed out now, but ultimately, they still want to control that space.

CoStar Advisor: Let's use Sharper Image as an example -- they filed bankruptcy at the beginning of this year, said they would close 90 of their 184 stores and then on May 29 a joint venture between well-known liquidators, Hilco and Gordon Brothers, as well as Bluestar Alliance, Windsong Brands and Crystal Capital, purchased Sharper Image for $49 million. The group proceeded to close and liquidate the remaining stores. So now Hilco and DJM (Gordon's real estate subsidiary) are disposing of Sharper Image's leases. When another entity buys a bankrupt retailer, like in this case, what happens regarding the rights the landlords hold?

This is where it gets a little tricky. It goes back to the question of why a landlord might not grant the tenant's concession request. A landlord might not give concessions if they think potential purchaser is a liquidation firm, because really what those firms want to do is come in and find a tenant for that space.

Sharper Image, for example, had 'better' locations -- that increases the value to the liquidator.

When a liquidator takes control and looks to assign a lease - the use provisions of the leases, which are there to protect the landlord, can create an issue. Technically, to assign the lease it has to be shown that the use is going to remain the same. The problem arises on whether or not its realistic to obtain another tenant that can conform to the use provision the bankrupt tenant had.

If the liquidator comes in with a tenant that doesn't fit that use provision, then the landlord has to decide if they want the proposed tenant or if they want to fight it based on non-conformity to the use provision. Then the judge will make a determination as to whether or not anyone could realistically comply with the use provision and if not, then the landlord could get stuck with a potentially undesirable retailer for that location in their center.

CoStar Advisor: So if the landlord rejects the liquidator's proposal to bring a fitness center into a former Sharper Image space (theoretical example), the judge could decide that Sharper Image's use isn't realistic because the liquidator likely won't be able to find anyone who would fit the use, and the judge could rule that the landlord has to accept the fitness center?

That's right. The judge could say that there's nobody who could meet the use clause -- it depends how finely nailed the use clause is. If the use clause is women's apparel, you could find lots of tenants to fit that use; but if the clause is very specific, such as the 'sale of electronics and gadgets', for example, you might not be able to.

CoStar Advisor: When an entity buys out a bankrupt retailer, and let's say they want to continue operating the chain, like Steve & Barry's suitor, Bay Harbour Management, says it intends to, what happens regarding the rights landlords hold?

Landlords tend to become more concerned in the buyout scenario, depending on who the purchaser is, because the question becomes whether or not it is an entity who will continue to operate as the tenant or if it's an entity that is going to look to shop the leases and flip them to a tenant the landlord might not want.

In the situation where an entity is purchasing all of the assets and is indicating a desire to continue to operate, that new purchaser has to give adequate proof of future performance. Which is where landlords often raise objections. Here is a company saying they're going to buy, but the landlord doesn't know anything about them, so they request to be shown that this potential buyer has sufficient assets to cure, buy and perform under the terms of the leases. Landlords will often request financial statements and confirmation that the buying firm will continue to operate, etc.

CoStar Advisor: What about the fact that its getting close to the holiday shopping season? Is this an issue for landlords dealing with tenants in bankruptcy now?

In these months leading up to the holiday season, landlords will often request that the potential buyer provide for "holiday protection," meaning they're requesting that the tenant stay open and operating through January 31. Realistically, if a tenant isn't open by Sept. 1 - with the exception of seasonal tenants - they're not really going to be able to get into the space, do all of their tenant improvements and open in time to be a viable tenant over the holiday season. Especially with fairly large spaces, landlords can't have the tenant decide Nov. 1 they're closing, because they would have a large space that is dark over holidays.

CoStar Advisor: Another issue that's risen in the Steve & Barry's case is signage - some landlords are asking that the retailer not be allowed to post liquidation signage in the stores. How often does this issue arise and what usually happens?

The major Landlords will always seek to require that the debtor comply with the signage requirements in the respective leases, which generally prohibit oversized signs within a certain distance of the storefront, which are not professionally done and which mention bankruptcy, liquidation, store closing etc.

For the most part in the retail bankruptcies, lawyers have worked out general parameters, which each side can live with on signage. Each side gives a little with regard to size, wording, location, however, at the onset, until someone raises the objections, a debtor or the liquidator who is called in to handle the sales will usually push the envelope and try to get away with as much signage as it can.

CoStar Advisor: If the bankruptcy court approves a sale of the retailer to an entity, is the new owner still responsible to pay off the claims the bankrupt tenant owes?

The new buyer still has to make a decision on whether to assume or reject each lease. So the landlord has a new operator in there, but that new operator still has to make the decision to assume or reject.

A lot of times, as part of a purchase and sale, there will be almost simultaneous decisions where the tenant and buyer know they're going to reject leases. So maybe only certain leases will get transferred to the new buyer and the other leases will be rejected; meaning the new owner could buy only part of the chain.

Sometimes the bankrupt retailer will potentially pull leases from the sale package, because they would have cut a deal with a particular landlord. Then a third party doesn't get control of that landlord's real estate.

Then, the money from the new buyer would go into the bankrupt retailer's estate to pay off its secured and unsecured creditors. A lot of times it’s really the secured creditors who are probably going to get paid off and the unsecured creditors see very small amounts.

Source: CoStar

Groceries & gadgets: Stop & Shop's geeked-out stores help boost bottom line

I stopped by one of my favorite high-technology retailers the other day, to pick up some skim milk.

No, Best Buy and Circuit City haven't added dairy departments. I buy my groceries at Stop & Shop Supermarket Co., the big grocery chain that might offer the most geeked-out shopping experience in America.

Many of Stop & Shop's 376 stores feature a variety of digital devices that let customers weigh their own veggies, order deli meats by using a video touch screen, and pay their bills without human assistance. Many other retailers, like Stop & Shop's main Boston-area rival, Shaw's Supermarkets Inc., offer self-checkout. But Stop & Shop has gone further than any of its rivals to automate our trips to the grocery.

The company has quietly deployed the technology in dozens of locations since 2005. Now, it will plug the gadgets into many more stores over the next year, as part of a major face lift. "It is an opportunity for us as the market leader to stay in front of the pack," said Jim Dwyer, the chief business development officer for Ahold USA, Stop & Shop's Dutch parent company.

Instead of saving labor, the new gadgets shift it, from store employees to shoppers. Users weigh, scan, and bag their own purchases, preferably in reusable cloth bags, priced at 99 cents each. Good for the environment, and for the bottom line. No wonder the bags are green.

When I asked Stop & Shop spokesman Robert Keane about how all this technology will reduce labor costs, he deftly sidestepped the question. "This is something to really offer the customer choices," he said. And of course, he's right. After years as a faithful Shaw's customer, I switched to the Stop & Shop in Quincy because its grocery tech gets me in and out of the store so much faster. Besides, it's cool.

Especially the device at the heart of the Stop & Shop system, the Scan It personal scanner. Shaped like a bar of soap with a pistol grip, the Scan It has been deployed in about 90 Stop & Shops, the first large-scale deployment of the system anywhere in the world.

Scan It is a lot sleeker and simpler than the first personal scanners introduced by Stop & Shop in 2005. The old device, called Shopping Buddy, was about as big and heavy as a laptop computer and overburdened with features shoppers didn't need, like a digital map of the store or games to keep children occupied while their parents shopped.

"It was too much for the shoppers," said Michele Deziel, spokeswoman for Modiv Media Inc., the Quincy company that designed the software for Shopping Buddy and Scan It.

The new version, introduced last year, keeps things simple. You activate it by scanning a Stop & Shop "loyalty card," the kind you may already use to get discounts on various items. Now just walk the aisles. When you pick an item, aim the Scan It at the barcode and press a button. The device tracks each selection and the total price of your purchases.

The do-it-yourself strategy also applies to items that aren't scanner-friendly, like deli meats and vegetables. You can use a touch-screen computer to place deli orders; when your corned beef is ready, Scan It flashes you a message. For produce, scales calculate the correct price when you punch in a four-digit code for each item. Out pops a barcoded sticker.

It works fine, if you know the code, or if a code sticker has been glued to your onions or broccoli. Often, though, there is no sticker, forcing you to search for it using the scale's touch screen. Usually this works, but sometimes it doesn't, leaving shoppers irritated and possibly vitamin-deficient.

One thing you can't purchase alone is booze. Scan a six-pack of Bass Ale, and a human will meet you at the checkout to confirm you're old enough to drink.

Scan It is also a subtle but persistent salesman. Scanning the loyalty card links the device to a history of your previous purchases. Stop & Shop's system uses this data to come up with special offers for products you might fancy. The offers are relayed to Scan It, which gently pings you about discounts. You'll be glad to know that personal data, like names or credit card numbers, don't travel over the wireless network - just a numerical code that identifies you as a sucker for pasta.

Still, this can all seem a little intrusive. Then again, it's nothing new. Retailers invented loyalty cards to track customers; Scan It just lets them ride herd on us every minute we're in the store. If you don't like it, get rid of your card - and forget about using Scan It.

Your last stop is the automated checkout line. These come in two varieties - a simple kiosk for small purchases and a long line with a conveyor belt for big shopping trips. The little kiosk, with its rack for bagging your purchases, can be a nuisance if you use a paper sack to line the plastic grocery bag. The rack has a scale to make sure you're not sneaking items past the scanner to avoid paying. Sometimes it reads an extra bag as an unscanned item and halts the checkout process. It's infuriating. I prefer the less-irksome conveyor belt.

Either way, it's time to pay. Scanning a barcode mounted atop the checkout device tells the Scan It you're done. Swipe your loyalty card at the checkout scanner, and it instantly reads your list of purchases and tells you how much to pay. Now and then, you'll be ordered to a checkout line where a human attendant will rescan your purchases. It's a random audit to deter theft. But usually, the machine just asks for the money. Shove in a few bills or swipe a credit card, and it's all over but the bagging.

And no 99-cent cotton eco-sacks either. I use disposable paper and plastic, paid for by Stop & Shop. All my scanning and weighing saved it a tidy sum in labor costs; it's the least they can do.

Source: Boston Globe

Boston: Menino wants assurances from developers

Mayor seeks new rule after financial tie-ups

Boston Mayor Thomas M. Menino wants to require developers of large projects to obtain financing before they win permission to dig up the city.

His call follows financial problems for two high-profile developments that have already begun construction in Boston: the $650 million redevelopment of the Filene's building in Downtown Crossing and the $800 million Columbus Center complex over the Massachusetts Turnpike.

Menino is having city planners devise a regulation that would delay approvals for developers who cannot show adequate financial backing to proceed with construction. The regulation is an attempt to prevent city streets from being at the mercy of credit markets that can suddenly stall or upend projects.

"We already have two or three holes in our landscape; we don't want any more," said Menino. "We don't want to stifle development, but we don't want developers to take advantage of the city."

The mayor spoke yesterday after the Globe reported that the developers of the 38-story commercial and residential tower on the former Filene's property have been unable to raise financing because credit markets have severely tightened in the wake of the subprime mortgage debacle.

The project is the cornerstone of Menino's effort to remake Downtown Crossing into a destination shopping district in the heart of the city. Almost a year after receiving city permits, the developers have only begun to excavate a portion of the site for its new foundation.

Menino and officials at the Boston Redevelopment Authority said they have been working on the policy for several days and that they were not spurred to action solely by Filene's or any other development. A draft of the regulation indicates that $12 billion in projects are currently under development in the city, and points out that many neighborhoods might have to put up with abandoned or vacant construction sites if tight credit markets continue to delay construction.

An executive with a leading development group said the mayor's regulation is unworkable and would have a chilling effect on future projects.

"It will become a barrier to development. The market just doesn't work that way," said David Begelfer, Massachusetts director of the National Association of Industrial and Office Properties. "To react this way because of the current abnormality in the credit market, I don't think is very prudent."

Other individual developers, including those for the Filene's and Columbus Center projects, declined to comment.

Lenders have been wary of making commercial real estate loans since the subprime mortgage crisis erupted last summer and caused heavy losses at investment banks and other financing firms.

The team trying to build the Columbus Center halted construction on the giant mixed-used complex this year after developers lost some of their private financing as well as some state subsidies.

The draft of Menino's regulation indicates that developers would have to show proof of financing within 18 months of city approval in order to move forward with construction. If they fail to do so, they would have to ask the city for an extension of their permits.

The Filene's project received its city approval in August 2007, while the Columbus Center project was approved in July 2003.

To take effect, the regulation needs the BRA board's approval.

The mayor said the policy would also help the city control the practice of "flipping," in which developers get approval for a project, carry out demolition and other site work, and then sell it for a profit.

"Too many times developers come in, get approvals, sit on it and make all the money off the city," Menino said. "It's an issue we have to get a hold of."

Source: Boston Globe

Overnight Success Can Take Years

Overnight successes usually don’t happen quite that fast — especially in retail. I was reminded of that in stories I read about two vastly different clothing retailers. You may have heard of Forever 21, a hip clothing store known for its low prices on up-to-the-minute fashions. You probably never heard of Show Hoppers, a dancewear shop in Concord, New Hampshire that doesn’t even have a website. Fortunately, the Concord Monitor followed the mother-and-daughter owners of Show Hoppers in their first year as they learned the intricate dance of retail survival.

After 24 years in business, Forever 21’s worldwide sales are in the billions of dollars, according to this article in the Los Angeles Times. Show Hoppers’ owners say they’re thrilled if sales hit $300 a day. Yet both are niche marketers. Aggressive Forever 21’s mantra is “Create a niche, and then blow it out.” Show Hoppers’ niche is dancewear for girls in their small town. They realized parents had to drive many miles to find appropriate clothes for their little dancers, so they started on a shoestring with a boutique catering to those parents.

Forever 21 attributes its success to spotting fashion trends and then finding manufacturers who can supply them with quality, low-cost clothing. Show Hoppers is still looking for its place in the Concord sun — or sleet, if you factor in the miserably snowy first winter they experienced in downtown Concord. But they hung in there, adjusted inventory and are optimistic about their second year in business.

I like the attitude of the daughter, who doesn’t let being legally blind slow her down: “Every decision you make that’s unknown is scary. But if you don’t take a chance, how are you going to know?”

I also like the attitude of Forever 21’s senior vice president: “Where there’s a flash of opportunity, we’re stepping in.”

It took Forever 21 nearly a quarter of a century to achieve its “overnight” success and become a media darling. I hope Show Hoppers is content to become the premier dancewear shop in its home state, and perhaps beyond. Before you become an overnight success, I hope you will read both stories and draw inspiration for your retail store.

Source: TrioDisplay.com

Brokers Search the Depths

Has the slowdown in retail real estate sales hit bottom?

Not yet, say wavering observers who predict that won’t occur now until the second quarter of 2009 when cap rates on retail properties will fall between 8 percent and 10 percent.

In the second quarter of 2008, significant retail sales transactions amounted to only $5 billion, according to New York City-based Real Capital Analytics. That represented a 63 percent drop from the second quarter of 2007. More alarming was the fact that the figure was a 30 percent drop from the first quarter of this year, when properties worth $7 billion traded hands, says Real Capital Analytics’ July report.

The slowdown continues in part because there is still not enough financing available for new acquisitions, cited Robert Bach, senior vice president and chief economist with Grubb & Ellis, a Santa Ana, Calif.-based commercial real estate services firm. With no new commercial mortgage-backed securities issuances in either July or August, year-to-date volume remains at just $12 billion, according to Commercial Mortgage Alert, an industry newsletter, down 93.6 percent compared to the same period in 2007.

Wall Street now accounts for just 1 percent of acquisition financing for commercial properties, according to Real Capital Analytics. From January 2006 through June 2007 it accounted for 33 percent of the market. At the same time, major banks slashed their lending volumes by 18 percent, finance/management companies by 4 percent and regional savings banks by 2 percent.

Over the last 12 months, average cap rates on strip centers moved up 40 basis points, to 7.0 percent, reports Real Capital Analytics. Cap rates on lifestyle centers went up 80 basis points, to 7.3 percent, and on power centers 50 basis points, to 7.0 percent. However, with buyers forced to put more equity into each transaction because of troubles in the credit markets and a grim prognosis on the state of the economy, the increases have not been enough to break the impasse in the sales sector.

When investment sales in the retail real estate sector first came to a halt, in the fall of 2007, market observers said they would rebound in the first quarter of this year. The forecast was then amended to the second half of this year, after the ICSC RECon convention in Las Vegas. Today, sellers have dug in their heels on pricing and buyers anxiously wait for the market to bottom out.

The lack of readily available financing is forcing some buyers to walk away from deals even when they are happy with the valuation, says Joseph C. French, national director of retail properties, at Sperry Van Ness, an Irvine, Calif.-based investment brokerage firm. But in the past few months, the lack of available credit has taken a back seat to another concern for prospective investors—the dire state of the retail sector.

This year, ICSC expects store closings to reach a 14-year high. Retailers are entering bankruptcy and announcing store closings almost daily. Now, retail acquisitions seem very risky, so buyers want to make sure they are getting good value for their money, says Gary Bringhurst, CEO of DBSI, a Boise, Idaho-based real estate investment firm.

“The slow-down in the retail sector has caused many buyers to stop purchasing retail centers altogether. This, [along] with financing, has contributed to the escalating cap rates,” says Bringhurst. He notes a reasonable cap rate for a well-anchored center in a core market today could be more than 8 percent.

Sellers, however, have not yet reached the point where they are willing to accept the notion that cap rates will only continue to rise, says Bernie Haddigan, national director of the retail group with Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based brokerage firm. He estimates it will not be before the second quarter of 2009 when the bid-ask gap will finally close and cap rates will stabilize at a level that’s more in-line with market fundamentals—somewhere around 8 percent for class-A assets and upwards of 9 percent for class-B and class-C properties.

The change, says Arthur M. Milston, managing director in the New York City office of Savills a global real estate services provider, will put short-term investors looking for “financial engineering” out of the market for good. But it will bring the marketplace back to a healthier place, where people who purchase retail properties do so for the value of the real estate and not for a quick speculative gain.

DBSI plans to spend $1 billion on commercial real estate acquisitions this year, including retail. But the firm will only consider class-A and class-B centers built since the late 1980s with occupancies above 80 percent in markets with either stabilized or positive space absorption trends.

“Cap rates of 3 percent and 4 percent [do not make] a healthy market,” says Stephannie Mower, executive vice president and managing director of national investment services with PM Realty Group, a Houston-based real estate services firm. “It’s a happy market, but it’s not a healthy market and now it’s going to be a market where buyers and sellers can trade with confidence as opposed to playing a game of musical chairs.”

Source: Retail Traffic

Target Slows Expansion as Net Falls

Discount retailer Target Corp. will curb store expansion and tighten credit-card terms after reporting fiscal-second-quarter net income fell 7.6% because of credit-card write-offs and weak sales.

The Minneapolis store chain said profit from credit-card operations fell sharply for the fiscal quarter ended Aug. 2 as a result of write-offs and the sale earlier this year of a half-interest in its credit-card receivables.

CONFERENCE CALL

"August is a great leading indicator. We said beginning of the month we expected minus three to minus one in same-store sales, and I remarked earlier that we've seen quite a bit of volatility. If the first ten days were all we had to look at, clearly we would be very concerned about our ability to meet even minus three. Sales are on a better pace since then, which alleviates some of that concern, but clearly we're in for a more challenging period." -- Doug Scovanner, Target CFO

Read the full transcript of Target's conference call, provided by Thomson StreetEvents (www.streetevents.com). (Adobe Acrobat Required.)

The operation, which had been delivering strong profit, reported income tumbled 65% to $74 million, from $213 million a year earlier. In May, Target sold a half-interest in its card receivables to J.P. Morgan Chase & Co. for $3.6 billion.

The company said it is slowing the growth of its credit-card portfolio and revising credit terms to counter higher bad-debt expense. Credit losses this year will run between 8% and 9% of loans, higher than its spring forecast, and higher than the 5.9% of loans in the last fiscal year.

It said growth in credit-card receivables, which increased at an about 27% rate in the second quarter, will moderate into the teens by the fourth quarter.

Target has successfully managed inventories and labor expense controls to avoid profit-sapping mark downs and expenses, Gregg Steinhafel, chief executive, told investors Tuesday. Retail gross margin, a measure of profitability, rose slightly in most areas, he said.

Net declined to $634 million, or 82 cents a share, from $686 million, or 80 cents a share, in the year-earlier quarter. Per share profit increased as a result of stock repurchases that reduced the number of shares outstanding.

Revenue rose 5.8% to $15.47 billion. Retail sales, excluding credit-card revenue, rose 5.6% to $14.97 billion, from $14.17 billion boosted by new store openings. Sales at stores open at least a year, a measure of retail-market share, declined 0.4% in the quarter.

Target, which gets about 40% of sales from clothing and home decor, has been harder hit in the downturn than discount rival Wal-Mart Stores Inc., which gets about 40% of its sales from consumables, such as groceries. Wal-Mart has reported strong same-store sales gains all year.

Doug Scovanner, chief financial officer, said Target will trim about 20 stores from its new store openings next year. Target had previously said it planned to open between 90 and 100 stores this year and next.

Economic conditions continue to be volatile. The total use of credit cards for store purchases, which had been rising, was flat in the fiscal first quarter and down in the second quarter, he said. "The use of credit cards is determining our same-store sales," Mr. Scovanner said.

Source: Wall Street Journal

Goodyear to shutter 92 stores

Underperforming company-owned stores with 600 workers to close by end of year

Aug. 20--Goodyear Tire & Rubber Co. said Tuesday it will close 92 "underperforming" company-owned retail stores nationwide by the end of the year.

Goodyear did not release which locations would be shuttered. In a news release, North American Tire Vice President Scott Vogel said the company first wanted to notify the store locations and the approximately 500 full-time and 100 part-time employees affected and the property owners of leased facilities.

The closings will allow Goodyear to be a stronger competitor and focus on long-term potential, Vogel said.

No specific timeline for the store closings was given, but Goodyear spokesman Keith Price said they would take place by the end of the year. Much of that depends upon whether the facility is company owned or leased, he said.

"These are stores that have not performed well and the projections are that they won't," Price said.

The closings will result in after-tax charges of approximately $30 million, of which $15 million will be recorded in the third quarter of 2008. The company also said it is expected to eliminate losses related to the underperforming stores of approximately $9 million annually.

The closings are only affecting company-owned stores. After the closings, Goodyear will have about 650 company-owned stores throughout the country, Price said. He did not have an exact number, but said the "lion's share" or "thousands" of Goodyear stores are dealer-owned.

Goodyear stock closed Tuesday down 70 cents at $20.18. The stock is down 27 percent from one year ago.

Source: Plain Vanilla Shell

U.S. economy hit by surging inflation

WASHINGTON (AP) -- Wholesale inflation soared in July, leaving U.S. prices rising at the fastest pace in nearly three decades. While recent declines in oil and other commodity prices raise hopes inflation may have peaked, some economists worry about the widespread nature of the July price surge and caution it will take more time for that pressure to ease on Wall Street and Main Street.

The Labor Department reported Tuesday that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy and a variety of other products from motor vehicles to plastic goods.

The increase was more than twice the 0.5 percent gain that economists expected and left prices rising over the past 12 months by 9.8 percent. That marked the biggest annual increase since the 12 months ending in June 1981, a period when the Federal Reserve was driving interest rates to the highest levels since the 1861-1865 U.S. Civil War in an effort to combat a decade-long bout of inflation.

Core prices, which exclude food and energy, rose 0.7 percent last month. That increase was the biggest since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.

Elsewhere, the Commerce Department reported that construction of new homes and apartments slid to an annual rate of 965,000 units in July, a 17-year low. Builders continued to slash production as they battled slumping sales and soaring mortgage defaults dumping more homes on an already glutted market.

Wall Street tumbled on the gloomy economic news as investors worried the worst housing slump in decades was showing no signs of a rebound and that the Federal Reserve's tool to combat the weakness -- lowering interest rates -- was unlikely to be used given the sharp jump in inflation seen last month in both wholesale and consumer prices.

The Dow Jones industrial average fell 130.84 points to close at 11,348.55 after losing 180 points on Monday. It was the worst two-day performance for the Dow since late June.

Last week, the government reported that consumer prices had jumped by 0.8 percent in July, leaving prices over the past 12 months rising at the fastest pace since 1991.

The steep slump in housing, rising unemployment and a severe credit crisis have worked to offset $92 billion in economic stimulus payments made from April through July intended to keep the economy out of a deep recession. Retail giants Target Corp. and Home Depot Inc. on Tuesday reported that profits sank in the second quarter. Home Depot said it continued to have a downbeat outlook for the year as the housing market shows no signs of recovery.

The July price pressures reflected in part the surge in energy costs that pushed crude-oil and gasoline prices to record highs. Crude-oil prices have fallen by more than $30 per barrel since then, raising hopes that inflation pressures will soon ease.

But the price spikes seen elsewhere in July prompted concerns that the prolonged surge in energy was beginning to show up more broadly throughout the economy, and that while prices may rise quickly, they tend to come back down much more slowly.

"Inflation is way too hot," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania "It took a long time for the surge in commodity prices to seep into the general economy so don't expect one month of commodity price declines to suddenly turn off the inflation pump."

But other economists said they believed the July inflation report could represent the worst for inflation pressures this year if -- and they concede this is a big if -- energy prices continue to decline in coming months.

"A firmer dollar, retreating commodity prices and continued economic weakness should damp inflation by the fall," said Sal Guatieri, an economist at BMO Capital Markets in Toronto, who said he looked for elevated inflation numbers at both the consumer and wholesale levels for another month before they start declining.

Economists saw a silver lining in the continued plunge in housing construction, saying it is needed to help reduce the glut of unsold properties as builders compete with foreclosed homes selling at steep price discounts.

In Crawford, Texas, where President George W. Bush is vacationing, spokesman Tony Fratto said the big jump in July producer prices did not "reflect the recent significant fall in oil prices, which everyone would like to see continue."

The Federal Reserve is caught between a slumping economy, as reflected by the further plunge in housing construction, and the big jump in inflation pressures, which has some Fed officials lobbying for the central bank to start boosting interest rates.

The Fed, which aggressively cut interest rates from last September through April, has held rates unchanged at meetings in June and earlier this month. Richard Fisher, president of the Fed's Dallas regional bank, dissented at both those meetings, arguing the central bank should start raising interest rates to make sure the inflation surge does not become embedded in the economy.

"We cannot afford to gamble away our credibility," Fisher said Tuesday in a speech in Colorado. He warned that the recent burst of inflation could threaten the economy as "a lingering inflationary fever."

Rebecca Braeu, an economist at John Hancock in Boston, said that the big jump in core inflation in the wholesale price report would definitely set off alarm bells at the Fed. But she and other analysts said they did not believe the central bank will start raising rates, especially before the November election, as long as price pressures begin to moderate in upcoming reports.

For July, wholesale energy prices jumped by 3.1 percent following a 6 percent gain in June. That increase reflected big increases in the price of natural gas, home heating oil and liquefied petroleum gas, which offset a 0.2 percent dip in gasoline costs.

Food prices rose by 0.3 percent in July after a 1.5 percent surge in June. Beef prices jumped by 7.4 percent, the biggest increase in nearly four years. Milk prices shot up by 5 percent, the biggest gain in a year, while soft drink prices rose by 2.4 percent, the largest increase in four years.

Excluding energy and food, the 0.7 percent rise in core inflation reflected big gains in the prices of passenger cars and light trucks, pharmaceutical preparations and plastic products.

Source: CNN

As Supercenters Gain, Wal-Mart Still Attracts The Affluent

While the limping economy has hurt most retailers, Wal-Mart continues to be a big beneficiary. A new report from Information Resources Inc. finds that the Bentonville, Ark.-based company is posting market-share gains in an impressive 84% of the top 100 consumer-product goods categories.

While lower- and middle-income shoppers increased their spending at Wal-Mart when the economy started to soften, the report finds that the bigger change has been upper-income consumers who have flocked to Wal-Mart in the last six months, as gas prices soared.

Source: ConsumerLab.com

TJX sells Bob's Stores to private equity firms

NEW YORK, Aug 19 (Reuters) - Off-price retailer TJX Companies Inc (TJX.N: Quote, Profile, Research, Stock Buzz) sold its Bob's Stores unit to private equity firms Versa Capital Management and Crystal Capital. for an undisclosed sum.

TJX also raised its full year forecast for fiscal 2009 earnings as a result of the sale.

It said the sale is expected to generate cash proceeds of about $23 million, which primarily represents anticipated tax benefits, as well as the proceeds from the sale, partially offset by fees and expenses related to the transaction.

"Our decision to sell the business reflects our vision to grow TJX as a global, off-price company," TJX Chief Executive Carol Meyrowitz said in a statement on Tuesday.

Bob's is a chain of lower-cost, casual clothing and footwear superstores with about 34 locations in the U.S. Northeast. For the first half of the fiscal year, Bob's posted a loss of nearly $27 million, compared with a loss of $10 million in the same period a year earlier.

TJX will post an after-tax loss from the sale in its fiscal third quarter of about $15 million, or 3 cents per share, which will be reported as a loss from discontinued operations.

The company, which also is home to T.J. Maxx and Marshalls, said it now expects full year earnings per share from continuing operations of $2.30 to $2.35. It previously had forecast earnings per share of $2.26 to $2.31.

Excluding other items, TJX sees full year earnings from continuing operations of $2.19 to $2.24, representing an increase of up to 16 percent from the prior year.

Source: Reuters

Real Estate Investors Turn To Traditional Banks For Financing

The commercial mortgage-backed securities market came to a screeching halt in early 2008, forcing real estate investors to scramble for alternative financing sources. The disappearance of CMBS vehicles, which had dominated the market in recent years, left borrowers with three financing options: life insurance companies, traditional banks, and agencies such as Fannie Mae and Freddie Mac, which focus on multifamily financing.

In the first quarter of 2008, CMBS originations were down 95 percent compared to the volume of deals closed in the fourth quarter of 2007. During the same time period, loan originations through traditional banks were down 56 percent, and financing provided by life insurance companies had fallen by 27 percent.

Buyers are seeking ways to compensate for the lack of financing options. Life insurance companies only finance a certain amount of product each year, and many of them have already completed their allocations for the year. The insurers that are still issuing debt are cherry picking the best deals with terms that are not overly competitive.

A select few of the big Wall Street banks are offering on-balance sheet financing to key clients with the assumption that the CMBS market will reopen for business sometime in the near future. They hope to take the loans they are originating now and refinance those loans in the CMBS market when it returns. Most of the loans being originated by the big banks are 3- to 5-year term loans with some including interest-only terms.

Many buyers and investors have turned to traditional banks for financing. Some banks are actively lending, some are not providing any debt at all, and others are in and out of the market.

The traditional banks that are offering financing are being inundated with loan applications. At the same time, federal regulators are examining the banks, carefully scrutinizing all of the loans on their books. Many banks have no choice but to take write-downs on bad loans and shrink their balance sheets. Others are trying to raise more capital to offset the bad loans and issue new ones. The banks actively lending, however, are demanding more from their borrowers than they did just a few months ago.

One of the many attractive features of CMBS financing was that it offered borrowers non-recourse debt. Under the CMBS structure, the loan was secured by the real estate, but the loan issuer could not go after the borrower for repayment in the event that the borrower defaulted, with the exception of intentional bad acts by the borrower.

Not surprisingly, traditional banks are balking at providing non-recourse debt. Many of them are requiring at least some recourse — typically ranging from 35 percent recourse to full recourse. This can be a serious issue for buyers and investors, depending upon how the equity portion of the transaction was structured.

Given the structure of the deals DBSI completes and the due diligence it performs, the company has not asked investors to provide recourse. DBSI takes on the burden itself as the majority of its 1031 exchange deals are sold with a master lease. The company is already responsible for the management and operation of the property, so DBSI is willing to take the recourse position.

Many tenant-in-common investors are unwilling to agree to financing that includes recourse. Each TIC investor owns a separate and distinct share of the property and, in many cases, does not interact with other investors in a meaningful manner. With some TIC properties having as many as 35 co-owners, individual TIC co-owners are often not comfortable signing for recourse debt with other investors they do not know. The sponsors selling these transactions are being forced to consider taking on the recourse debt themselves, even though they are selling the property.

When the CMBS market was in full swing, borrowers were able to originate long-term (up to 10 years), interest-only debt. Now that banks are originating shorter-term loans with required amortization, equity returns have been squeezed. Real estate sellers are slower to adjust pricing than are the capital markets. Cap rates are rising at a slower pace than the cost debt funds are increasing, which results in a lower equity yield to the investors.

Real estate prices are also declining, which results in cap rates increasing. This trend has caused potential sellers that do not have to dispose of their real estate to reconsider selling in the current market. Some owners must sell, due to maturing loans and the inability to obtain sufficient loan proceeds to refinance.

Buyers and investors that are completing 1031 exchanges must find a replacement property within 45 days of selling their property or they will be required to pay capital gains taxes. Depending upon their tax basis in the relinquished property and the tax consequences of not completing an exchange, many investors are accepting recourse debt and current market debt terms when faced with paying the taxes as the alternative. With many potential exchangers sitting on their current real estate investments, the number of 1031 exchanges being completed is significantly reduced compared to the volume of deals closed in 2007.

It will take some time for the turmoil within the financial markets to quiet, but things will eventually settle down. Financing is still available, albeit more expensive and more difficult to obtain. Nonetheless, profitable deals are still being completed by Spectrus and many other companies. Real estate runs in cycles and many players are waiting to see more stability before diving back into the markets.

Source: Northeast Real Estate Business

Blockbuster CEO Explains Crazy Circuit City Bid: Desperate Cry For Attention

We were never able to wrap our heads around Blockbuster's odd bid for Circuit City; neither were investors. But now that Blockbuster (BBI) has finally walked away from it, CEO Jim Keyes comes clean. He was never that interested in it, anyway. It was just more effective than paying for ads or rentin a booth at next year's CES. WSJ:

Blockbuster is now a stronger contender in electronics retailing, Mr. Keyes argued, because manufacturers started courting the company after the bid.

"We were really not on the radar screen of any major consumer-electronics manufacturers previously," Mr. Keyes told Dow Jones Newswires. "They did not see Blockbuster as a potential retailer of these devices. With the announcement of the Circuit City transaction publicly, it caught the attention of all the [consumer-electronics] providers."

Of course, that result must only make investors wonder why Blockbuster offered a hefty 58% premium for Circuit City back in April, with no knowledge of its target's finances, and pursued its bid so aggressively that it enlisted corporate activist Carl Icahn.

We think investors will also wonder just how much the Circuit City bid cost them in legal and banking fees. We imagine that they'll find out soon, when the company files it's next 10Q. Hope they got their money's worth.

Source: Silicon Alley Insider

Retailers 'Sell' to Young Virtually

Kohl's, Sears Build Brands As Children Clothe Their Avatars Online

Retailer Kohl's Corp. this month launched a new line of apparel, but the plaid skirts and printed T-shirts won't be sold in its 957 stores. Instead, it's selling them on Stardoll.com, a virtual community for teens and tweens where kids can fork over "Stardollars" -- purchased online at a nominal sum -- to buy apparel for their online characters.

With back-to-school sales off to a slow start, more old-line retailers and clothing labels are reaching out to kids online, enticing them to try virtual versions of their togs in hopes of making actual sales later. Kohl's first virtual line features pieces from its new Abbey Dawn collection, designed by singer Avril Lavigne. In its first 16 days, Kohl's Stardoll boutique logged some 2.2 million visits and sold 1.8 million items. Kohls.com lured 97,000 visitors who clicked through from the boutique site.

Kohl's

In the Kohl's boutique on Stardoll.com, kids can dress an online character in the retailers' brands. More big-name retailers are embracing virtual worlds to reach teens.

This month, casual-wear maker K-Swiss Inc. and lingerie and swimwear designer Eberjey rolled out virtual clothes on There.com. And in late July, retail pioneer Sears Holdings Corp. opened its first online boutique featuring back-to-school apparel and dorm-room furniture on teen site Zwinky.com. Sears said the boutiques logged 750,000 visitors and sold 850,000 virtual items during their first 16 days through mid-August.

These mainline retailers hope the virtual showrooms will be more effective than traditional ads in hooking tweens and teens. Users of the sites already can spend virtual dollars on virtual clothes designed by the sites, or by early adopters such as American Apparel Inc. that went virtual two years ago. The sites are places to fashion digital personalities, called "avatars,"

participants use to explore new styles, relationships and behaviors. Typically, these sites now offer a click through to buy the real products.

"When you look at an ad, it's pretty quick," said Jennifer Weiderman, vice president of global marketing for K-Swiss. "But when they're in this virtual world, this gets them to spend more time [viewing] your product. It's a little bit more sticky."

Ms. Weiderman said she is dialing back her spending on TV ads this year and expects to allocate 15% of her marketing budget to online initiatives, up from 5% last year. Sears and J.C. Penney Co., which last month made virtual versions of its teen and young-adult clothing available to users of Yahoo's instant messenger service, say they've increased online ad spending this year. Kohl's also said it is allocating more of its online ad dollars this year to targeting teens. None would detail the scale of the budget shift.

Details of the arrangements vary, but a retailer or brand typically pays a fee to have a virtual community host and develop its store and products. At There.com, the fee ranges from a few hundred dollars to a few thousand, depending on how elaborate the store is and how many items will be sold. The brand and the Web site sometimes split revenue from the virtual purchases. But since virtual clothes cost from under $1 to $5 -- brands regard this revenue as negligible.

"It's really a way to get shoppers to test-drive your product," said Carlos Mejia, chief financial officer of Eberjey, a maker of lingerie, swimwear and sleepwear. The brand, which largely sells to women ages 20 to 45, hopes to attract teenagers with its virtual line.

Penney decided this year to put back-to-school outfits on Yahoo after learning that, during a seven-week experiment last summer, 1.5 million avatars wore its clothing on Yahoo and 5 million Penney outfits were tried on. "It casts a very modern, current light on the brand with teens," says Mike Boylson, Penney's chief marketing officer. Before Penney's presence on Yahoo, "perhaps J.C. Penney wasn't on their radar before," he says.

Sears is marketing its virtual boutiques on billboards in the virtual world, and is hosting daily fashion shows on the site promoting its products through the end of August.

Not everyone is pleased. Patti Miller, vice president of Children Now, an Oakland, Calif.-based national children's advocacy group, expressed concern over marketing to youngsters via these virtual shops. The Federal Communications Commission in 1990 established rules governing the hourly amount of advertising directed at children. But the newer, Web-based virtual communities that have replaced TV viewing for some kids have no similar restrictions.

"Some of these younger kids, those younger than 8 and even kids up to 12, can't make the distinction between what's advertising and what's not," says Ms. Miller. She says children may not grasp that the virtual stores function as a brand advertisement.

Dave Bazant, Sears' marketing manager for online and emerging media, argues that children who frequent the virtual sites are savvy enough to know that the stores also function as a branding tool.

"It's fairly transparent -- kids are not very naïve these days," says Mr. Bazant. He notes that Sears is careful to not aggressively push its wares in these sites because teens and tweens are "turned off by direct advertising. We're not giving away our product for free. Most of these items, they have to purchase."

The online pitches are striking a chord with Jen Rediger's daughters, 13-year-old Tyler and 9-year-old Kenzie. In the first week that the Kohl's store opened on Stardoll, they spent about 70 Star Dollars, or $7, on virtual skirts and shoes. Ms. Rediger, 32, an interior designer who lives in Hoschton, Ga., says she doesn't mind her daughters being exposed to such marketing because "it's not worse than what they see on television."

Tyler has already asked her mom to take her to Kohl's to buy the real versions. "They look really cool on my doll," she says. "It's my style so I think I'll wear it a lot."

Source: Wall Street Journal

Macaroni Grill to be sold to Golden Gate Capital

Brinker International Inc., the parent company of Chili’s, Romano’s Macaroni Grill, On the Border and Maggiano’s Little Italy restaurants, has entered into an agreement to sell a majority of the company’s interest in the Romano’s Macaroni Grill brand to private equity firm Golden Gate Capital.

Based on the agreement, San Francisco-based Golden Gate Capital will pay Brinker $131.5 million in cash for the brand.

Dallas-based Brinker (NYSE: EAT) says it plans to retain a 19.9-percent stake in the chain and has committed to offering Macaroni Grill corporate support services for up to a year, with room for an extension. Brinker also will have members serving on the new corporate entity’s board of directors.

The pending sale is expected to close by the end of 2008.

“Golden Gate is well-known for partnering with corporations to help grow established consumer and retail brands,” said Doug Brooks, chairman and chief executive officer of Brinker International. “Brinker International will retain a minority position in order to both maximize the value to Brinker’s shareholders and contribute to the success of the Macaroni Grill as a stand-alone entity.”

Brinker put its Macaroni Grill Brand on the market earlier this year. The announcement of the sale to Golden Gate comes two weeks after Brinker saw its fourth quarter profit drop to $42.6 million, or 41 cents per share, down from $83.6 million, or 71 cents per share during the same quarter last year.

Brinker attributed its 49 percent profit decline to the rising cost of commodities.

The company has more than 1,800 franchises or corporate-owned restaurants in 24 countries. There are seven Macaroni Grills in Georgia, including five in metro Atlanta, according to the restaurant's Web site.

Source: Atlanta Business Chronicle

NJ: Burlington Coat Leases 80,000 SF

OCEAN TWP., NJ-Investcorp has signed a lease with Burlington Coat Factory as an anchor tenant at its 856,000-sf Seaview Square Shopping Center here. For the retailer, it’s a matter of size--the chain is doubling its space in a move down Route 35 from its existing location just to the north at Monmouth Mall in Eatontown. But it’s also shrinking its previous space commitment to co-anchor Seaview Square.

As part of its deal with Burlington Coat Factory, New York City-based Investcorp has purchased the retailer’s contract to lease a 125,000-sf building at Seaview Square from discounter Value City, after Burlington decided that the 80,000-sf space it’s now taking was “more appropriate for our needs,” says a spokesman. Further terms of the signing were not released.

“We’ve received quite a bit of interest in Seaview Square from both regional and national retailers, specifically the Value City space,” says Jeremy Isaacs of leasing group RIPCO Real Estate Corp. of New York “The Value City space, we believe, is a great opportunity for a retailer to join the national tenants here.”

Seaview Square itself is part of the ongoing story. Previous owner Starwood Heller had launched a repositioning of the one-time enclosed mall, which had fallen on hard times owing to competition from the 1.5-million-sf Monmouth Mall. Investcorp acquired the center in late 2005 and continued that repositioning, which has converted the mall into an open power center.

Seaview Square, located at the intersection of routes 35 and 66 in Monmouth County, now consists of 788,225 sf of existing space in six separate buildings, and more than 68,000 sf of new space that has been approved for construction on four vacant land parcels. Existing anchors include Costco and Target, both of which occupy new stores, and other national tenants on-site include PetSmart, Washington Mutual, Starbucks and Applebee’s. Sears independently owns and operates a store at Seaview Square as well.

Burlington Coat Factory will occupy about half of a building that once housed a Lowe’s home improvement store. Lowe’s moved out several years ago in the wake of structural defects to the building, said to have been caused by settling, that have subsequently been repaired. Burlington’s build-out is just under way, with a grand opening slated for February 2009.

“Adding a respected retailer like Burlington Coat factory as an anchor is very exciting,” says Michael O’Brien, a principal in Investcorp’s real estate group. “We feel that this asset is continuing to exhibit strong growth prospects, attractive near- and medium-term cash flow and capital appreciation.”

Source: GlobeSt.

Bay Harbour Is Likely Buyer Of Steve & Barry's

Investment Firm Leads Bid for Retailer; A Plan to Keep Many of Its Stores Open

New York investment firm Bay Harbour Management LC is the leading candidate to purchase out of bankruptcy the assets of discount retailer Steve & Barry's LLC, with a plan to keep open anywhere from 125 to 200 stores, say several people involved in the case.

Associated Press

Steve & Barry's had 276 stores when it filed for Chapter 11 protection.

Steve & Barry's had 276 stores when it filed in early July for protection under Chapter 11 of the U.S. Bankruptcy Code. An auction for the retailer's assets, including store leases, merchandise and celebrity or brand licenses, continued in midtown Manhattan into Monday evening and is expected to wrap up Tuesday, according to these people. The winning bid then must be approved by a bankruptcy judge.

Should Bay Harbour win the auction, the number of Steve & Barry's stores that remain open will depend on the lease concessions Bay Harbour wins from Steve & Barry's current landlords, according to the people involved in the case. Some landlords are resisting efforts to cut rents while they also deal with bankruptcies and store closings by other retailers such as Sharper Image Corp., Linens 'n Things and Mervyn's LLC, these people say. The most likely outcome is that about 150 stores will remain open, they say.

Steve & Barry's management is trying to cobble together an alternative from a group of bidders who have shown interest in individual properties and store assets. But that effort has been unsuccessful, those people said.

Bay Harbour, along with the liquidation firms Gordon Brothers Retail Partners and Hilco Merchant Resources, made a $163 million "stalking horse bid" in early August for all of Steve & Barry's assets. A spokesman for Steve & Barry's declined to comment. Bay Harbour didn't return calls seeking comment.

Steve & Barry's bankruptcy also sidelined ambitious growth plans for the previously fast-growing retailer, which opened its first store in 1985 in Philadelphia, selling discount University of Pennsylvania apparel. Internal projections at the Port Washington, N.Y., company called for expanding to 371 stores by the end of 2009 and 497 stores with more than 18.1 million square feet of store space by the end of 2010. Those plans have been shelved, according to the people involved in the case.

As of January, Steve & Barry's had 16,000 to 17,000 employees. At the time of the July 9 bankruptcy filing, the company said it would cut 172 corporate and field office jobs. It isn't known how many more jobs could be eliminated.

The Steve & Barry's filing is another blow for the U.S. mall industry. Mall vacancies amounted to an average of 6.3% per mall in this year's second quarter, the highest percentage since early 2002. A single mall typically isn't considered to be struggling until its vacancy rate reaches the 20% or 30% range. Still, any locations to be vacated by Steve & Barry's will be particularly difficult to fill because the discount retailer has typically occupied large, hard-to-rent anchor slots at the backs of malls in exchange for discounted rents.

Four of the top 20 creditors listed in Steve & Barry's bankruptcy petition are mall owners: Simon Property Group Inc., the largest U.S. mall owner by number of properties, is listed with a claim of nearly $2.2 million for rent owed. CBL & Associates Properties, which has 21 Steve & Barry's stores spread among its 86 retail properties, has a $1.2 million claim, as does General Growth Properties Inc., the second-largest U.S. mall owner. Westfield Group, an Australian retail-property owner with 55 U.S. malls, has an $812,030 claim. Each of the four declined Monday to comment on the Steve & Barry's situation.

Some did address the possible closures during their second-quarter earnings calls with investors. Simon executives are canvassing potential new tenants for those spaces, including Ethan Allen Interiors Inc., Nordstrom Inc.'s Nordstrom Rack, and Ross Stores Inc. CBL is hoping to replace some of the $7.3 million in annual rent that Steve & Barry's paid it by signing temporary, holiday tenants or dividing the spaces into small shops.

Several mall owners want strict guidelines imposed on how and when Steve & Barry's closes stores. Last week, landlords of 14 U.S. malls, including malls in Syracuse, N.Y., and Hadley, Mass., filed an objection in Steve & Barry's bankruptcy case in U.S. bankruptcy court in New York to the retailer's store-closure plans, asking that Steve & Barry's be prohibited from closing stores during the busy holiday season of Sept. 1 to Jan. 31. The blackout is requested so that other retailers in those malls don't suffer from the resulting loss of shopper traffic.

The landlords, who claim Steve & Barry's owes them a cumulative $376,000 in back rent since the July bankruptcy protection filing, also want any entity that buys Steve & Barry's out of bankruptcy to supply them with its financial statements so they can gauge its stability as a tenant. Finally, they want Steve & Barry's to refrain from unsightly tactics in its going-out-of-business sales, such as using sign walkers or posters emblazoned with the word "bankruptcy," according to the filing.

Still other mall owners would just as soon see the retailer relinquish its space in their malls so they can use it for other purposes.

One of Steve & Barry's stores is in the Santa Maria Town Center, which Architectural Ventures LLC, a Los Angeles real-estate investor, bought with other investors in June for $40 million. Greg Kozak, Architectural Ventures' principal, says he intends to spend another $40 million or so redeveloping the aging, 600,000-square-foot mall in Santa Maria, Calif. As part of that, he says he will need to figure out what to do with Steve & Barry's 26,000-square-foot store, which paid annual rent in the low teens of dollars per square foot.

After its bankruptcy filing, Steve & Barry's approached Mr. Kozak and proposed that its annual rent be lowered to the low single digits of dollars per square foot, he said. The landlord refused, instead preferring to carve up Steve & Barry's 26,000 square feet among the mall's theater, its Gottschalks department store, storage and small shops.

Source: Wall Street Journal

Linens 'n Things Reports Reorganization Plan

Linens 'n Things Inc. (Clifton, N.J.) has announced a plan to emerge from bankruptcy early next year. According to The New York Post, the retailer will reverse many of the strategies introduced after the company was bought for $1.3 billion in 2005 by Apollo Management LP (Purchase, N.Y.), primarily a return to an "everyday, low price" model and away from splashy clearance sales and product promotions.

The plan is being devised by turnaround advisory firm Conway, Del Genio, Gries & Co. LLC (New York). It also will focus on improving the quality of its merchandise and keeping shelves stocked in timely fashion, the Post said.

The retailer also said it will close another 28 stores, two weeks after the home-goods retailer said its improving outlook meant it would shutter fewer stores than planned as part of its bankruptcy reorganization. It said in court papers that it is closing the additional stores because landlords refused to give the company more time to consider whether to keep the locations.

Linens 'n Things, the second-largest home goods chain in the U.S., filed for Chapter 11 bankruptcy protection in May.

Source: VMSD.com

Penney Still Focusing on Off-Mall Growth

PLANO, TX-As mall vacancies increase, J. C. Penney Co. continues to examine its real estate, relocating stores in underperforming malls to off-mall sites, management said at its second-quarter conference call.

The company’s problem mall stores were closed six or seven years ago, noted Myron E. (Mike) Ullman III, chairman and CEO. The vast majority of Penney’s new stores are in its off-mall format, in part because of dramatic slowdown in new mall development. Relocating to shuttered anchors in malls is being examined closely.

“Given that we want to keep flexible, we don’t want to take someone else’s problem and make it our own,” Ullman said. “There is going to be a lot more consolidation than has been announced, in our view.”

Plans call for opening 35 new or relocated units in 2008. One store originally scheduled for this year has been deferred to 2009. The company also will renovate a total of 20 stores this year. The company will open 12 new stores in the third quarter, 11 of them in the off-mall format. The chain also continues to expand its Sephora in-store makeup boutiques, and will open 10 in the third quarter for a total of 91.

“[Sephora] continues to be one of the strongest aspects of the business and will expand,” said Ken C. Hicks, president and chief merchandising officer

Total sales were $4.3 billion, down 2.5% from the same period last year. Comparable store sales decreased 4.3%. Net income was $117 million, down 35.7% from the previous year.

The company opened 12 new and relocated stores in the quarter, including 11 in the off-mall format. J. C. Penney operates 1,083 department stores throughout the United States and Puerto Rico.

Source: GlobeSt.

DC: New franchise coming: Here’s the rub

Eric Barton, a regional developer for Massage Envy, is trying to get potential franchisees and stressed residents to see the benefits of a place that offers massage memberships. View Larger

Eric Barton hopes area residents will start to get massages as part of their regular routines, making them almost as common as going to the gym.

The regional developer for Massage Envy Ltd. LLC, an Arizona-based massage franchiser, has opened 11 stores throughout the region, and his goal is to have 40 operating in the area three years from now.

Massage Envy’s services are conventional — six different types of massages, ranging from deep tissue to Swedish — but the business model is different from a typical spa.

The concept is like a gym: Clients commit to an annual membership for a monthly fee of $59, which earns them one massage a month. Additional massages are $49 per 50-minute session. If customers don’t book their monthly appointments, the sessions roll over to the next month, with no expiration date during the year of membership.

The atmosphere at Massage Envy is more akin to a clean, therapeutic office than a luxurious, spa-like environment, Barton said. The company plans to try out some spa-type services such as facials with test audiences in California, but for now the emphasis is purely on massage.

The company was started in 2002 by John Leonesio, a fitness veteran who found massages to be the most profitable aspect of the industry.

There are 450 Massage Envy locations nationwide, with another 350 licenses sold.

A franchise opened at Arlington Gateway on South Glebe Road on Aug. 12, and a location in north College Park will open in September. Five more sites have been leased — in Gainsville, Lake Ridge, Fairfax, Falls Church and Severna Park, Md. — and four more spots are in negotiation. KLNB Retail is handling the leasing.

Most of the franchises are owned by individuals, many of whom purchased multiple locations.

Charles Fisher bought the area’s first clinic in Fredericksburg, Va., from Barton in May 2007, and recently opened another in Dumfries. He wants two more by 2009.

Fisher said the investment was feasible for him and his wife, who both made their careers in the military and wanted to open a franchise during their retirement.

Initial licenses cost $39,000, although a total of up to $400,000 may be needed to build the store out, Fisher said. The Fredericksburg location brought in $1 million in revenue during its first year, he said.

Though Barton said the company wants to appeal to a broad range of clients, Fisher assumed most of his customers, at least initially, would be from high-income backgrounds.

“What a surprise that was,” Fisher said. “We actually found the model lends itself to a wide variety — anyone from 18-year-old college kids all the way up to older, geriatric-type customers.”

The clientele is about 60 percent female and 40 percent male; Fisher predicted the gap would be wider.

Barton said initial conversations with landlords were rough.

“No one wanted to rent us space,” he said. “They were confusing us with the old parlors,” referring to the more notorious cousins of traditional massage joints.

Source: Massage Envy

Back to work in Towson

Nod your head if you have heard this one before: Baltimore County leaders and local developers want to pump millions of dollars into new projects in Towson, with the hope of turning the county seat into a more pedestrian-friendly locale.

It's an effort Towsonians are all too familiar with. Over the past four decades, slews of studies have recommended ways to turn Towson into a more thriving hub of commercial activity.

The latest version calls for more than $700 million to be spent by developers and investors in everything from the expansion of Towson Towson Center to the redevelopment of Towson Commons. Baltimore County is even kicking in about $8 million to put toward new open space and parking projects.

Still nodding? This time, county development officials say the outcome will be different.

"The extent and scope of the development, and the creative way that developers are looking at the physical space, distinguishes this redevelopment plan. They're approaching it with an urban sensibility," said Fronda Cohen, spokeswoman for the Baltimore County Department of Economic Development.

But even as builders move dirt and lay concrete, the viability of this development is clouded by an uncertain economy and perceptions that Towson has long tried to shake. The current downturn and subsequent financing challenges pose the biggest question marks to projects proposed and in development. At least one developer has put the brakes on his project as the housing market continues to suffer.

Other obstacles -- real or perceived -- include Towson's current pedestrian-unfriendly layout, insufficient parking, and a debate over whether the town should cater to the large number of Towson University and Goucher College students. More than 151,000 people live in Towson -- about 4,000 of which are college students living on campus.

"Towson suffers from its image of a college town. As a result, adults and children are not as inclined to come there," said Jennifer Weeks, a local planner and member of the Urban Design Assistance Team (UDAT), a national group hired in 2006 by Baltimore County's Office of Community Conservation to consult on Towson's future.

The projects

The latest redevelopment of Towson consists largely of three commercial projects and four residential ones. Among them are:

• Towson Circle III: Baltimore's Cordish Co. and Heritage Property Inc. are working together again on another Towson Circle project. About four years after developing Towson Circle II, the developers plan to create a "Main Street-style" project with 60,000 square feet of retail space, 60,000 square feet of office space and a 62,000-square-foot cinema atop a 4-story, 700-space garage.

Construction on the $75 million project -- bound by Joppa Road and Virginia, Pennsylvania and Delaware avenues -- is slated to begin in March.

• The expansion of Towson Town Center: Chicago-based General Growth Properties Inc. wants to add about 113,500 square feet to the 1.2 million-square-foot mall on Dulaney Valley Road. The project includes several new restaurants and retailers, including the Cheesecake Factory, P.F. Chang's China Bistro and the Pottery Barn.

Work could be done by October.

• Redevelopment of Towson Commons: The scarcely occupied retail and office complex has been something of a boondoggle for Towson in recent years. Retailers and restaurants have come and gone, including Borders Books & Music and Pizzeria Uno, leaving many storefronts empty.

Three years after buying the property, Washington, D.C.-based Western Development Corp. has yet to fill the 95,000-square-foot retail pad and company officials are mum on their plans. Ben Miller, Western Development's president, declined to comment on the project's status.

Baltimore County economic development leaders said the slow pace of redevelopment at Towson Commons is not linked to the sagging economy. Cohen said it is "not a reflection on the retail or restaurant market."

But little else is known of the progress at Towson Commons, other than leases for existing retailers and the AMC movie theater there will not be renewed because Western plans to reconfigure the space.

• The Palisades: As part of Towson's effort to boost its residential offerings, Southern Management is building a 357-unit apartment complex at Towson Boulevard and Susquehanna Avenue. The nearly $100 million project could be done by spring 2010, assuming construction begins as scheduled this fall.
• The Quarters: As many as 160 Goucher College students could live in the 900-unit condominium and apartment complex under construction at Dulaney Valley Road and Fairmount Avenue. The project is being developed by New Jersey-based Lane Co. and is expected to cost about $190 million.

But the final look and cost of the Quarters is uncertain. It is among the latest victims of the sour economy.

Lane Co. has delayed the second phase of the project for at least 12 months -- from mid-2008 to mid-2009 -- while the housing market remains weak. Jeff Price, a regional partner for the developer, said sales of the 430 residential units expected to open this fall have been slow.

The third phase of the Quarters project, consisting of 135 units, "will commence as the market permits," Price said.

Student-weary residents

Assuming developers do complete proposed residential projects, some community constituents voice concerns over students occupying much of that new space.

"Once you start loading up new apartment buildings with college students, you're going to drive out other tenants, like empty nesters," said Ed Kilcullen, president of the Greater Towson Council of Community Associations (GTCCA). Having an overwhelming student presence in the new housing units will have a negative trickle-down effect on the local economy, by discouraging high-end retailers from moving into the area, Kilcullen said.

Although the Greater Towson Council recently fended off development of a Towson University student housing project in downtown Towson, that won't keep area college students out of new residential projects. Southern Management Corp. predicts college students will comprise the majority of occupants at the Palisades. And Goucher students are expected to occupy part of the Quarters.

During a week-long planning session in 2006, UDAT panelists, community groups, area institutions, and county officials agreed on the need to increase the town's residential core. UDAT also suggested several ways to make Towson more appealing to residents and visitors. Topping the list was greater walkability.

"Every successful city is pedestrian-oriented," said Andrea Van Ragsdale, director of Baltimore County's Revitalization program.

The County is finding ways to increase foot traffic. They include aggressive signage to encourage motorists to circumvent York Road as a thoroughfare, granting the Towson Chamber of Commerce nearly $100,000 for downtown landscaping and maintenance, and narrowing of the Towson Circle, which slows traffic and makes it safer for pedestrians to cross.

Source: Baltimore Business Journal

Cookie company Mrs. Fields to file for Chapter 11

Mrs. Fields Famous Brands LLC, the cookie and frozen yogurt company based in Salt Lake City, said it plans to file for bankruptcy and began seeking support from creditors for a "prepackaged" Chapter 11 plan.

The company filed the turnaround plan Friday with the Securities and Exchange Commission. Unsecured creditors would be paid in full under the proposal while equity holders would get nothing. Funds affiliated with Capricorn Investors LP are the majority owners of Mrs. Fields and support the restructuring, according to the SEC filing.

In a prepackaged bankruptcy, creditors vote on terms of the reorganization before the actual bankruptcy filing, allowing the company to emerge from Chapter 11 more quickly. Creditors must vote by Sept. 15.

The company has 1,268 franchised and licensed locations in the U.S. and 21 other countries, the company said in court filings.

Source: Chicago Tribune

Lehman May Be Selling Real Estate Holdings

According to press reports, citing anonymous sources, Lehman Brothers Holdings Inc. may be in talks to unload as much as $40 billion in commercial real estate assets. The portfolio was valued at $52 billion in November of last year.

Possible buyers include Blackstone, Black Rock, Colony Capital and J.E. Roberts Cos., according to the Financial Times.

In addition, the publication noted rumors that Lehman would absorb future losses from the portfolio up to $5 billion after the sale.

The troubled firm has written down approximately $8 billion due to credit problems to date. As reported previously by CPN, Lehman Bros. has a net loss of $2.8 billion for the second quarter, ended May 31, 2008, compared to net income of $489 million for the first fiscal quarter of this year, and $1.8 billion for the second quarter of fiscal 2007.

The firm also said at that time that it reduced exposure to residential mortgages, commercial mortgages and real estate investments by 20 percent in each asset class.

Lehman made major news in an attempt to shore up investor confidence in June, when it replaced CFO Erin Callan and president & CEO Joseph Gregory. Bart McDade became president & COO, while the firm’s co-chief administrative officer, Ian Lowitt, became CFO.

Lehman was a huge player in both commercial mortgage securitization, as well as a direct real estate investor. Lehman and Tishman Speyer took apartment REIT Archstone Smith private in a $22 billion transaction last October. Overall, Barron’s reports that Lehman has from $65 billion to $70 billion in real estate exposure. That has fallen from $87 billion on Feb. 29.

No one involved, including Lehman Bros, would comment on the possible talks now taking place.

Source: Commercial Property News

Consumers mood improves a bit early Aug: survey

NEW YORK (Reuters) - Consumer confidence improved slightly in early August thanks to a drop in gasoline prices, but worries about a recession still weighed heavily on consumers' minds, according to a survey released on Friday.

The Reuters/University of Michigan Surveys of Consumers said its index of consumer confidence edged up to 61.7 in early August from 61.2 in late July. It fell short of economists' median forecast of 62.0, according to a recent Reuters poll.

The gauge looked ominous for the U.S. economy, which is dependent on consumer spending and currently in a fragile state. Consumers have already been struggling for months from the fallout of a persistent housing slump and tight credit.

"There is little doubt among consumers about the likelihood of a recession," Richard Curtin, director of the surveys, said in a statement.

This grim outlook led to a drop in the report's current conditions index to 69.3 in early August from 73.1 in late July and a forecast 73.2. The August reading was the second lowest since 1980 with the lowest set in June.

The report's expectations index, however, rose to 56.8 from 53.5 in late July. Analysts had expected a figure of 53.9.

A silver lining in the latest survey was a drop in consumers' inflation expectations in the next 12 months.

The one-year inflation expectations gauge slipped to 4.8 from July's 5.1 percent, which was the biggest one-month drop since September 2006.

The index on five-year inflation expectations held steady at 3.2 percent.

Source: Reuters

Toys ‘R’ Us pinning hopes on new superstores

Selling toys to kids is not child's play. Toys "R" Us, a $13.79 billion company based in Wayne, N.J., is trying to run with the market leader --- Wal-Mart --- by building toy "supercenters" around the country.

The grand opening of the first toy superstore in metro Atlanta is today.

The store is filled not just with toys but with the latest hopes of a retailer that has seen competitors such as FAO Schwarz file for bankruptcy. And Toys "R" Us has faced losing market share to Wal-Mart and Target's low prices.

In the superstores, Toys "R" Us is putting cribs, strollers, diapers and onesies under one roof with Hannah Montana electric guitars, Harley-Davidson-branded Big Wheels and Ripsticks, a two-wheeled skateboard.

The super-sized, 70,000-square-foot toy store here is anchoring a new strip mall, the Plaza, at 3480 Financial Way in Buford, a suburb near Lake Lanier. It's the seventh "super" toy outpost nationwide for the 60-year-old retailer. Toys "R" Us CEO Gerald Storch says 20 more are planned this year.

"Eleven years ago, we started Babies 'R' Us as a stand-alone [store]," Storch said. "But we fractured the traffic so parents would have to choose between them. In this era, people don't want to go to multiple places."

Toys "R" Us also has upgraded its aisles and inventory to look more like Target, known for fashionable gear and trendy looks at a cheaper price.

"The stores were not in fighting shape when I got here," said Storch, the former No. 2 executive at Target who has headed Toys "R" Us since 2006.

Toys "R" Us is owned by KKR, Bain Capital and real estate firm Vornado Realty Trust. They took the chain private for $6.6 billion in 2005.

Storch says Toys "R" Us is not a discount brand like Target, and the changes reflect the desire to be "the authority" on everything from baby bottles to toys. He emphasized he is not copying Target, but doing things that make sense for selling toys --- such as branding aisles pink for girls or blue for boys.

Industry watchers said it makes sense for Toys "R" Us to team up with Babies "R" Us because the baby business is year-round, while toys are seasonal, peaking over the holidays.

"Babies 'R' Us is successful and not seasonal," said Sean McGowan, an analyst with Needham & Co. in New York. "That's probably the biggest 'aha.' "

Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York, said Toys "R" Us "has gone through a lot of pain."

About 15 years ago, when he consulted for the company, Toys "R" Us led the American toy market with a 28 percent market share, he said. Today, market share has dropped to 16 percent, with Wal-Mart at 26 percent. Target is third.

By combining the babies and toy stores, Toys "R" Us is trying to create a destination, Davidowitz said, which is "logical."

Jim Silver, editor of Toys and Family Entertainment in New York, said the new concept makes sense.

Said Silver: "People are creatures that often don't change. This will be a one-stop shop from the time a child is born."

That was true for Amy Rundell of Duluth, who was shopping at the new store in Buford on Wednesday. She has a 19-month-old daughter, Molly, a 7-year-old son, Max, and is expecting another baby.

She was happy she won't have to drive out of her way anymore to go to a Babies "R" Us store. "This is great. One stop," she said.

Storch said that's the point.

"We think we can do even better with Toys 'R' Us and Babies 'R' Us by merging their strengths," he said.

The company still plans to build more Babies "R" Us stand-alone stores. But going forward, the strategy will also include more superstores, or Babies "R" Us areas within the smaller Toys "R" Us footprints. One of those is in the works for Savannah. Storch said the goal is to open about two dozen converted stores and 20 new superstores per year.

Source: Atlanta Journal Constitution

Keeping Up with Retail Trends

I make it my job to keep up with the latest retail trends so that I can better understand our clients and prospects. The women in my family enjoy Ann Taylor, so I look to see how they are doing every once in a while. The other day I was looking through their annual report and found something very interesting.

This is what Ann Taylor, Inc. had to say about their growth plans, “We understand that the economy invariably goes through cycles. We firmly believe that the manner in which we approach growth and manage our business through these cycles will differentiate us and determine our success in the market over the long term. In this regard, we have planned fiscal 2008 cautiously and realistically, focusing on three key areas-the evolution of our brands and channels, the reduction of our overall cost structure, and the continued pursuit of growth. This approach is designed to enable us to effectively navigate the current environment, while position Ann Taylor as a stronger, leaner Company dedicated to growing the value of your investment year in and year out.”

As one of our senior vice presidents has been known to say and the CEO of Ann Taylor amplifies here… “A good economic downturn is a terrible thing to waste.” It is important for retailers to understand that there is no better time to grow than right now. The successful retailers will take care of that and the others will be out of business.

Source: Buxton.com

Wilsons to shutter stores, liquidate

PreVu Inc., formerly known as Wilsons The Leather Experts Inc., announced Thursday that it is going out of business.

Brooklyn Park-based PreVu “has been unable to obtain the capital or other financing necessary to pursue the mall accessories store concept and continue its operations on a long-term basis,” the specialty retailer said in a U.S. Securities and Exchange Commission filing.

The company plans to fully liquidate its 100 mall stores by the end of October.

In July, Wilsons sold its name, online operations and 116 outlet stores to New York-based sportswear maker G-III Apparel Group for $22.3 million. Wilsons changed its name to PreVu as part of the deal.

In recent years, Wilsons had started shifting its focus away from jackets and other high-end leather goods toward purses and other accessories, but the updated concept never gained traction.

Source: Minneapolis/St. Paul Business Journal

Steve & Barry's LandLords Object to Sale

Steve & Barry's landlords objected to the sale of the bankrupt clothing retailer, saying the proposed buyer hasn't proven it will pay rent and asking that stores stay open before holiday sales.

Landlords holding leases for 14 shopping-mall locations said in papers filed in Manhattan bankruptcy court yesterday that Steve & Barry's is in arrears by about $376,000 in rent since seeking protection from creditors. They asked that Bay Harbour Management guarantee payment on the leases and provide them with its financial statements, tax returns and operational history before being approved as a buyer.

The landlords "have been provided no information" about Bay Harbour's financial condition, they said.

Steve & Barry's, based in Port Washington, New York, won court approval to auction its assets on Aug. 18 after Bay Harbour placed an initial bid of $163 million.

Souorce: NY Post

Macy’s Refutes Store Closing-Plan Rumors

CINCINNATI-Contrary to the grapevine, Macy’s does not expect any major change in store closing plans next year, the management said at its second-quarter conference call.

In the quarter, the company opened a new Macy's in Houston. The company also will add FAO Schwarz toyshops in up to 275 Macy’s stores in the fall.

“From time to time, there’s been a rumor that we’re going to close a large number of stores. I don’t see that happening,” said Karen M. Hoguet, executive vice president and CFO. “But as we do every year, we will close poor-performing stores. But I don’t expect any extraordinary store closing announcement.”

The bankruptcy of such chains as Mervyn’s, Goody’s and Boscov’s will not mean a major boost to sales.

“It can’t be bad for us, but we don’t see a big opportunity coming from that,” Hoguet said.

Sales in the second quarter totaled $5.7 billion, down 3% from the same period last year. Same-store sales declined 2.1%. Net income was $73 million, down from $74 million last year.

Macy's operates 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the Macy's and Bloomingdale's names.

Source: GlobeSt.

Uno's CFO says company not in danger of default

NEW YORK - Uno's Chicago Grill has the resources to pay a $7.5 million interest payment due Friday but is availing itself of a 30-day grace period, the company's chief financial officer said Wednesday after a report raised concerns that the chain might default.

Louie Psallidas, CFO of parent company Uno Restaurant Holdings Corp., said in an interview that the chain was holding out on the payment in an effort to recapitalize the business.

"We have a productive active dialogue going on with our bondholders," Psallidas said.
The Wall Street Journal reported Wednesday, citing sources it did not identify, that the chain famous for its deep-dish pizza was deferring the payment and was in talks for a waiver or an amendment. The interest payment is on the company's $141 million in senior secured notes.

Psallidas said the original agreement for the notes in 2005 included a clause allowing a 30-day grace period for the payment - a clause he said was standard in such a document.

Uno's wants to restructure its balance sheet, Psallidas said, adding that if a recapitalization can not be hammered out within the grace period, it will make the interest payment. He emphasized that until the 30 days are up, the company is not in default.

The news that Uno's would not make the payment on its original due date came just weeks after fellow casual dining company S&A Restaurant Corp., the parent company of Bennigan's and Steak & Ale restaurants, filed for Chapter 7 bankruptcy protection under pressure to repay its debts. S&A is owned by Metromedia Restaurant Group, a part of billionaire John Kluge's empire. In a Chapter 7 filing, a company seeks to liquidate its assets and close its doors.

Several other chains have filed for bankruptcy protection this year, including Vicorp Restaurants Inc. - which operates the Village Inn and Bakers Square chains - and Roadhouse Grill Inc.

With gas prices staying above year-ago levels and the housing market still in tatters in many areas of the country, restaurants have been struggling. Cash-strapped consumers, wary of spending money on a dinner out with the economy faltering, have cut back on discretionary spending. The hardest hit have been casual dining chains and bar and grill restaurants, which charge higher prices than fast food and other quick-service chains.

Meanwhile, commodity and labor costs have soared, squeezing margins. Credit has also tightened.

The combination of those factors at once has made it difficult for some chains to make enough money to pay their debts. Chains that used previously easy-to-get credit to expand quickly in the early 2000s may be most in danger since the debt from that growth is now coming due, analysts have said.

Same-store sales for Uno's first quarter fell 2.3 percent, slightly more than the average 1.1 percent decline at mid-priced sit-down chains, according to research service Knapp-Track, which measures sales at more than 10,000 restaurants.

Source: Plain Vanilla Shell

Barnes & Noble unlikely to bid for Borders: report

NEW YORK (MarketWatch) -- Barnes & Noble Inc. is not expected to bid for its main rival Borders Group Inc., according to a report Thursday in The Wall Street Journal, which cited people familiar with the situation.

The decision reflects tough lending markets that could have made financing difficult as well as concerns about the length of some of the leases Borders has signed, the newspaper reported.

Ann Arbor, Mich.-based bookseller Borders put itself up for sale in March due to potential liquidity problems and a failed foreign asset sale. At that time, the company determined that it needed more capital for 2008, and the difficult credit markets rendered some financing alternatives unavailable, Chief Executive George Jones said in a statement in March.

In May, The Wall Street Journal reported that Barnes & Noble had assembled a team to study a bid.

Barnes & Noble could still change its mind and make an offer, but Borders is hoping to complete the auction by the end of September, the Journal's latest report said. However, if Barnes & Noble does end up bidding for Borders, it's not clear whether antitrust authorities would clear the deal.

Both Barnes & Noble and Borders have faced increased competition from online retailers like Amazon.com while overall book sales haven't shown much growth, analysts have said. A combination between the two book giants could yield cost savings and bolster sales and profit, though the close physical proximity of some of the competing stores may pose a challenge.

Source: MarketWatch.com

Retail Sales Fall For First Time in 5 Months

WASHINGTON--Retail sales fell in July, the weakest performance in five months, as a variety of economic woes combined to blunt the impact of billions of dollars in government stimulus payments to U.S. households.

The Commerce Department reported Wednesday that retail sales dipped 0.1% last month, the first decline since sales had fallen by 0.5% in February. It was a worse showing than the flat reading economists had been expecting.

The weakness last month came after another big slide in auto sales as Detroit faced its worst sales month in 16 years. Automakers have been battered by the weak economy and record gasoline prices which have cut into demand for their once-popular sport utility vehicles and pickup trucks.

Excluding the big drop in autos, retail sales would have posted a 0.4% increase. While that was a positive reading, it was still the weakest showing for sales excluding autos in five months.

Much of what little strength there was in July came from a big jump in sales at gasoline stations, which were up 0.8%. That increase reflected surging prices rather than increased demand, however.

Gasoline pump prices hit an all-time high during the month at $4.11 per gallon. Without the big rise in gasoline station sales, retail sales would have fallen by 0.2% in July.

The disappointing performance of retail sales meant that the consumer sector, which accounts for two-thirds of total economic activity, got off to a weak start at the beginning of the third quarter. The government wrapped up distributing the bulk of the economic stimulus payments for a total of $92 billion through the end of July.

The Bush administration and Congress rushed a $168 billion package of stimulus payments to households and tax breaks for businesses through Congress at the beginning of this year. They were hoping to keep the worst slump in housing in decades and a severe credit crunch from pushing the country into a deep recession.

The stimulus payments, which the government started distributing in late April, have had only a limited impact on consumer spending. Their benefits have been blunted by a surge in gasoline prices that was occurring at the same time.

Studies have shown that so far about only 20% of the stimulus checks have been spent with consumers choosing to save much of the rest of the payments. The administration argues that the checks will get spent in coming months, helping to lift economic activity for the rest of the year.

Private economists are not as optimistic. Some believe that the effects from the stimulus will fade after the current quarter and activity in the final three months of this year and the first three months of next year will slump dramatically. Some economists believe that the gross domestic product will contract in both quarters, fulfilling the classic definition of a recession.

Democrats in Congress have begun to push for a second stimulus package. So far, the Bush administration has opposed it in part over concerns about what further stimulus activity will do to the budget deficit. The administration is already projecting the budget gap will hit a record of $482 billion next year.

For July, the retail sales report showed that sales at department stores and other general merchandise stores rose by 0.3%, just half the 0.6% June increase. Sales at restaurants and bars, which have been hit hard by the current slowdown, dipped by 0.2% in July after a modest 0.3% June gain.

Sales at furniture stores, which have been hurt by the steep slump in housing, rose by 1% in July but that followed a 1.2% decline in June.

Source: Fox News

No Stopping TJX

Millions of people have their personal financial records exposed when TJX Cos. has its computer systems hacked - not a problem. The economy softens and people reign in their spending, just not at TJX.

It appears no amount of bad news is enough to keep TJX and its chains including T.J. Maxx, Marshalls, HomeGoods and A.J. Wright from rolling right along. Sales at TJX stores open at least two years increased four percent in the latest quarter with a number of divisions in North America and Europe seeing high single and low double-digit revenue increases.

The company's CEO Carol Meyrowitz said it has benefited from being able to buy designer clothing, shoes and bedding on the cheap as department stores found themselves having to cut back on inventory and close stores.

TJX's allure is easy to understand, according to Patrick McKeever, an analyst with MKM Partners. "You know you are getting a good deal at T.J. Maxx and Marshalls,'' Mr. McKeever told Bloomberg. "If you look at off-price retailers, like TJX... you wouldn't know we're in a widespread consumer slowdown."

"In down economies, we tend to capture new customers," said Carol Meyrowitz, chief executive at TJX. "When times improve, our history has shown that our new customers stay with us because they love our value."

One TJX chain that has not fared so well is its Bobs Stores business. Same-store sales were off five percent and the company is exploring "strategic options" for the chain.

Source: RetailWire

As Supercenters Gain, Wal-Mart Still Attracts The Affluent

While the limping economy has hurt most retailers, Wal-Mart continues to be a big beneficiary. A new report from Information Resources Inc. finds that the Bentonville, Ark.-based company is posting market-share gains in an impressive 84% of the top 100 consumer-product goods categories.

While lower- and middle-income shoppers increased their spending at Wal-Mart when the economy started to soften, the report finds that the bigger change has been upper-income consumers who have flocked to Wal-Mart in the last six months, as gas prices soared. The report says that the combination of $4 prescriptions, competitive prices in key food categories, and wider product assortments are responsible for the shift.

"Low prices and one-stop shopping have proven to be an incredibly powerful combination at a time when consumers are forced to strategize to maximize gas usage and stretch budgets as far as they will go," the company says in its release. "Wal-Mart is exceptionally well positioned for growth."

Of course, Wal-Mart isn't the only store benefiting from this shift in shopping patterns, as consumers balance the need to save money on groceries with the pressure to use less gas. The result is fewer, larger trips, and all supercenters have been capturing share in all income and lifestage segments, as well as attracting those who shop heavily in competing channels.

In the 12 months ended in June, IRI says three-quarters of all shoppers typically visit five or more channels for consumer products. But while 50% say they are often shopping around for better deals, only 10% are now willing to drive further to get them. While grocery stores still lead the way with a 55.2% share of shoppers, that represents a decline of 0.2%. Supercenters are next, with a 15.1% share--a gain of 1.4%.

The report finds that grocery stores have lost ground in the fresh/perishable, frozen and center store categories, including high-demand meal ingredient and meal component foods. And Wal-Mart--despite a decline in share its private-label goods--has made considerable gains in meal ingredients, meal components and convenience meals.

Source: MediaPost

Best Buy could lose share to discounters

CHICAGO - An analyst said electronics retailer Best Buy Co. Inc. will likely lose market share if heavyweights Target Corp. and Wal-Mart Stores Inc. began to offer installation services to customers.

Citi Investment Research analyst Kate McShane, initiating coverage of the nation's largest consumer electronics retailer, said in a research note late Monday that she was giving the company a "Hold/High Risk rating" and a $47 price target.

"Despite Best Buy (nyse: BBY - news - people )'s growth opportunities we think the sluggish macro environment and increased competition at retail will continue to weigh on results in both the short and long term," McShane wrote to investors.

McShane said Best Buy could face a disappointing fourth quarter - a vital time for retailers - as consumers push more of their spending into earlier periods of the year.

Meanwhile, the Richfield, Minn.-based company could also face pressure from other retailers such as Target Corp. (nyse: TGT - news - people ) and Wal-Mart Stores Inc. (nyse: WMT - news - people ), which has made strong inroads into the consumer electronics sector in recent years.

"We are increasingly concerned by the competitive environment with discounters' foray into providing services for the consumer," McShane wrote. "Customer service and installation is one of Best Buy's competitive advantages in a highly competitive and commoditized industry. While Wal-Mart and Target have no where near the service level of Best Buy (which includes home installation from Magnolia and Geek Squad) the fact that these companies are starting to offer installation in a difficult environment could result in a slow down in share gains or possibly even share loss for Best Buy."

McShane said Best Buy's outlook stands to improve if economic conditions reverse and a major competitor collapses, but its fortunes could head south if there's a lack of new product introduction and discounters begin to amass a larger market share.

Best Buy shares rose $1.62, or 3.8 percent, to $44.40 in trading Monday. The stock is down 19 percent in the year to date.

Source: Forbes

Tween Brands to rebrand Limited Too stores

Tween Brands Inc. said Tuesday it's converting nearly 600 Limited Too stores to its lower-priced Justice brand as cost-conscious parents steer their children toward more discounted stores.

The move will give the Justice chain about 900 stores - nearly triple its current size - when the conversion is completed in the first quarter.

After the change, the New Albany, Ohio-based teen clothing chain will no longer operate its Limited Too stores in the U.S., ending the brand's two-decade history as a shopping mall stalwart. In addition to the stores being converted, the company will also close about two dozen Limited Too stores.

Still, some of the Limited Too's clothing will continue to be sold in Justice stores, where most apparel is about 25 percent less than its sister chain.

"Limited Too was the brand that introduced great fashion to tween girls, but our customers are looking for the next great thing and their parents want more value for their dollar," Tween Brands (nyse: TWB - news - people ) chairman and chief executive Mike Rayden said in a statement.

The desire for cheaper apparel was dragging down the company's performance, as comparable sales - an important retail industry metric - fell 11 percent at the Limited Too during the second quarter. Same-store sales rose 3 percent at Justice.

The company said the deal will save up to $25 million after taxes.

It will record an $18 million charge in the second half related to severance, store closings and other charges related to the transition.

Meanwhile Tuesday, the clothing chain said its poor springtime inventory choices and a sluggish economy kept shoppers away from its Limited Too stores, dragging down the company's profit.

For the quarter ending Aug. 2, the children's clothing merchant lost $6.7 million, or 27 cents per share. That compares with a profit of $2.1 million, or 7 cents a share, during the same period last year.

Revenue rose 4 percent, climbing to $223.1 million.

Tween Brands shares fell $2.52, or 16.9 percent, to $12.36 in after-hours trading. The company's stock fell 23 cents, or 1.5 percent, to $14.88 in regular trading.

Source: Forbes

CVS Caremark buys Longs Drug Stores

Drug store chain CVS Caremark Corp., looking to build its West Coast presence, said Tuesday it would buy Longs Drug Stores Corp. in a deal valued at $2.7 billion. The $71.50 per-share cash offer, announced after the end of trading Tuesday, was a 32 percent premium over Walnut Creek, Calif.-based Longs' closing price of $54.04. Longs' shares soared 30 percent, or $16.21, to $70.25 in after-hours trading. Including the assumption of the chain's roughly $200 million in debt, the deal is valued at about $2.9 billion. Executives at Woonsocket, Rhode Island-based CVS said the acquisition will give the nation's largest provider of prescriptions significant inroads in fast-growing West Coat markets where property is often unavailable or expensive to acquire. "Geographic reach has become a more important thing for us," CVS Chief Financial Officer David Rickard told The Associated Press in an interview. "CVS has always wanted to be in good markets that grow, and if you look at population centers of the United States, we're in most of them. ... This directly addresses the central and northern California markets and gives us access to those consumers." The deal is expected to close in the fourth quarter. Longs operates 521 drugstores _ mostly in California _ but also has sites in Hawaii, Nevada and Arizona. The company also owns Rx America, a prescription benefits management program with more than 8 million members. CVS executives said building such a portfolio could take the pharmacy chain a decade to complete, while spending hundreds of millions to acquire on property. "These are highly attractive regions of the country, where we are not currently represented," CVS Chairman and Chief Executive Tom Ryan told investors during a conference call. "And they are very difficult real estate markets to penetrate." The Longs stores in the continental United States will be converted to the CVS brand in 2009, while sites in Hawaii will retain the Longs' name for the foreseeable future. After the acquisition is completed, CVS will operate 6,800 drugstores in 41 states and the District of Columbia. "Given our changing industry landscape, we believe this combination is the logical step for our company," said Warren F. Bryant, Chairman and Chief Executive Officer of Longs. Longs' stock has climbed since the spring amid speculation the company would seek an outright sale or alternatives for its real estate portfolio. During the second quarter, the company's same-store sales fell 1.1 percent as more generic drugs flooding the market ate into profits. Meanwhile, total sales increased 0.5 percent to $1.2 billion. Year-to-date, Longs said its same-store sales declined 0.1 percent, but total sales increased 1.7 percent CVS shares fell 49 cents, or 1.3 percent, to $38.05 in trading Tuesday, before falling $1.67, or 4.4 percent, to $36.38 in after-hours activity. Source: Indianapolis Business Journal

NJ: 14-Screen Theater Starts Construction

SECAUCUS, NJ-Construction has started for a 14-screen, stadium-style theater operated by Kerasotes ShowPlace Theatres within Hartz Mountain Industries’ Harmon Meadow mixed-use community here. The new location was reported by GlobeSt.com in May, and with the start of construction the Chicago-based Kerasotes is projecting a fall 2009 opening.

The 2,752-seat venue also marks Kerasotes’ initial foray into the New Jersey market, notes COO Dean Kerasotes. The cost of the project hasn’t been released.

The construction start comes as the locally based Hartz takes the wraps off a renovated Plaza Courtyard within Harmon Meadow. The pedestrian walkway surrounded by stores, restaurants, hotels and offices has been redeveloped with a replica of the Chartre Labyrinth, copied from the Notre Dame de Chartres Cathedral outside of Paris.

"Labyrinths have their origin in prehistoric times and offer an opportunity for reflection and recreation, which is what our plaza does for office tenants and visitors," says Emanuel Stern, Hartz’s president and COO.

Harmon Meadow has several other retail openings on the immediate horizon. A Toys ‘R’ Us and Babies ‘R’ Us combo superstore and TJ Maxx are both slated to open in the fall, and a Sports Authority is under construction and on target for a spring 2009 opening. All three are Harmon Meadow’s Mill Creek site.

Source: GlobeSt.

Bulfinch Triangle project OK'd

The Boston Redevelopment Authority has approved a $160 million hotel, office and retail project in Boston’s Bulfinch Triangle neighborhood.

Construction work is slated to begin during the first quarter of 2009 and is expected to take two years to complete. The project will also bring approximately 240 construction jobs and about 275 permanent jobs.

Dubbed The Merano, the project will include two moderately-priced hotels — a 153-room short-term hotel and an 121-room extended-stay hotel, as well as 206,000 square feet of office, 10,000 square feet of retail space and 13,000 square feet of restaurant space. The hotels will be operated by the Marriott Hotels.

Located across from the TD Banknorth Garden and in close proximity to the Rose Kennedy Greenway, the hotels at The Merano will accommodate tourists and fans attending events at the Garden, according to a BRA press release.

The demolition of the elevated I-93 highway helped make the 54,900 square-foot property available for development. It consists of three parcels owned by the Massachusetts Turnpike Authority.

The development team includes: Boston Development Group; architecture firm CBT Inc; permitting consultant Epsilon Associates Inc.; Engineering firm Howard/Stein-Hudson Associates Inc. acting as transportation consultants; and the law firm Goulston & Storrs LLP as legal counsel. The project includes public benefit such as: $50,000 to support a comprehensive traffic study of the Bulfinch Triangle neighborhood in coordination with the Boston Transportation Department; $75,000 to support neighborhood improvements; $300,000 for the city’s Crossroads Initiative; $12,000 for the Bulfinch Triangle Streetscape Improvements Initiative and the generation of substantial annual property and hotel taxes.

Source: Boston Business Journal

Challenging Months Ahead for Shopping Center Owners

As the number of retail store closings continues to rise, landlords in the retail sector should brace for falling rents and declining occupancy. Property & Portfolio Research expects the final tally of store closings for the year to climb to more than 6,000, compared with 4,600 closings in 2007. As of mid-August, Boston-based PPR reports 5,300 closings.

The breadth of the closings has caught the industry off-guard. “The industry believed that you were just going to see the Home Depots of the world, the furniture stores, the ‘Granite counter tops are us’-type retailers get hurt. They are surprised to see how quickly it spread to other types of retailers,” says Suzanne Mulvee, a senior real estate economist with PPR.

Of the store closings tracked by PPR, 46% are located in malls and about 43% in strip centers, with the remaining stores tied to big-box retailers. The current retail vacancy rate nationally is 11.8%, according to PPR. The firm forecasts the vacancy rate to rise to approximately 13% by the end of 2008 and 14% by late 2009.

Considering the softer occupancy, PPR expects rent increases in the retail sector to decline 1.7% this year, which means landlords will have to give back the 1.7% rent growth seen in 2007. PPR forecasts retail rents to drop 0.5% in 2009.

One beneficiary of the rising number of store closings is Lake Success, N.Y.-based Excess Space Retail Services, which helps retailers restructure leases and dispose of unwanted properties. Excess Space expects to work on 3,000 or more store lease restructurings this year, a 50% increase from the 2,000 restructurings the company worked on last year.

“Business is booming. It will be very robust for us this year and for sometime into the future,” says Michael Weiner, president and CEO of Excess Space.

Landlords are becoming creative in dealing with lease terminations and restructuring leases so that they can maintain occupancy levels, according to Weiner. They are increasingly receptive to rent concessions and subleases.

“Landlords are more open to the tenants we bring them instead of raising objections. Right now, many of them are just happy to see the spaces get filled as long as the tenant isn’t hurting any of the other tenants they have,” says Weiner.

Excess Space’s business is growing, especially in states that are at the heart of the housing downturn, such as Florida, California, Nevada, and Arizona. In these states, “The economic climate is bad, and we see a lot of additional sites being added to the portfolio,” says Weiner. “People don’t have discretionary income, and they are severely hurt by the impact the housing market (downturn) has had.”

Apparel stores accounted for about 35% of the 2,831 store closings tracked by the International Council of Shopping Centers (ICSC) in the first half of 2008. The retailers that added to this tally include Wilson’s Leather, Goody’s Family Clothing, Ann Taylor, and Geoffrey Beane-outlet stores.

Retailers focusing on home entertainment, home furniture and furnishings, and food and beverage have also been at the forefront of the store closings during the first half of 2008.

About 6.5% of the store closings through the first half of 2008 tracked by the retail industry trade group were in the home furniture and furnishings niche, one that moves in tandem with the housing market. However, this is an improvement considering that this niche accounted for more than 14% of store closings in the first half of 2007, and about 34% of the closings in the second half of 2007, according to ICSC.

“The stores that are more susceptible to slowdowns in the economy are the stores announcing closings,” notes Abigail Marks, an economist with CBRE Torto Wheaton Research in Boston. “Consumers have less discretionary income right now, so non-essential goods such as clothing are struggling with sales. Thus, some clothing retailers have to close stores.

”PPR’s Mulvee anticipates that, following a soft 2008 Christmas season, the first quarter of 2009 will likely be another big quarter for store closings with as many as 3,400 closings projected.

Source: National Real Estate Investor

FTC reopens examination of Whole Foods deal

The Federal Trade Commission on Monday reopened its antitrust investigation into Whole Foods Market Inc.'s purchase of Wild Oats Markets.

An order from the commission indicates it's taking another look at the matter and has scheduled a conference for Aug. 18 that will establish a schedule for the investigation.

Austin-based Whole Foods completed its $565 million purchase of Boulder, Colo.-based Wild Oats in August 2007.

Prior to the closing of the deal, the FTC had tried to stop it. That move was blocked by a federal judge who refused to issue an injunction to halt the merger.

On July 29, a federal appeals court ruled that that judge had erred in denying the FTC's request. That decision has prompted the government to reopen the antitrust case.

Despite the setback, Whole Foods' stock climbed more than 4 percent on Monday to close at $19.50 a share.

Source: Austin Business Journal

Zara overtakes Gap to become world's largest clothing retailer

Spanish fashion chain Zara has ­expanded so rapidly in recent months that it has overtaken its main US rival Gap to become the world's largest clothing retailer.

Beloved by proponents of fast-fashion, Zara has spread its reach across the globe at a time when Gap has suffered from plummeting consumer spending in the US.

Inditex, Zara's parent company, recorded a 9% increase in sales to €2.218bn (£1.7bn) in the first quarter of its financial year. It also benefited from the strength of the euro to edge slightly ahead of Gap which saw its revenues fall by 10% and recorded sales of €2.169bn in the same period.

The difference may be tiny, but ­Inditex claims it is significant: for the first time the Spanish group has inched past its American rival.

The group, whose high street store Zara has led the charge, hopes to consolidate its lead over rivals later in the year as it continues to expand overseas in spite of the economic downturn.

It is three years since Inditex overtook H&M, to become the biggest clothing retailer in Europe. But the rapid growth is nothing new to a company which first started in 1963 in the bedroom of chairman Amancio ­Ortega's home in Galicia, northwest Spain, making bathrobes.

The first Zara store was opened in 1975, in A Coruña in Galicia. The 1980s saw rapid expansion across Spain, followed by the opening in 1988 of the first Zara store outside Spain, in Porto, Portugal.

Other shops followed swiftly in New York in 1989, Paris in 1990. Now the group has nearly 3,900 stores in 70 countries around the world.

Inditex has managed to get so far, so fast largely through the use of innovative management and logistics techniques, which have now become the subject of studies in business schools around the world.

In simple terms, it follows the same 'oil stain' pattern when moving into a new market. This involves opening one 'insignia' store aimed at building up its name in a new location, before setting up smaller shops of different brands to reach a certain density of outlets that allows it to create economies of scale and boost profit margins.

For a company which spends very ­little on advertising, its shops have always been its principal marketing tool, so many are purpose-built to look like fashion boutiques.

The key to Inditex's brand ­diversification lies in the group's vertical integration. Almost all the phases of developing and selling a new product are carried out in house — from design and production to logistics and sales.

Shop staff are encouraged — even expected — to keep Inditex designers in touch with any fashion trends as soon as they spot them, so the group can turn them round as soon as possible. A small team of in-house designers then works to keep up — if not ahead — of trends and get them on to the high street as soon as possible.

An Inditex spokesman said: "The ­success of the model lies in being able to adapt what you're ­offering in the shortest time possible to what ­clients want.

"For Inditex, time is the principal ­factor to take into account, more so than the costs of production."

Last year, Inditex saw profits rise by 25% to €1.25bn. Zara remains Inditex's most important brand, with sales of €6.26bn in 2007, which represented two thirds of the group's total revenues of €9.43bn.

Inditex has managed to branch out to a younger generation with its Bershka brand. This is where rivals have struggled to attract fickle, younger customers.

Gap in the market In particular, Gap has found that as its core customer base has aged and looked elsewhere, the chain has struggled to attract a younger generation to its stores. The company's Banana Republic chain in the US has fared better although a cheaper brand, Old Navy, has been a patchy performer.

For much of the past four years, Gap's sales have been falling. The company brought in a new chief executive, Glenn Murphy, last year to turn around its performance but just as things were showing signs of improvement, the US economic slowdown caused a dip in consumer spending.

Gap has 3,100 stores globally and employs about 150,000 people. A Gap spokeswoman declined to comment on the loss of the top spot to Zara.

Inditex's Bershka recorded sales of €925m last year with Massimo Dutti, Inditex's more upmarket offshoot , bringing in €696m in sales in 2007, while Pull and Bear, which sells casual wear aimed at a younger people, recorded €614m sales. Stradivarius, meanwhile, offers cutting edge designs. Its sales last year were €521m. Other brands, such as Oysho, a women's lingerie chain, and Zara Home, the furnishings chain, recorded sales of more than €200m each. The ­newest addition to the Inditex stable is the accessories chain Uterque.

Ortega, 72, remains the group's ­reclusive chairman, who hardly ever appears in public and never grants interviews. He has already anointed his 24-year-old daughter Marta Ortega Pérez as heir. She is expected to take a role in the boardroom but has also been reportedly working on the shop floor learning the ropes.

Source: The Guardian

Shoppers Make Fewer Supermarket Trips: Report

CHICAGO — Shoppers are making more trips to supercenters and dollar stores and cutting back on their supermarket visits, according to the latest Times & Trends report from Information Resources Inc. here. The report, “Channel Migration 2008,” showed that supercenters enjoyed a 5.5% gain in average purchase occasions per household for the 12-mointh period that ended June 15, followed closely by dollar stores, which saw a 4% increase in visits. Supermarkets visits declined 2%. The numbers were also reflected in CPG dollar share, which was up 1.4 points at supercenters, to 15.1% of CPG share, vs. a decline of 0.2 points, to 55.2% of share, at supermarkets. Supercenters saw gains among all consumer segments measured, while supermarkets saw gains only among Hispanics. For more on this report, go to supermarketnews.com/trends.

Source: Supermarket News

Seven For All Mankind Debuts New York Flagship

Denim label Seven For All Mankind, owned by Greensboro, N.C.-based VF Corp., debuted its first flagship in New York's SoHo neighborhood yesterday, according to WWD.com. The 3,000-sq.-ft. store replaces the former Smith & Hawken home and garden space at 394 W. Broadway. As Seven's fourth full-price unit--in addition to locations in Los Angeles, Dallas and Malibu, Calif.--the SoHo flagship is the largest store yet. The store features a gallery space to showcase art projects, kicking off with photographer Tim Mantoani's "Behind Photographs" exhibit. The interior of the space is similar in design to the Los Angeles store, but also features unique elements such as plank flooring, a staircase, white marble and polished chrome. The SoHo store will initially carry 70 percent denim and 30 percent sportswear.

"We've never been able to tell the brand's whole story in a retail environment here. From a global standpoint, New York hits everyone," said Aaron Battista, vice president of retail for the company. Seven plans to open 100 stores over the next five years, with nine locations scheduled to open this year, and 20 to launch in 2009, Battista said.

Source: Display & Design Ideas

Sports Authority to Open 11 New Stores This Week

ENGLEWOOD, Colo. , Aug. 8 /PRNewswire/ -- Building on its lead as the country's largest full-line sporting goods retailer, Sports Authority will formally open 11 new stores in eight different states Saturday, August 16 , it was announced today by Greg Waters , chief operating officer of the Colorado -based company.

The new stores, each averaging more than 40,000 square-feet in size, will debut in Omaha (2 new stores), Kansas City, Tucson , Phoenix, Austin , Hiram (GA), Gainesville (VA.), Rockwall (TX), Fort Collins (CO) and Amherst (NH).

The grand openings will bring the total number of Sports Authority retail outlets to 441 nationwide. This year alone, Sports Authority plans on opening a total of 37 new stores throughout the country.

Source: AnsomMag.com

The new stores, similar to all Sports Authority locations, will offer the combination of top-line brands, broad product selection, knowledgeable sales staff and competitively low prices that has become the hallmark of the chain's operations. Each will be tailored to the myriad interests of area shoppers, and will feature dedicated sections for footwear, apparel, winter sports, golf and fitness.

"Our goal is to be aggressive in meeting the need and demand for our products and services throughout this country," said David Campisi , president of Sports Authority. "We have already established ourselves as the pre-eminent sporting goods retailer in these markets, and the growth opportunity continues to be attractive. We're excited about expanding our footprint and look forward to success in every one of these stores."

Retailers' 2Q results may not be as bad as thought

Amid the pile of downbeat sales reports for July from retailers, there was a sliver of hope: Second-quarter profits may not be as bad as expected when merchants such as Wal-Mart Stores Inc., Macy's Inc. and J.C. Penney Co. post their results starting this week.

Several companies, from Gap Inc. and Penney to teen retailer Hot Topic Inc., raised their outlooks last week — with help from strict inventory controls and slashing expenses — even as they reported sales declines in July at established stores.

Still, retailers overall are expected to report a fifth consecutive drop in quarterly earnings, according to Ken Perkins, president of research company RetailMetrics LLC. Worries abound about how merchants will stem the erosion of their profits as they confront what could be a deeper spending funk in the critical months ahead.

Among the hardest hit have been clothing stores, which have seen a sales slump worsen in recent months as shoppers buy only what they need. Analysts will be looking for any clues from the earnings reports on when the apparel sector will see a recovery.

The challenge becomes, "how do we drive traffic in a really slow environment?" says Perkins. He expects that his estimate for a 5.7 percent decline in second-quarter profits from a year ago may now be a bit too harsh amid the better outlook many merchants have given. Still, with the economic uncertainty and the cost pressures retailers are facing, he said it's hard to "nail down" a figure.

Nevertheless, the back-to-school season "doesn't look promising," said Michael Appel, a managing director of Quest Turnaround Advisors.

With the benefits of the federal stimulus checks dried up, retailers face even bigger challenges as they try to get shoppers to splurge on skinny jeans and fancy backpacks for their children. Consumers already struggling with high food and gas bills and increasing layoffs are less confident in the economy. And while oil prices have receded a bit, paychecks are not keeping up with overall inflationary pressures on basics.

The reports for July on same-store sales, or those at stores open a least a year, underscored Americans' growing financial strain as shoppers focused even more on buying necessities like detergent and avoided mall-based clothing stores.

Such frugality is creating a wider disparity between low-price operators like Wal-Mart and mall-based chains and department stores. Disappointments in the apparel sector cut across all types of chains from teen retailer Abercrombie & Fitch Co. to department stores such as Penney and Kohl's Corp.

Merchants can't even depend as much on international sales to offset weaker U.S. business as markets in Spain and other European countries are softening as they get dragged down by the slowing U.S. economy.

Analysts will be closely watching Wal-Mart, which has been a beneficiary of the slowing economy but did feel some pain in July. It announced that same-store sales for the month were below analysts' consensus estimates and also predicted slower growth in August. The discounter, considered a barometer of consumers' financial well-being, said that its customers are increasingly unable to stretch their paychecks to the next payday.

That cautious tone caused Mark Miller, an analyst at William Blair & Co., to downgrade shares of Wal-Mart to "market perform" from "outperform" based on expectations for slower sales and profit growth in the second half. In a note to investors, he said that Wal-Mart's July sales performance was a "material deceleration" from the previous two months. Still, he believes the company is on track to meet or exceed Wall Street's current expectations for second-quarter earnings of 84 cents per share when it reports results on Thursday.

Macy's, which no longer reports monthly same-store sales, is expected to post earnings of 19 cents per share when it reports second-quarter results Wednesday, according to Wall Street consensus estimates. Appel said he will be looking for updates on how the company's new efforts to better tailor its merchandise to local areas are faring and whether business has improved at the May Co. stores now converted to Macy's.

Meanwhile, TJX Cos., which sells name-brand labels at a discount, has benefited from shoppers looking for cheaper alternatives than the mall. The company, which is set to report results Tuesday, raised its earnings outlook last Thursday even after reporting that same-store sales fell a bit short of Wall Street estimates.

Source: International Herald Tribune

Bankruptcy Court Clears Boscov's Restructuring

READING, PA-Within days of its Chapter 11 bankruptcy filing, the locally based Boscov's department store chain has gotten key court approvals that will allow it to continue regular business operations as it prepares to close 10 locations. The motions granted by Judge Kevin Gross of the US Bankruptcy Court for the District of Delaware enable Boscov's to tap into $250 million of debtor-in-possession financing from Bank of America.

In a news release, the locally based Boscov's says the court approvals will allow it to "normalize" vendor relationships as it prepares for the back-to-school and holiday selling seasons, pay employee salaries and benefits and hire a liquidation firm. "The DIP facility will provide Boscov's with adequate working capital to meet its ongoing financial obligations during the restructuring," according to the release. The order comes just four days after Boscov's filed for Chapter 11 protection.

"The approval of the first-day orders is an important step in the restructuring process," Ken Lakin, chairman and CEO of Boscov's, says in press release. "We will be working with our creditors and others to move forward quickly with the hope of filing a plan of reorganization by late October."

Gross set Aug. 12 for an auction to select a liquidation firm, followed by a sale hearing on Aug. 14. Going-out-of-business sales at the 10 "underperforming" stores slated to close are expected to begin Aug. 15, according to the release.

The chain is closing two stores in the Philadelphia suburbs, one in Harrisburg, two in suburban Pittsburgh, three in the Baltimore area and one each in New Jersey and Virginia. Seven of those 10 stores were part of a February 2006 purchase of a 10-store Federated Department Stores portfolio. Founded in 1911, Boscov's currently operates 49 stores, including 29 in Pennsylvania.

Source: GlobeSt.

More Shoppers Spurning The Mall

It's August--the month when many states offer tax-free shopping periods, millions of parents hope to cross back-to-school shopping off their list, and hordes of teens want to try on just a few more pairs of jeans. Theoretically, malls should be packed--even given the current economic slowdown.

But not only is traffic flat, Americans are changing the kinds of shopping centers they visit. "The shares of monthly shoppers and monthly clothing shoppers continue to decline across most shopping center types," says TNS Retail Forward, a Columbus, Ohio-based consulting company that tracks shopping trends.

"The only locations to capture larger shares of monthly shoppers as well as monthly clothing shoppers in 2008 are power centers," which are strip shopping centers that contain at least one discount department store or category superstore, "or strip malls with supermarket anchors."

Online sites also captured a larger share of shoppers.

Retail Forward reports that the popularity of power centers, as well as the rising cost of gas, are making it easier for shoppers to skip more distant shopping destinations, so that all other types of shopping centers are losing customers.

For example, regional malls--which in 2006 had a 34% share of monthly shoppers and a 26% share of monthly clothing shoppers--now have a share of 30% and 23%, respectively. Lifestyle centers, the type of mostly unenclosed shopping areas that typically include specialty stores, department stores, restaurants and entertainment, had 24% of monthly shoppers and an 18% share of monthly clothing shoppers in 2006; this year, it has fallen to 20% and 16%. Downtown shopping areas also declined, from 10% of monthly shoppers and 9% of monthly clothing shoppers in 2006 to 8% and 8% in 2008. Outlet centers held even, with 13% of monthly shoppers and 11% of monthly clothing shoppers.

In recent weeks, the International Council of Shopping Centers reports that while sales tax holidays in 11 states and the District of Columbia helped spur traffic in those areas, "overall national traffic trends were softer which led to a flat weekly performance."

For the month of July, ICSC predicts, comparable-store sales are expected to increase between 2 and 3%. Most retailers will report those results later this week.

Source: MediaPost

July sales flat as school shopping season starts

In an ominous sign for the back-to-school shopping season, retailers ranging from Abercrombie & Fitch (ANF) to J.C. Penney (JCP) reported dismal July sales Thursday as economic concerns trickled down even to once largely recession-proof young shoppers.

Consumers ages 18 to 26 report being harder hit by gas prices and more reluctant to buy clothes because of high fuel costs than do adults 27 and older, according to data provided to USA TODAY by BIGresearch.

"They may want to spend, but the cash tank is on E," says BIGresearch's Phil Rist. "When there's no money because it's in their car, they can't spend."

The National Retail Federation warns that back-to-school apparel sales will likely be flat this year. That trend was evident in July sales, as American Eagle (AEO), Limited Brands (LTD)— which owns Victoria's Secret — Pacific Sunwear (PSUN) and other more youthful brands posted drops in same-store sales.

Another alarming signal came from Wal-Mart (WMT), which projected Thursday that sales will slow in August, partly because of the fading effect of tax-rebate checks that had helped lift store sales earlier this year. The discounter, which BIGresearch says is where women ages 18 to 26 shop most often for clothes, said sales rose a less-than-expected 3%, largely because of slow apparel sales.

With higher gas prices, July same-store sales appeared to enjoy less of a boost from tax rebates, as more shoppers used rebates for food and gas than they did this spring, TNS Retail Forward says.

"The summer spike in fuel and food prices is causing shoppers to pare back their plans for tax rebates and back-to-school spending," says Frank Badillo, senior economist at TNS Retail Forward. "That's clearly squeezing spending on retail goods other than food and gas."

Some retailers popular with younger shoppers managed to defy the weak trends. Urban Outfitters (URBN) is thriving, along with Buckle (BKE), which posted a same-store sales increase of 20.9%, and Aéropostale, (ARO) which reported an increase of 13%.

"When the times get tough, it separates the good and the bad," says Greg Maloney, CEO of mall management company Jones Lang LaSalle Retail. "That's what we're seeing right now."

Some remain optimistic about retailers that cater to younger consumers. Nita Rollins, a retail trends expert, says younger shoppers aren't likely to drastically change their shopping habits, because their "sense of history is very compressed."

Some of them even benefit from three sources of income: their parents, grandparents and their own jobs, says Rollins, a futurist at the digital marketing agency Resource Interactive.

That could bode well for retail sales, even in a recession, Maloney says: "The parents still want to make sure their kids get what they need and want."

Source: USA Today

Wal-Mart eyes $10 billion sales per year for Marketside

NEW YORK (Reuters) - Wal-Mart Stores Inc says its new Marketside stores could expand to a chain of more than 1,000 stores with more than $10 billion in annual sales, the Financial Times reported, citing a job posting for the retailer, which the FT said was subsequently removed.

A Wal-Mart spokesman, when contacted for comment, said that Marketside is a very small-scale pilot project, and that the world's largest retailer has no firm plans for it beyond that.

Wal-Mart will open four Marketside stores in the fall in the Phoenix, Arizona, area, according to the community grocery store concept's website.

The FT online report said the retailer plans to open 10 of the 15,000-square-foot (6,000-square-meter) Marketside stores initially, including the four in the Phoenix area.

A job advertisement for the retailer said the Marketside format "is expected to start with 10 stores and evolve to between 1,000 - 1,500 stores with over $10 (billion) annual sales," the FT reported.

Wal-Mart has said earlier it is developing the Marketside stores to attract shoppers looking for a quick option to purchase fresh groceries.

The new store concept comes after British supermarket rival Tesco Plc entered the U.S. marketplace last year with its Fresh & Easy Neighborhood Markets in California, Arizona and Nevada.

Source: Reuters

Retailers Pull Back, at a Cost

Stingy consumers force retail chains to keep inventories low. That's boosting profit margins but it may be reducing sales growth, too

The Children's Place (PLCE) store at the Paramus Park Mall in northern New Jersey has a set of sales racks, each placed at four different sections of the store, with items for babies to older girls and boys. Sharad Shah, a young mother of two children, is shopping at the store and is disappointed with the lean sales racks, which carry just a few T-shirts and pants. "Maybe I'll come back for Labor Day sales," she says, leaving empty-handed.

During a normal year, this would be a healthy sign for a retailer. It would indicate the store sold its stock at full price and doesn't need to rely on clearance sales. However, in the current environment, when more and more shoppers are looking for deals, turning them away from the store without enticements might not be what retailers want. Nonetheless, many chains are keeping a tight lid on inventory to the point where it's putting a crimp on sales.

"There's a fine line between not having racks of clearance from leftover inventory, and cutting to the bone," says Erin Armendinger, managing director of the Jay H. Baker Retailing Initiative at the Wharton School of Business at the University of Pennsylvania.

Indeed, on Aug. 7 The Children's Place reported sales were flat in July at its stores open for at least a year or more. That fell far short of the 7% increase expected by Wall Street. "We are in a conservative inventory position for the fall," said Jane Singer, vice-president for investor relations, in a prerecorded call discussing monthly sales. Its stock was down 0.94, or 2.7%, to 33.98.

Sales Gains for Wholesale Clubs

Consumers have continued to tighten their purse strings for almost all discretionary purchases and seem to be spending only on basics. That has been good news for off-price discounters like TJ Maxx and Marshalls. TJX Companies (TJX), which runs those two chains, saw same-store sales rise 3% in July.

Stores that sell cheap gasoline and food also posted positive sales gains in the Aug. 7 industry reports. Wal-Mart's (WMT) same-store sales increased 3%. That was lower, however, than analyst expectations of a 3.4% gain and investors sold its shares, which were down 3.80, or 6.3%, to 56.96. Costco (COST) reported a 10% increase in sales, and BJ's Wholesale Club (BJ) reported a 16.7% increase in same-store sales as shoppers flocked in to load up on bulk purchases of food and gasoline, which is typically a few cents cheaper at wholesale clubs than at gas stations.

Inventory Questions

But for retail executives in areas other than food, it's a treacherous time to try to forecast how much merchandise to order for stores. More often than not, retailers are choosing to err on the side of caution. That has resulted in better profit margins—in the first quarter Wal-Mart reported its gross margins were up 11 basis points—but perhaps at the expense of losing some potential sales. "In an economic downturn everyone is in a cutback mode and they might be missing the few opportunities that present themselves," says Frank Badillo, senior economist at TNS Retail Forward, a research firm.

For instance, discount department store chain Kohl's (KSS) saw sales in July dip sharply, by 10.4%. The company didn't give details about its inventory levels. "July was a month driven by clearance sales of spring and summer merchandise," says Larry Montgomery, Kohl's CEO. But he notes: "Our inventory levels in these clearance and transitional categories were significantly lower than last year, affecting sales results, but leading to improved gross margins."

Source: BusinessWeek

Dunkin’ Donuts signs deals to open 10 new stores in D.C. area

Dunkin’ Donuts Inc. has signed franchise agreements to open 10 new stores in the D.C. area.

Canton, Mass.-based Dunkin’ Donuts said the new stores will open later this year and next year.

D.C. Coffeee Kings Inc. will develop five new restaurants in Southeast D.C. The first store will open in 2009, according to a press release. DoJoe LLC will open five new spots in Silver Spring, Bethesda and Chevy Chase, the first of which will open this year.

The new stores are part of a Northeastern expansion effort Dunkin’ Donuts has been planning for some time now. The company said in March it is aiming to have 70 new stores in the D.C. area over the next few years.

Source: Washington Business Journal

Is intimate apparel recession-proof?

Intimate apparel is big business on a global scale, and conventional wisdom has it that the category generally outperforms the broader apparel category during economic downturns.

Whether this is myth or reality is a point of contention among industry watchers. However, everyone can agree that lingerie is a vibrant, high-margin category ranging from staples like bras and panties to fashion-oriented luxury items for women across every demographic group.

“Intimate apparel is probably as strong as anything right now and has traditionally fared well during a recession,” says Mike Sandler, chairman of the intimate apparel council of the American Apparel & Footwear Association, based in Arlington, Va. “When pocketbooks tighten up, people are less likely to make large purchases like dresses or new outfits. Intimate apparel gives them the ability to buy something less expensive that makes them feel good: It’s an affordable indulgence.”

Beyond that, the business is bolstered by the fact that items wear out more quickly — particularly bras and panties, which represent 65 percent of intimate apparel purchases. “There’s a lot of replacement value there,” Sandler says.

Still, statistics from the NPD Group indicate that intimate apparel could use a bit of lift. In the 12 months that ended in April, sales totaled $10.92 billion, 3.4 percent lower than the same period a year ago.NPD reported that bra sales ($5.79 billion) declined 3.3 percent and panty sales ($3.5 billion) were down slightly over that same period. Shapewear, a much smaller ($718 million) category, experienced the biggest squeeze — 9.2 percent.

Sleepwear, which is listed separately by NPD, outperformed the rest of the intimate apparel market, rising 1.5 percent on sales of $6.5 billion. Nightwear, which accounts for the bulk of sales, was up 2.9 percent, while robes and loungewear dipped 3.9 percent.

Virtually all retailers reported lower sales. Specialty stores and mass merchants — the biggest segments — were down 4.1 and 3.9 percent, respectively. Department store revenues declined 3.5 percent, and even factory outlets experienced a 12.4 percent decline. The only gain for the period (14 percent) was among off-price retailers, a relatively small segment.

Although the economy can work in the category’s favor, it is also its biggest challenge. “Retailers are all being very careful about purchasing,” Sandler says. “They are watching inventory very carefully and are less likely to experiment with new things,” which is likely to result in higher stock outs.

Meanwhile, while China remains a large producer of intimate apparel, it is no longer the least expensive one, so companies are going to Vietnam, Cambodia and back to the Philippines. Additionally, Sandler says, “freight has gone up dramatically and manufacturers are really being squeezed.”The escalating cost of gasoline could contribute to even higher online sales. However, the pace remains difficult to judge, according to Sandler. “Many in the industry feel that lingerie is a category that consumers look at online but go to the stores to buy.”

What is too sexy?

The question is, which stores do they visit? Victoria’s Secret has a firm grasp on about 30 percent of the market, but even this venerable purveyor of intimate apparel is not immune to market swings: After a relatively weak first quarter, company officials have been asking themselves whether they have veered off course by becoming “too sexy.”

Bemoaning an overabundance of sensuality seems oddly puritanical for a company whose marketing theme was “What is Sexy?” However, as CEO Sharen Jester Turney recently told analysts, “We use the word sexy a lot and really have forgotten the ultra-feminine. … We will return to an ultra-feminine lingerie brand to meet [customer] needs and expectations.” She emphasized the success of the chain’s Pink brand, a $900 million annual business that targets a younger demographic.

With the lingerie business becoming more fragmented, there is no shortage of competitors for the younger set. One of these is Gilly Hicks, intimate apparel stores with an Australian twist, launched by Abercrombie & Fitch. They specialize in moderately priced items that are described as more casual and fun and a less-provocative alternative to Victoria’s Secret for younger consumers, according to industry observers. The company now has five stores in operation and plans call for another seven or eight this year.

Source: Stores

July Sales Tough for Retailers

With the benefits of government stimulus checks largely exhausted, retailers struggled to make their numbers in July and most fell short of both expectations and their year-ago same-store results.

Wal-Mart Stores Inc. ended the month with a 3 percent comparable-store sales gain in its U.S. unit, excluding fuel, within its own guidance but short of analysts’ estimate of a 3.4 percent increase. The company prepared investors for a tough August as well, with its estimate of a 1 to 2 percent boost in U.S. comps. “We still see volatility from week to week,” said Tom Schoewe, executive vice president and chief financial officer, “especially around paycheck cycles.

”Target’s comps fell 1.2 percent for the month, while Kohl’s was off 10.4 percent. Despite strength in women’s apparel, family shoes and children’s, J.C. Penney was down 6.5 percent. Higher-end stores weren’t exempt from the month’s pressures either. Neiman Marcus was down 1.7 percent in July and 1.4 percent for the quarter, while Saks was off 5.3 percent for the month. Nordstrom’s same-store sales dropped 6.1 percent.

Gap Inc.’s comps were down 11 percent, with U.S. Old Navy stores down 16 percent, again showing the steepest declines. Among teen retailers, Abercrombie & Fitch and American Eagle Outfitters were both down 7 percent for the month, but Aeropostale managed a 13 percent increase and Buckle again raised eyebrows with a 20.9 percent advance. Pacific Sunwear of California was off 4 percent.

Limited Brands dropped 5 percent, while Chico’s FAS was down 18.5 percent. Wet Seal finished July with an 8.2 percent same-store sales decline. Among the specialty stores showing comp increases for the month were Mothers Work (2.8 percent) and Cache (2 percent). Off-price specialist Ross Stores registered a 4 percent increase.

Dillard’s reported a 2 percent increase but noted that juniors and children’s were both below the trend. Bon-Ton checked in with a 0.2 percent increase based principally on late-month promotions. Tony Buccina, vice chairman, said, “The consumer continues to be event- and value-driven, which pressured gross margin performance.”

Source: WWD

CarMax to slow growth after seeing sales drop

RICHMOND, Va. -- Used vehicle retailer CarMax Inc. said Wednesday it is reducing staffing levels and will temporarily slow its store growth after seeing a sharp drop in car and truck sales because of high gas prices.

CarMax originally withdrew its fiscal-year sales and earnings guidance in June, after sales dropped beginning Memorial Day weekend. From the Memorial Day weekend through the end of May, CarMax said its same-store sales -- or sales at stores open at least a year -- fell 5 percent.

Those sales continued to fall in June and July, resulting in an average drop of 17 percent for the two months, the company said Wednesday.

As a result, CarMax said it reduced its used vehicle inventory by about 9,500 units during those two months and adjusted the vehicle mix to reflect changes in consumer preferences.

As gas prices have climbed, people have been abandoning once-popular trucks and sport utility vehicles in favor of fuel-efficient small cars. That has driven used truck and SUV values lower.

"Falling vehicle prices and the negative equity it is creating continues to pressure sales trends," RBC Capital Markets analyst Scot Ciccarelli wrote in a note to investors. "Unfortunately for (CarMax), we don't see any reason for a quick turnaround in those trends."

The company, which has more than 16,000 employees, said it has worked to lower its variable store staffing levels, mainly through scheduling and attrition. It also is re-evaluating all open positions and is continuing to focus on controlling overhead expenses.

Layoffs "obviously are our last choice," said spokeswoman Elia Imler.

The company said it expects to open one additional store in the fiscal year that began March 1, bringing it to 10 openings in the current fiscal year. Four originally planned store openings will be pushed back to the following year, when the company plans to open between five and 10 stores.

Source: Detroit News

MA: CGI Acquires Marketplace Center for $6.3M

Newton Centre Retail Trades for $417 PSF

Brookline, MA-based investors CGI Cos. acquired the Marketplace Center in Newton Centre, MA from a private trust for $6.29 million or $417.00 per square foot.

The 15,072-square-foot retail building at 714-724 Beacon St. was built in 1920 in the Newton/Brookline submarket. Tenants include West Coast Video, Kitchen Views and the United States Post Office.

Richard Cohen, CPM represented CGI. Craig Barker of Boston Real Estate Advisors represented the seller.

Source: CoStar

Buca bought by Planet Hollywood