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Company
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4:
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Dillard's
Inc.
Analysts said that if Dillard's did put itself up for sale, the most likely buyers would include Federated Department Stores Inc., which operates the Macy's and Bloomingdale's chains, and May Department Stores Co., which operates Lord & Taylor. "Acquisitions are always a part of our strategic approach to growing the business," responded Carol Sanger, a Federated spokeswoman. "But they have to be acquisitions that make sense form an operational and financial standpoint." Mr. Sanger wouldn't comment specifically on whether Dillard's fit the profile of a possible Federated acquisition. A May spokeswoman said the company doesn't comment on talk of acquisitions. For years, the Little Rock, Ark., retailer has resisted a consolidation trend in the department-store industry, choosing to remain independent while Federated and May have continued to acquire other chains. As shoppers increasingly flock to discount stores and specialty-apparel shops, department-store chains in recent years have struggled to maintain profitability. Dillard's has suffered more than most department stores, beset with operational difficulties that have sent its stock price to about half its book value. back to top
Sears,
Roebuck & Company
Now even the name will be gone, further evidence for Canadians worried that U.S. brands are taking over in their country. Sears Canada said it is making the change because customers are spending less money at Eaton's stores, which are more expensive than Sears. The company may also close two of the remaining seven stores, cutting as many as 600 jobs. It said employees whose jobs are cut would get the chance to apply for other positions in the company. A division of U.S.-based Sears, Roebuck & Co., Sears Canada acquired 19 Eaton's locations in 1999 and has converted 12 of them to Sears stores. It said those stores are performing at or above expectations. Eaton's and other department stores were hit hard by a lingering recession in the 1990s that curtailed consumer spending. Tough competition from discount chains such as U.S.-based Wal-Mart also hurt its performance. back to top
Federated
Department Stores
Sales for the recent quarter fell 8.4% to $5.13 billion from $5.6 billion, partly because of the closing of Stern's. But sales at stores open at least a year, a crucial measure for retailers, were weak: Same-store sales for the quarter fell 6%; comparable-calendar same-store sales fell 3.9%. The year-ago period contained an extra week, and the comparable-calendar figure adjusts to compensate for that discrepancy. "The challenge for all traditional department stores, including Federated, is to give consumers a reason to go there," said Christine Kilton-Augustine, an analyst at ABN Amro. Private brands will be an important way for traditional department stores to set themselves apart, and that Federated has an advantage because it already has well-developed private brands. Some analysts speculated that Federated would seek to grow through an acquisition. "Clearly that's why they've got so much cash and why they're being pretty cautious with share repurchases," said Linda Kristiansen, an analyst at UBS Warburg. "Some time in the next 12 to 18 months I think we'll see some opportunities." She said some of the small to midsize department-store chains could be likely targets, but did not speculate as to which ones. back to top
The
Limited
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Specialty
Apparel Chains
Roughly 17% of American high school students consider themselves "alternative," while only 11% view themselves as "popular," according to a survey of 2,000 teens conducted last year by Teenage Research Unlimited, a market-research company. The largest groups are those who call themselves "average," mostly Gap and American Eagle shoppers, followed by the less-selective "nerds" and "bookworms," who mostly buy clothes at JCPenney, Kaufmann’s and Target, the survey says. One reason for its success is its near-monopoly at the mall on "alternative" fashion. Most malls are filled with stores aimed at mainstream kids. But "Hot Topic has virtually no competition," says Jennifer Black, an analyst at Wells Fargo Van Kasper. It used to take work to find all this stuff -- which is one reason why many teens simultaneously love and hate the store. By making weird fashions accessible to mall goers across the country, the chain strips dedicated nonconformists of a bit of their originality. It’s this oddball merchandise that helped Hot Topic avoid the drastic markdowns that plagued malls during the holidays. Ellen Schlossburg, an analyst at William Blair & Co., estimates Hot Topic marked down about 10% of its stock. "Everywhere else, that number was around 60% or 70%," she says. Hot Topic's sales rose to $336.1 million in fiscal 2001 from $43.6 million in fiscal 1996, while its profit climbed to about $28 million, according to analysts' estimates, from $2 million in the same five years. While Gap, American Eagle and other teen retailers reported fourth-quarter sales that were flat to declining, Hot Topic posted a 3.8% increase in same-store sales. It plans to add 85 stores in 2002, including 15 in a new chain called Torrid, which will be aimed at plus-size teen girls. back to top
An
Unstable Marketplace
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Source
2:
On top of that, analysts have repeatedly had to revise earnings estimates downwards, and worries have spread about whether the economy can stage a sustained recovery. Accountants, once among the nation's most trusted professionals, are accused of helping hide wrongdoing and of misleading investors. Some market analysts worry that these problems aren't going to go away soon. "It is absolutely what almost invariably happens after every bubble," says investment strategist Barton Biggs at Morgan Stanley, referring to the scandals, bankruptcies and accounting disclosures. "You should expect them... The bigger the binge, the longer and more severe the hangover." The root of the accounting problem is that stock-market bubbles reward aggressive accounting, since it inflates earnings and helps push up companies' stock prices. As bubbles develop and the continued inflation of stock prices becomes paramount, conservative accountants and executives become discredited, and bending the rules becomes standard. back to top
Trouble
At The Gap
For the quarter ending this past February 2, the nation's largest specialty-apparel retailer swung to a net loss of $34.2 million, or four cents a share. Weaker sales and falling gross margins produced the poor performance, Gap said. At the Gap chain, flip-flopping merchandise strategies have confused customers and failed to turn sales around. Edgy, '80s-inspired styles flopped in the fall. Bland beige sweaters performed poorly during the holidays. Fourth-quarter sales fell 11%, to $4.09 billion from $4.58 billion, marking the second consecutive quarter that top-line sales fell despite new store openings. Sales at stores open at least a year, or same-store sales, tumbled 16%, continuing a string of declines that has stretched for nearly two years. The chain's current fashions -- button-down shirts in classic colors, simple jackets and countless styles of khaki pants -- are reminiscent of the basic styles that made Gap famous. But they don't seem to be working: So far this month, same-store sales are down 17%. Last year was "our most difficult year ever," Chief Executive Millard Drexler said in a statement. For the year, Gap swung to a net loss of $7.8 million, or a penny a share, from prior-year net of $877.5 million, or $1 a share. Although Gap has drastically scaled back expansion plans, analysts say the retailer needs to go further and close stores. back to top
Speigel
Down, Nordstrom Up
Spiegel said it needed to sell the credit-card unit to focus on its retail business, which has been floundering, with fourth-quarter revenue falling 13%, to $1.01 billion from $1.16 billion a year earlier. At Eddie Bauer stores open at least a year, sales dropped 20%. Spiegel said it hired consulting firm McKinsey & Co. to review Eddie Bauer's strategies. The company said it will close a net 40 Eddie Bauer stores this year. "Retail today is quite challenging and requires a lot of capital," said Martin Zaepfel, Spiegel vice chairman and chief executive. Spiegel , which operates several catalog divisions and the Eddie Bauer apparel and home-furnishings chain, said it plans to continue offering customers credit through a third party. Nordstrom, meanwhile, boosted by better than expected sales and expense controls, said fiscal fourth-quarter earnings jumped 88%. The upscale retailer posted net income of $50.7 million, or 38 cents a share, up from $27 million, or 20 cents, a year earlier. Last week, Nordstrom raised its fourth-quarter earnings guidance to between 36 cents and 38 cents a share, from a range of 27 cents to 31 cents. back to top
Attention
Kmart Shoppers
Bluelight has had trouble keeping up with other discount retailers, such as Sears, Roebuck & Co. and J.C. Penney Co., which have expanded their online operations to allow customers to pick up and return online orders in person at stores. Kmart wouldn’t be the first bricks-and-mortar retailer to retrench online. Federated Department Stores Inc. next month plans to overhaul its e-commerce sites for Bloomingdales.com and Macys.com. For the period from February 1, 2001, to July 31, 2001, Bluelight had net sales of $8 million, and a net loss of $55 million. Also, less than 1% of people who visited Bluelight.com in the fourth quarter actually made a purchase on the site. Bluelight has 44 employees today, down from 220 this time last year. back to top
The
Customers
Customer satisfaction appeared to be rising throughout the economy during the final months of the year, which the University of Michigan says should help to underpin consumer spending in the months ahead. Its overall index of satisfaction rose for the first time in 15 months, to its highest level since the final months of 2000. Much of that improvement was the result of heavy price-cutting, which bolsters customer satisfaction because it leads consumers to feel that they are getting more for their money. There is a tight link between customer satisfaction and consumer spending. As consumers perceive greater value and satisfaction with what they buy, they are likely to spend more money, and because the overall, economy-wide index improved, this suggests that spending might prove to be stronger than expected early this year. Online retailers outshone their bricks-and-mortar
counterparts, thanks in large part to high marks from merchants like Amazon.com
Inc. and Barnes
& Noble.com Inc. Amazon's score, at 84, was unchanged from the
previous year and was the highest of any single company in the latest quarterly
survey.
The
Future
Analysts said January contributes only
about 20% to 25% of fourth-quarter revenue (most retail fiscal years end
in January), and about 5% to 9% of annual revenue, so it is risky to draw
sweeping conclusions from the month's results. But with the exception of
J.C.
Penney Co., the misery of old-line department stores and full-price
specialty apparel stores stood in sharp contrast with accelerating strength
at their discount and value rivals. Gap
Inc. also continued to flounder. Consumers continue to favor
necessities over discretionary items.
Federated Department Stores Inc., the Cincinnati parent of Macy's and Bloomingdale's, reported an 8.8% same-store sales decline at its department stores. May Department Stores Co. saw same-store sales fall 10.7%. Sears, Roebuck & Co., Hoffman Estates, Ill., posted a domestic same-store sales decrease of 3.4%. J.C. Penney, Plano, Texas, bucked the department-store blues with a 5.9% rise in same-store department-store sales. A number of specialty apparel chains also are under pressure. Abercrombie & Fitch Co., a teen and college-age retailer, saw same-store sales fall 14%. Charming Shoppes Inc., the Bensalem, Pa., owner of Lane Bryant and Fashion Bug, said same-store sales fell 4%. AnnTaylor Stores Corp. topped expectations with a 14.6% same-store sales increase. Same-store sales rose 16.2% at its Ann Taylor division and 11.8% at its lower-priced Ann Taylor Loft unit. Few are doing as poorly as Gap Inc., which suffered a 16% same-store sales decline that followed a 12% decline in the year-earlier period. The specialty retailer continues to miss with its merchandise selection and has alienated many once-loyal older customers. Its chains posted negative same-store sales on top of a prior-year decline. Gap domestic plunged 22%; Gap International fell 16%; Banana Republic declined 7%; and Old Navy fell 14%.
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