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Industry News - August 6th 2010



Consumer Study: 60% of Families will Cut or 'Zero Out' Back-to-School Spending

Six in ten American families with children at home (62%) say they plan to spend less this year than last, or nothing at all, on back-to-school shopping, according to the RBC Consumer Outlook Index. Although most families are cutting back, 9% say they actually plan to spend more, and 29% say they will spend about the same this year as last year on back-to-school items.

Despite a planned reduction in back-to-school spending, an important barometer of consumer sentiment, consumer confidence as measured by the RBC Index rebounded this month, increasing to 63.9, compared to 47.2 in July. The improvement in the Index is driven primarily by less negative sentiment about job security and future economic prospects, rather than any sudden optimism.

"The pull-back in back-to-school shopping is a true sign of the times," said Tom Porcelli, U.S. Market economist at RBC Capital Markets. "The economic recovery has been slow and uneven leading to diminished expectations for many Americans. As they adjust to living in this new economic reality, consumers continue to remain very cautious when it comes to personal spending."

RIS News sees this as a serious red flag following June’s sorry retail sales numbers. For certain retailers, the back-to-school season can represent a significant portion of annual sales. However, unlike the holiday season, a consumer’s intention to spend less may not actually materialize, as many schools require certain materials and purchases may end up being more fixed than shoppers originally intended.

Retail industry associations have predicted that this year's back-to-school season will be stronger than previous years. The National Retail Federation's 2010 Consumer Intentions and Actions Back to School Survey, conducted by BIGresearch, found that the average American family will spend $606.40 on clothes, shoes, supplies and electronics, compared to $548.72 last year.


Barnes & Noble, On the Sales Block, Will Add eBook Boutiques in Stores

Electronic books will be a much more visible presence in Barnes & Noble's brick-and-mortar locations, as the world's largest bookseller creates 1,000-square-foot eReading NOOK Boutiques in its 720 stores.

The boutiques, which will be introduced beginning this summer, will feature demonstration tables and multiple operating NOOK devices for trial, with large flat panel displays on adjoining walls featuring video demos of the readers and more than 100 accessories. Store associates will offer device demonstrations, help customers download the company's free NOOK software to mobile or computing devices, and provide ongoing support.

Barnes & Noble entered the electronic book market one year ago, and already the NOOK eBooks are its best-selling items, according to the company. Commenting on the boutiques, CEO William J. Lynch said "No other company is doing what Barnes & Noble is doing, utilizing its store footprint and innovative technology to add value to the customer's eReading experience, including unique features such as digital eBook lending, free Wi-Fi connectivity, in-store browsing of complete eBooks and exclusive content."

The chain's aggressive move to create synergies between its traditional products and new electronic media comes at a difficult time for brick-and-mortar retailers in general, and for book and music retailers like Barnes & Noble in particular. The company's Board of Directors, saying it believes its shares are now significantly undervalued, announced on August 3 that it was seeking a buyer as a means to increase stockholder value. Leonard Riggio, the company's founder and largest stockholder, has informed the Board that he intends to consider the possibility of participating in an investor group to acquire the company.

In the quarter that ended May 1, 2010, the company posted a net loss of $32 million, despite total sales of $1.3 billion that were 19% higher than sales for the same period in 2009. For the full fiscal year, which also ended May 1, the company's comp store sales declined by 4.8%.


Walmart Canada Store First to Achieve Zero Waste

The Walmart Canada store in Bridgewater, Nova Scotia achieved an estimated 98% waste diversion rate from landfill in 2009, exceeding the 95% threshold that marks zero waste. For 2009, this represents almost 558 million kg (253 million pounds) of waste that was not sent to a landfill.

The store is the first in Canada to achieve this goal, and it was honored with the Mobius Award for Environmental Business of the Year from the Resource and Recovery Fund Board of Nova Scotia.
"It is a remarkable achievement and we are very proud of our Bridgewater associates," said Jim Thompson, chief of operations for Walmart Canada. "As one of the three sustainability objectives for Walmart Stores worldwide, our zero waste program is not only good for the environment, it is good for the bottom line."

The other sustainability goals, which are shared with Walmart globally, are to be supplied 100% by renewable energy and to sell products that sustain people and the environment.

Steps taken by the Bridgewater store to zero out landfill waste include:
--Customers and staff now use waste sorting stations
--Use of reusable plastic crates rather than cardboard boxes
--Recycling of cardboard used in the store
--Switching to reusable signage for promotions
--Lunch room is now Styrofoam free
--Addition of a full-time position to manage the waste program
--Tripling of the compost output over the past year.


Store Closings: Two Retailers Shutter 150 Stores in 2010

By September, supermarket retailer Winn-Dixie Stores will shutter 30 underperforming stores and cut at least 120 positions in addition to those lost as a direct result of the store closings. Jones Apparel Group closed 41 locations in the second quarter and plans to close an additional 80 unprofitable stores by the end of the year.

Jones Apparel Group has already closed 41 locations in Q2, ending the quarter with 880 stores, including acquired Stuart Weitzman locations. Consistent with its stated plans, the company will shutter another 80 stores by the end of 2010. During the second quarter Jones Apparel also completed the acquisition of a 55% interest in Stuart Weitzman Holdings, a designer of women's footwear, and entered into an exclusive licensing and distribution agreement with G-III Apparel Group for Andrew Marc men's clothing.

Venerable supermarket retailer Winn-Dixie Stores will close 30 stores, consolidate its four operating regions into three and reduce both its field and corporate workforce levels by 120 positions, in addition to those lost due to the store closings. The company expects to save between $12 and $17 million through these actions, which it estimates will be completed by September 2010.

The grocery retailer currently operates 514 stores in Florida, Alabama, Louisiana, Georgia and Mississippi. CEO and president Peter Lynch said "We continue to operate in a particularly difficult economic and retail environment in the Southeast. To respond to these business and economic conditions, we have thoroughly reviewed our retail operations and support structure and have decided to exit certain retail locations and reduce our corporate and field support staffs."


First Data Moves into Facebook with eGift App

Facebook fans of ice cream retailer Cold Stone Creamery can now use the social media site to send gifts that are redeemable in the physical world by using the First Data eGift Social solution. Consumers spent $10 million on virtual goods through Facebook platform applications in 2009.

Gift-givers access the First Data eGift Social application through Cold Stone's Facebook page or web site and select one or multiple people to send gifts to, either by adding them from Facebook or entering their email address. The sender selects the products and adds a personal message, and proceeds through a secure checkout process.
Users of the application must register an account, but they only need to provide credit card information if they actually decide to purchase a gift, so they can explore the application before sharing any financial information.

Recipients receive a Facebook message, email or both, with an alert that they have received a gift, the account number and redemption instructions. They can visit any Cold Stone location and redeem the eGift by using the account number at the POS.

While the gift comes from the virtual world, calories consumed can add to waistlines in the physical world.


Cabela's Sales Drop Due to Aggressive Inventory Reductions

Operating income at Cabela's for the second quarter increased 62% to $30.7 million compared to $18.9 million a year ago quarter, but revenues decreased 3.3% to $526 million. Of these revenues, retail revenue decrease 2.5% to $294 million and direct sales revenue decreased 11.7% to $172 million. Comparable store sales decreased 4.6%.

Although merchandise demands were strong in the quarter, Tommy Millner, Cabela's CEO notes in a recent conference call with analysts that "we cut inventory a little too much, particularly in Cabela's branded soft goods. This resulted in significant lower fill rates in our direct business."
Millner also notes that, "Due to longer lead times associated with Cabela's branded product, we expect these low inventory levels to continue to modestly impact direct revenue in the early third quarter before returning to more normalized levels by the fall selling season."

On the positive side, Millner notes "clearance inventory was at a minimum and merchandise gross margins increased 80 basis points, which is the first increase in the past year. The improvements were broad based with margin increasing 11 of 13 merchandise subcategories."

Improvements in merchandise gross margin "are a result of lower markdowns and liquidation of problematic inventory due to better inventory management, and early progress related to vendor collaboration and price optimization," according to Millner.

Cabela's reports it is on track to open two stores in the U.S. and one store in Canada in 2011. Springfield, Oregon, and Allen, Texas will open in the second quarter of 2011, and Edmonton, Alberta, Canada will open in the third quarter of 2011. The Canadian store will be a next-generation store format 70,000 square feet in size


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