In Sears: The Beginning of the End?, in our January issue, Vice President of Research Bob Sheehan reacted to the closings of over 100 Sears stores by observing that the venerable retailer’s “too big to fail persona” seemed precarious at best, but concluded, “With total sales last year of more than $35 billion, a store count above 4,000 units, and an employment base of more than 300,000 workers, it is unreasonable to think that Sears Holdings will follow the path of Circuit City, Borders, and Linens ‘n Things (among many others) by liquidating anytime soon. Sears Holdings remains a top 10 retailer and is surpassed only by Walmart among department store firms. We don’t recall such a top ten retailer ever going out of business. Yet we also believe that the latest wave of store closings, a mere 2% or so of its store count, is far from the last; if the slight bleeding turns into major hemorrhaging, who knows what might happen next?” Note: in October, Sears spun off its Hometown and Outlet stores. Sears announced in February that it would split off the companies as a separate publicly traded entity, Sears Hometown. In November it was reported that net income for the spinoff had risen 29% for the quarter.
Bob Sheehan saw so much to comment on at JC Penney that he wrote about it twice this year, in Ron Johnson’s Next Attempt at Retail Magic: The Transformation of JCPenney in the February issue, and in November’s JCP: Doomsday or New Beginning? Of Johnson’s promotion-free “fair and square” pricing policy, Bob wrote, “No matter how much creativity Johnson can instill, it will all be for naught if the new strategy doesn’t draw substantially more shoppers (particularly younger ones). But it’s a gutsy move, an attempt not merely to improve the company, but reinvent it, which if successful will be no small achievement.”
In November, reacting to a “precipitous fall” in JCP comp sales, Bob wrote, “in my 30-plus years in the retail industry, I can’t recall any other retailer’s sales falling as dramatically in such a short stretch”, but went on to note that “the loss in sales is largely a result of previously loyal shoppers jumping ship for Kohl’s, Macy’s, Dillard’s and Target. Sales at these firms have been generally improving this year for which they can probably give thanks, at least in part, to Penney’s – but that thanks may be short-lived if those shoppers begin to migrate , and Johnson succeeds in drawing in a new, younger shopper. While many people think Ron Johnson’s strategy for JC Penney is way off course, its brethren department stores better hope Johnson doesn’t, eventually, have the last laugh”. Note: Earlier this month JCP listed listed company morale among new “risk factors” surrounding workforce reductions, and concern that customers may not accept new marketing and merchandising strategies, in its Q3 regulatory filing.
Bob Hayes based his insights on managing troubled properties on KeyPoint Partners’ - and Bob’s own - wealth of experience handling troubled assets for special servicers and other clients: “From the first day you take on a distressed or foreclosed property, you’re thinking about the last day you own it. A service company should have that goal in mind, too. An exhaustive takeover checklist (such as the one we use) assures that no detail is overlooked. The checklist is a blueprint for everything you need to know, and to which you have to pay attention. It takes a special set of skills, and a special way of thinking, to handle the distinct challenges of such assets”. Note: if you’d like to see our checklist, or if you have questions about how we can help you with distressed properties, contact Bob Hayes at BHayes@KeyPointPartners.com.
In July’s E-Tail to Retail, Chris Cardoni wrote about rends in online retailing: “It goes without saying that online retailing has evolved from a developing but still somewhat separate phenomenon, warily observed and tentatively sampled by what are still sometimes referred to as “bricks-and-mortar” retailers, to simply one of several ways in which virtually all of those retailers do business, with varying degrees of dedication, innovation, and success - a world of Twitter feeds, tablet wars, showrooming, and QR codes.” Note: a report by comScore says that for the holiday season-to-date, 11 individual days have surpassed $1 billion in online retail sales, surpassing last year's record of 10 such days.
In Mobile Dials It Up (September), Bob Sheehan wrote about the “phenomenal recent growth” in the mobile communications retail category, as tracked in our proprietary GRIIDTM retail database: “Even during the Great Recession, consumers have to run out and buy the latest mobile devices. From juveniles to seniors, mobile phones and tablets have become a basic necessity. That’s a big piece of business, and it makes sense that everyone from discounters to wholesale clubs to office supply stores to online sellers want a share of the sales dollars. The category still has room for growth”. Note: in our article we mentioned Apple, saying,”When the iPhone 5 was released this month, sales reached 2 million units the first day.” After that initial burst, sales of the iPhone 5 stumbled a bit, with a long wait for the next batch and a reported lag in supplies and accessories; then of course there are the ongoing issues related to the infamous Apple Maps app on the iP6.
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The Partners of KeyPoint:
Mark A. Becker, MBecker@KeyPointPartners.com
Robert K. Lemons, RLemons@KeyPointPartners.com
William A. Lawler, WLawler@KeyPointPartners.com
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