Retail turbulence ignites stronger competition

Reuters retail and consumer summit 2012
A woman carries shopping
bags on Oxford Street in
London, December 13, 2011.
REUTERS/Finbarr O’Reilly
Retail turbulence ignites
stronger competition
S
hoppers the world over are stressed and forcing retail executives to be both more aggressive and more conservative heading into the
year-end holiday period and new year. U.S. retail executives are not reading too much into a recent uptick
in consumer spending growth, while their European
counterparts are dealing with shoppers afraid that the
region is slipping into recession. In the face of such
prospects, the trick for retailers and consumer brands
will be to figure out how to coax shoppers into stores
and onto websites without shrinking profit margins
through discounting, opening too many new stores
or loading up on inventory that could go unsold at
Christmas. Reuters Retail and Consumer Summit took the pulse of the industry by speaking with
leaders from a wide swath of retailers and consumer
goods makers. During closed sessions with Reuters
journalists in New York, London, Paris, Dubai and
Milan executives and experts discussed these issues
and many more.
1
Reuters retail and consumers summit 2012
Burberry warning could delay luxury M&A
By Astrid Wendlandt and
Antonella Ciancio
PARIS, September 13, 2012
B
ritish fashion house Burberry’s profit
warning this week could put on ice
potential acquisitions in the luxury
sector as fears are growing that the industry’s growth forecasts could be cut further, a
top corporate finance executive told Reuters.
Potential buyers gauging the value of
luxury assets by their growth potential will
want to wait to hear what rivals of the British brand have to say about the sector outlook before sealing any transaction, predicted Marco Belletti, global head of consumer
retail and luxury at the corporate finance
division of Societe Generale.
“In the short-term, valuations (of luxury assets) will be affected,” Belletti told the Reuters
Retail and Consumer Summit on Thursday.
“We are just seeing the first signs of this
correction ... The next month will be critical to understand what is happening in the
(luxury) sector. We will see what other luxury brands have to say,” he told the summit,
held at the Reuters office in Paris.
The luxury goods sector rebounded
strongly after the 2008/2009 financial crisis
but analysts say the boom days now seem to
be over as trading conditions have worsened
since the beginning of the year, and more severely since the summer.
Burberry (BRBY.L) warned sales growth
had slowed down much more than expected,
especially in recent weeks and added it was
not alone, suggesting other big luxury brands
were feeling the pinch.
It admitted that part of the problem came
from weaker demand in China.
Mark Belford, co-head consumer and
retail at the investment bank arm of Janney Montgomery Scott believes the first red
flag for the luxury industry was waved a few
weeks earlier, by Tiffany & Co (TIF.N).
The U.S. jeweler late last month cut its
sales and earnings forecasts for the second
quarter straight, citing a tough global economic climate.
“A lot of distress is coming out of the
Asian markets, China in particular ... and
that reverberates into this country (USA) as
well,” he told the summit in New York.
Belletti said the slowdown in luxury sales
growth was due to several factors including the
debt crisis in Europe, weaker consumption in
China and a drop in global travel as tourists
made up the bulk of luxury goods buyers.
If luxury demands softens, sellers might
want to hold out for the industry to recover
before they put their assets on sale, Belletti
suggested.
Saleswomen wait for customers in a Burberry shop in Beijing, July 11, 2012. . REUTERS/Jason Lee
Names often cited by investors that could
change hands include Hugo Boss (BOSSn.
DE), which is controlled by private equity
firm Permira. Elsewhere, Italian familyowned fashion brand Versace has said it may
seek outside investors.
As the environment worsens, analysts
predict the price of luxury assets could go
down and high-priced deals such as the July
sale of Permira’s Valentino to the Qatari royal family are unlikely to be repeated.
The deal valued the Italian fashion brand
at around 700 million euros ($903.49 million), or 31 times its 2011 EBITDA, more
than twice the luxury sector’s average.
Shareholders in luxury companies that
want to sell their stakes on the open market via an initial public offering or a placing
might also want to wait and see, Belletti said.
Investors will likely demand more information about the current slowdown before a company can pencil in a market valuation, he said.
Italian notebook maker Moleskine has
said it planned to list in Milan this year in
a deal that would allow its private equity
shareholders to sell their stake.
Some analysts expect luxury sportswear
maker Moncler, which pulled its plans for a
flotation at the last minute last year, could
come back to the IPO market.
If in the short term, times look challenging, Belletti said that the luxury goods sector’s growth prospects remained attractive in
the medium to longer term, driven by penetration of new markets such as Indonesia.
He said China’s growth prospects also
were still strong - relative to other countries
- and luxury brands would continue to benefit from building up their presence inland,
in second and third tier cities.
($1 = 0.7748 euros)
Additional reporting by Pascale Denis in Paris,
Antonella Ciancio in Milan and Phil Wahba in
New York; Editing by Hans-Juergen Peters)
2
Reuters retail and consumer summit 2012
Walmart wants PCs to sleep earlier
By Jessica Wohl
NEW YORK , September 12, 2012
W
al-Mart Stores Inc (WMT.N)
is asking computer makers to
shorten the default time it takes
for their laptops and PCs to lapse into sleep
mode as part of the retailer’s effort to sell
products that are more environmentally
friendly, a Wal-Mart executive.
Computers enter sleep mode, which cuts
down on power consumption, when the
gadgets are left unused for a period of time.
Now, the world’s largest retailer is pushing manufacturers to shorten the time it takes
before computers go into sleep mode in their
default settings, Andrea Thomas, Wal-Mart’s
senior vice president of sustainability, told the
Reuters Retail and Consumer Summit.
The switch is part of the company’s efforts to sell products that sustain people and
the environment. For Wal-Mart, making
such changes can help it quietly improve
energy efficiency for shoppers who often are
not willing to pay more for “green” products.
“In general our customers are really much
more focused on budget and saving money,”
Thomas said. “They are not willing at this
time to pay a premium for sustainability.”
Initial estimates show Walmart customers
could potentially save up to $10 million on
energy bills and reduce carbon dioxide emissions from energy by 100,000 metric tons
over the lifetime of their computers if energy
saving features were significantly improved
on computers sold at Walmart U.S. stores
over the next two years, the company said.
“We’ve really been trying to focus on
things that we can do that can provide a
benefit but that won’t cost our customer
more because that’s not something we believe that they’ll pay for,” Thomas said.
Wal-Mart began its major push to become more environmentally friendly as it
was trying to burnish its image in the face
of criticism over a myriad of issues including low wages and the impact its large stores
have on their surrounding communities.
Wal-Mart has partnered with outside
groups as part of that push. It is a member of
the Sustainability Consortium, which includes
suppliers such as Coca-Cola Co (KO.N) and
Procter & Gamble Co (PG.N), as well as
groups such as the World Wildlife Fund and
the U.S. Environmental Protection Agency.
Under a sustainability index Wal-Mart
is initially rolling out on 100 categories of
goods, companies can see how their environmental practices rank against those of
competitors. Also, the employees who make
purchasing decisions for Wal-Mart can use
the findings to evaluate products.
Wal-Mart is also making its own energy and
cost-cutting changes. It is set to have solar panels
on up to 200 of its buildings by the end of 2012
and continues to test using alternative fuels and
making other modifications to its trucks.
On Thursday, Wal-Mart plans to announce
its largest solar installation yet. The Buckeye,
Arizona, distribution center, near Phoenix,
will include 14,000 solar panels on its roof and
parking canopies that should produce up to 30
percent of the energy it needs to operate.
The solar panels at the Buckeye distribution center alone will generate up to 5.3
million kilowatt hours of renewable energy
per year, or the equivalent of powering more
than 400 homes and taking about 600 cars
off the road, Wal-Mart said.
Under requirements from EnergyStar, a
program from the EPA and the U.S. Department of Energy, a computer’s default should be
for a monitor to go into sleep mode within 15
minutes of no activity, while a computer system should enter sleep mode after 30 minutes.
Wal-Mart is asking manufacturers, where
possible, to make sleep modes begin after 5
minutes of inactivity for displays, and after
10 minutes of inactivity for systems. Such
recommendations are open for discussion
The Walmart logo is pictured on cash registers
at a new store in Chicago, January 24, 2012.
REUTERS/John Gress
with manufacturers, Wal-Mart said.
Customers who buy the computers could
lengthen the time it takes before a computer
goes into sleep mode by changing their settings.
While the change is only for computers
sold at Wal-Mart’s stores, companies that
change their products to cater to the massive retailer typically make the change across
their product lines.
For example, about five years ago, WalMart told laundry detergent manufacturers
to remove significant amounts of water from
their products in order to shrink package
sizes and save on shipping costs and fuel.
The result was an industry shift to concentrated laundry detergent.
Wal-Mart first asked its suppliers 15 broad
questions about their environmental impact
in 2009. Now, it is catering questions to specific categories and ranking suppliers’ efforts.
With the sustainability index, Wal-Mart
is first looking at 100 categories in areas
including beef products, beer, writing and
office paper, mobile electronics, plastic toys
and printers, Thomas said.
Additional reporting by Phil Wahba and
Nivedita Bhattacharjee in New York; editing by
Matthew Lewis
3
Reuters retail and consumer summit 2012
Arab Spring boosts Dubai retail sales: mall owner
By Matt Smith and Praveen Menon
DUBAI , September 11, 2012
S
pending at Dubai malls owned by
Majid Al Futtaim (MAF) is up 10
percent as the Arab Spring and economic woes in Europe draw immigrants
and tourists to the emirate.
“The Arab Spring has been positive for
Dubai because a lot of Gulf-based people who
used to go to Lebanon or Egypt have identified
Dubai,” chief executive Iyad Malas told the Reuters Retail and Consumer Summit.
MAF, the franchisee for Carrefour (CARR.
PA) hypermarkets in 19 countries and operator of 11 malls across the Middle East and
North Africa, including 6 in the United Arab
Emirates, expected to maintain double-digit
revenue growth in 2012, he said.
Its Dubai retail tenants saw a 15 percent increase in footfall in the first half and 10 percent
growth in sales, Malas said. “(In) Egypt ... tourists are coming to see the Pyramids, the Nile.
Few are going to shop. Whoever visits Dubai
has at least two malls to visit.”
The emirate’s population has been swelled
by people seeking refuge from political strife in
the Middle East and economic malaise in Europe, which is also supporting retail sales.
“If you look at the profile of the people
moving to Dubai it is people with money who
are either worried about the political situation
in places like Syria or Egypt or wherever it
might be,” said Malas.
“There is new interest coming out of Italy, Spain
and some of the southern European countries.”
Retail accounted for nearly a third of
Dubai’s gross domestic product in 2011, with
the emirate positioning itself as the shopping
capital of the region a place to buy designer
clothes, luxury watches, top-end cars and goldplated mobile phones.
The global economic downturn in 2008 led
to a drop in tourists visiting the emirate and
dampened demand for luxury goods. “People
Iyad Malas, CEO of Majid Al Futtaim Group speaks during the Reuters Consumer and Retail Summit
at the MAF headquarters in Dubai, September 11, 2012. REUTERS/Jumana ElHeloueh
with wealth were maybe a little bit scared at
the beginning, but then continued to spend
strongly,” Malas said.
MAF’s gross revenue was up 10 percent in
2011 to 19.6 billion dirhams, while operating
profit rose 19 percent to about $750 million,
said Malas, adding this year’s growth was likely
to be similar.
Editing by Dan Lalor
4
Reuters retail and consumer summit 2012
Neiman sees e-commerce as tool for global push
By Phil Wahba
September 13, 2012
L
uxury retailer Neiman Marcus
Group Inc NMRCUS.UL will use
e-commerce to push into new international markets, with plans to start a
Chinese website by July and offer overseas
shipping on its main site in time for the
holiday season.
Neiman Marcus currently gets international revenue only from shipping to Canada from its U.S. websites. Its 42 namesake
department stores, as well as its outlet locations and Bergdorf Goodman store, are all in
the United States.
But earlier this year, the company took
a 37 percent stake in Glamour Sales Holding Limited, a privately held e-commerce
company based in Hong Kong with leading flash sales sites in Asia, with the goal of
introducing a full-price e-commerce website
in China by next July.
“There are a number of ways we could
approach international expansion,” Neiman
Marcus Group Chief Executive Karen Katz
told the Reuters Retail and Consumer Summit
by phone from Dallas. “What we’ve chosen for
today is to launch a full-price NeimanMarcus.
com.cn site in China and to really focus our
efforts in China through e-commerce.”
Katz said Neiman has moved a number
of senior executives to Shanghai.
“The one thing that is for sure at the
Neiman Marcus Group is e-commerce is
becoming a larger and larger percent of our
total business,” Katz said. E-commerce accounts for about 20 percent of sales.
Earlier on Thursday, Neiman reported a
much smaller quarterly loss, helped by a 7.9
percent jump in comparable sales.
Neiman and other department store chains
have been looking for ways to tap into international shoppers’ interest in their brands.
In May, Macy’s Inc (M.N) said it would
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start selling some items from its privatebrand collection directly to shoppers in China through a deal with online retailer omei.
com, a new China based e-commerce site
operated by VIPStore Co Ltd, with a view
to gauging long-term prospects there.
And on Thursday, Nordstrom Inc
( JWN.N) said it was expanding into Canada, with plans to open four stores there starting in 2014.
Both Nordstrom and Macy’s have tested
international sales by offering online shipping on their websites.
Neiman will start offering that service
beyond Canada in the next two months.
Katz said the chain would also consider opening stores in Canada under the
right circumstances.
“I think it’s a matter of ‘can we find locations there that fit our demographic and
psychographic profile?’” she said.
Reporting by Phil Wahba in New York; Editing
by Lisa Von Ahn
A Neiman Marcus store in Oak Brook,
Illinois, a suburb of Chicago, May 2,
2005. REUTERS/John Gress JG
5
Reuters retail and consumer summit 2012
Crocs seeks to expand beyond clogs
By Nivedita Bhattacharjee
NEW YORK | Tue Sep 11, 2012 6:13pm EDT
S
hoemaker Crocs Inc (CROX.O)
hopes to attract those aged 13 to 30
as it launches its spring/summer collection featuring heels, boots and wedges.
The new designs as well as Retro clogs higher priced but still made with its signature resin Croslite - are part of the company’s plan to expand by reinvesting the money
it makes from selling the bright and chunky
clogs for which it was originally known.
Crocs customers currently range from
kids below 12 years on one end to their parents on the other, leaving a gap in the middle.
“Now, the original clog is 46 percent of
overall sales; the rest of the 54 percent of
our sales (comes from) rain, winter or boat
shoes,” Jeff Lasher, Crocs’ chief financial
officer, said at the Reuters Retail and Consumer Summit in New York.
About three years ago, clogs still made
up more than half of the company’s sales,
Lasher said. The company’s average selling
price has risen over the years as it moves into
more fashionable shoes, said Lasher.
Crocs’ clogs, like its stock, were a fad in
the early 2000s, but the popularity of the
colorful shoes faded, forcing the company to
grapple with declining sales and excess inventory. Its shares were trading at about $18
on the Nasdaq well below its 52-week high
of $29.50, and far below its lifetime high of
$75.21 in the fall of 2007.
Crocs was investing heavily in Asia, which
is set to become its biggest market by the end
of next year, Chief Executive Officer John
McCarvel said in an interview in February.
The company had also said it was betting on newer designs to double sales in less
than five years.
“There’s a lot of opportunity for us to
go directly to consumers in China,” Lasher
reiterated, adding the company was also
Crocs sandals are seen in a store in Quebec City, July 25, 2008. REUTERS/Mathieu Belanger
looking at Spain, Belgium, Luxembourg,
the Netherlands and Russia for direct selling
opportunities.
Crocs, which sells its footwear in more
than 90 countries, said its internet business
in the Americas and Europe did not grow as
a percentage of sales this year. E-commerce
in the United States makes up about 10-12
percent of overall sale, Lasher said.
Asia now competes with the Americas
for the top market spot for the company, he
said, speaking at the summit.
Lasher said Niwot, Colorado-based
Crocs is also investing in e-commerce, especially in China and other parts of Asia, as it
tries launching local language websites.
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Asia’s warmer weather gives Crocs an
added opportunity in those markets, Lasher
said, as does its expanding middle class. In
Asia, China is a major focus for 2013, and
will stay that way in 2014.
The company, which is celebrating its
10th anniversary this year, has about $300
million in cash and cash equivalents, Lasher
said, and is not looking to spend that money
in dividends, buybacks or acquisitions in the
immediate future.
“We’re a relatively conservative management team... who went through the 2009
period,” Lasher said. “At this point ...(the)
approach is leaving that money in the bank
and not repatriating it.”
Reporting by Nivedita Bhattacharjee in New
York; Editing by Matthew Lewis and Phil
Berlowitz
6
Reuters retail and consumer summit 2012
European luxury groups on the lookout for crafts
By Antonella Ciancio and
Astrid Wendlandt
MILAN/PARIS, September 13, 2012
E
uropean luxury makers are buying
production centers to overcome a dramatic shortage of skilled workers that
is putting historic brands at a competitive disadvantage with low-cost production centers,
fashion executives told Reuters this week.
Italian textile leaders Ermenegildo Zegna, Marzotto and Loro Piana this week
bought a controlling stake in Pettinature Di
Verrone, a combing mill specialized in fine
wool, cashmere and special fabrics needed
for their tailored suits.
Beyond the Alps, vertical integration of
luxury producers in France such as Chanel,
Louis Vuitton (LVMH.PA) and Hermes
(HRMS.PA) begun more than a decade
ago and is still going on.
Chanel, which owns the famous embroiderer Lesage, the hat maker Maison Michel
and the plume specialist Lemarié, acquired
last December the Parisian embroiderer
Montex and is constantly on the lookout for
other potential small bolt-on acquisitions.
“Bringing production in-house is essential if you want to keep the quality that is
needed for luxury products,” Toni Scervino,
chief executive of Italian fashion house Ermanno Scervino, told the Reuters Retail and
Consumer Summit on Milan on Thursday.
In 2002, Ermanno Scervino bought
three family-owned makers of haute couture, lingerie, knitwear and childrens wear.
Seamstresses and textile workers work with
the designer at the company’s headquarters
on the outskirts of Florence.
“There is a trend among luxury companies to acquire artisans to secure their supply chain,” Elisabeth Ponsolle des Portes of
the French luxury lobby Comite Colbert
told Reuters.
Luxury makers are under pressure to
retain skilled artisans as young people are
not attracted to handicrafts, a demanding
job far from glamorous catwalks and seen
as low in the social scale.
“The lack of craftsmen is our biggest
problem and schools are not enough,” Scervino told the Reuters summit in Milan.
Ponsolle des Portes said some luxury
groups in France were also struggling to
hire enough artisans to meet demand. Also,
experienced artisans were retiring and not
being replaced.
“We try to tell young people that these
are promising fields which are highly valued
and that these jobs can become a passion,”
Ponsolle des Portes told Reuters in Paris.
To entice youths to consider going into
craftsmanship, some luxury brands such as
Roberto Cavalli and Cartier have set up
their own divisions to train artisans while
others such as Hermes have signed partnerships with schools to have access to the
best graduates.
Hermes employs about 3,000 in fields
ranging from silks to leather goods.
Florentine fashion designer Roberto
Cavalli makes his own animal and floral
prints for which he is famous worldwide,
the group Chief Executive Gianluca Brozzetti told Reuters.
The Florentine-based group has also
opened a division with craftsmen making
prototypes for leather bags and shoes, he said.
In France, over the past five years the
Comite Colbert has invited thousands of
students from Paris colleges to visit production sites and invited representatives of luxury companies to make presentations in class.
Brands participating in the Comite Colbert’s initiative included jewelers Cartier
and Boucheron, Hermes, Guerlain perfumes and watchmaker Breguet.
In Italy, the manufacturing crisis is aggravated by a prolonged recession that is
prompting many firms to close.
Designer Ermanno Daelli and Chief Executive Toni
Scervino (R) of Italian fashion house Ermanno
Scervino pose in the atelier near Florence
September 5, 2012. REUTERS/Giampiero Sposito
The number of Italian textile firms has
dropped 4 percent to over 21,700 since
2009, according to the Italian Union of
Chambers of Commerce.
The number of Italian shoe makers has
halved since 1962, according to Il Sole 24
Ore daily. Italy is famous for making shoes
for brands such as Christian Dior (DIOR.
PA), Yves Saint Laurent (PRTP.PA) and
Oscar de la Renta, among others.
Scervino said the crisis could, however,
push more young people to manufacturing
jobs. “Need is the best motivation,” he said.
Writing by Antonella Ciancio; Editing by
Richard Chang
7
Reuters retail and consumers summit 2012
The CEO of
Marks & Spencer,
Marc Bolland,
listens during the
Reuters Retail
and Consumer
Summit
in London
September 13,
2012. REUTERS/
Benjamin Beavan
M&S boss says stock problems fixed, feels relaxed
By James Davey and Neil Maidment
September 13, 2012
M
arks & Spencer (MKS.L) has
fixed the stock management
problems that hit womenswear
sales in the last six months, its CEO said,
adding he did not feel under pressure from
investors despite renewed talk of a possible
bid for the British retailer.
In July Britain’s largest clothing retailer
M&S shook up its general merchandise management team after posting its biggest quarterly sales drop for 3-1/2 years, blaming wet
summer weather and stock management issues that left its stores short of best selling lines.
“It was not good enough; we took the adequate steps,” Chief Executive Marc Bolland
said at the Reuters Retail and Consumer
Summit on Thursday.
“Stock levels are back up where we want
them. ... We’ve also changed the buying processes for it.”
John Dixon, previously in charge of food,
has replaced Kate Bostock as the boss of clothing, while Belinda Earl, former CEO of Debenhams (DEB.L), Jaeger as well as Aquascutum, has been brought in as style director.
“I think that they (Dixon and Earl) need
some time and shareholders are aware that
normally you would have sort of six months
lead time before you can change. Spring/
summer next year will show some of the
new buys,” said Bolland, sporting a so-called
M&S sustainable suit made from organic, recycled and reclaimed materials, at the summit
held at the Reuters office in London.
Some analysts reckon July’s disappointing update from M&S, which followed
one in May when the firm slashed its sales
growth forecast, have made the bellwether
UK retailer increasingly vulnerable to a bid.
Shares in the 128-year-old company that
sells clothes, footwear and homewares as well
as upmarket foods from about 730 stores to 21
million Britons a week, have risen 15 percent
over the last three months, buoyed by persistent speculation regarding a possible offer from
private equity or a sovereign wealth fund.
Bolland said reports of possible bids were
“rumors and speculation; we cannot comment on any rumors or speculation.”
Asked if M&S was preparing for a pos-
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sible takeover bid, he said no and said its major investors fully backed his strategy of focusing on the UK, embracing multi-channel
retailing and selective overseas expansion.
“The board has a very clear strategy, is behind the strategy. Major shareholders are in
behind the strategy,” he said. “I’m relaxed.”
Bolland said M&S’ customer research had
shown a “strong uptick” in consumer confidence
over the Olympic and Paralympic Games period.
But he noted: “The translation of immediate customer confidence into ‘I am going to
spend more’ is not what the industry data and
the data that we are tracking have suggested.”
Separately on Thursday, clothing retailer Next (NXT.L) and department store
and food group John Lewis JLP.UL, two of
Britain’s best performing retailers, warned
of a slowdown in an already troubled sector,
dampening hopes that consumers might help
return the recession hit economy to growth.
Shares in M&S closed down 1.3 percent
at 370 pence, valuing the business at about
5.96 billion pounds.
Reporting by James Davey and Neil
Maidment; additional reporting by Mark Potter
and Kate Holton; Editing by Richard Chang
8
Reuters retail and consumer summit 2012
Home Depot steps up e-commerce efforts in China
By Dhanya Skariachan
NEW YORK, September 14, 2012
H
ome Depot Inc (HD.N) has already started selling goods on
website 360buy.com in China and
is looking for opportunities to partner with
other e-commerce sites as it tries to maintain a presence in the world’s most populous country even as it abandons its big box
stores there.
The world’s largest home improvement
chain realized that its large store model was
not right for the Chinese market, Chief Financial Officer Carol Tome told the Reuters
Retail and Consumer Summit on Friday.
“We realized we had a model that wasn’t
meeting the needs of the Chinese consumer,” she said.
China does not have the type of projectoriented customer that Home Depot has
found in other markets such as the United
States, Mexico or Canada.
Adapting Home Depot, a retailer focused on being a destination for do-ityourselfers, to a market such as China
where consumers want the remodeling and
repair projects to be done for them has been
challenging.
The company made its first foray into
the rapidly growing Chinese market in late
2006 through its acquisition of a 12-store
Chinese chain called The Home Way.
It has struggled to expand since then as
it was a relatively late entrant into the market, behind other international chains such
as Britain’s Kingfisher Plc (KGF.L), which
ventured into China in the late 1990s.
Home Depot is now planning to focus
on taking the online route to reach the
Chinese consumer.
Home Depot and 360buy.com have been
working together for about 10 days, Tome
said. Home Depot is also in discussions with
Alibaba Group’s Tmall.com, she said.
Carol Tome, chief financial officer of Home Depot, speaks at the Reuters Retail and Consumer Summit
in New York, September 14, 2012. REUTERS/Brendan McDermid
Late on Thursday, Home Depot said it
would close all seven of its big box stores
and cut 850 jobs in China as the retailer
changes its focus in the Chinese market to
online and specialty stores.
In June, Home Depot opened a paint
and flooring store and a separate Home
Decorators Collection store in Tianjin,
China. While Tianjin is a second-tier city,
Tome said the company was looking for
sites in a bigger city like Beijing as well.
Credit Suisse analyst Gary Balter called
Home Depot’s move to close its seven big
box China stores a “prudent decision.”
While the move was an acknowledgement that the big box approach may not be
the best way to serve the Chinese market,
it still made sense for Home Depot to continue to find ways to succeed in China as
it already has sourcing offices and specialty
stores there, and given the size of the market, he said.
Balter estimates the Chinese market for
paint, furniture and home furnishings at
about $20 billion.
Tome, who has had operational responsibility for the retailer’s China operations
for about 18 months now, said she has
learned a lot more about the Chinese consumer since taking over.
For instance, Tome recently learned that
Chinese customers like furniture with a
smooth finish and have little appetite for
“distressed furniture.”
“It is our intent to keep learning,” she said.
Home Depot shares were up 2.3 percent
at $59.65 Friday on the New York Stock
Exchange. They rose to as much as $59.70
earlier in the session.
Reporting by Dhanya Skariachan, Jessica
Wohl, Brad Dorfman and Phil Wahba; Editing
by Phil Berlowitz
9
Reuters retail and consumer summit 2012
Rajen Ruparell, Vice President of
Global Sales at Groupon speaks at
the Reuters Retail and Consumer
Summit in New York, September
14, 2012. REUTERS/Mike Segar
Groupon working on global consumer deals
By Nivedita Bhattacharjee and
Alistair Barr
NEW YORK, September 14, 2012
G
roupon Inc (GRPN.O) is working
on cross-border and multi-country
deals as the world’s largest online
daily deals provider looks for newer ways to
build market share and help retailers broaden their footprint, a top executive said.
“That really is where we have added
advantage, being in 48 countries,” said Rajen Ruparell, vice president of global sales,
speaking Friday at the Reuters Retail and
Consumer Summit in New York.
“We can do national deals with retailers not only in the United States or Europe,
but in countries where they would like to
build their footprint in, and some of them
are starting to realize that opportunity
now,” he said.
Once hailed as the fastest growing Internet company ever, Groupon has shed about
three-quarters of its market value since its
November 2011 debut on the Nasdaq. A
sharp slowdown in revenue growth has raised
questions about the sustainability of its business of selling discount vouchers online, and
about its growth in the domestic market.
The stock was up 7.1 percent at $5.10
on Friday.
Global deals help the company build
a common platform and negotiate better
deals, said Ruparell. It is also something
merchants want.
Ruparell, who took over as sales chief
last month, said Groupon is in discussions
to expand its deal with Rosetta Stone Inc
(RST.N), helping take the language-learning software maker beyond the 10 countries where it operates.
“One of the discussions we’ve been hav-
ing actively with them is seeing how we can
expand their global footprints outside of
the U.S. into the mid-European countries,”
said Ruparell. He added there could be a
Rosetta Stone deal in Russia within a week.
The company is also being more “aggressive in building inventory,” while it irons
out glitches in merchant tie-ups.
Users of Groupon often complain about
second-tier treatment, especially for services in restaurants and similar industries
where Groupon buyers often select from
limited menus or choices.
Ruparell said the company hoped to
do away such problems, and “a way to do
that was to have a lot more inventory and
more merchants.”
Reporting by Nivedita Bhattacharjee in New
York and Alistair Barr in San Francisco; Editing
by Phil Berlowitz and Jeffrey Benkoe
10
Reuters retail and consumer summit 2012
More luxury outlets planned to lure US bargain hunters
By Phil Wahba
NEW YORK, September 14, 2012
T
op luxury brands that long ago
shunned outlet malls as America’s
bargain bin are now moving more
aggressively with plans to build more outlet
stores and take advantage of shoppers’ love
of bargains.
Saks Inc (SKS.N), Nordstrom Inc
( JWN.N), Tumi Holdings Inc (TUMI.N),
Neiman Marcus Group NMRCUS.UL and
Michael Kors Holdings Ltd (KORS.N) are
among the high-end names making lower
priced outlets a cornerstone of their store
expansion, even as some have all but halted
building new full-service stores.
For instance, Nordstrom is planning to
double the number of its Rack outlet stores
to 230 locations by late 2016, while Saks
now has 64 Off Fifth stores and could have
as many as 100 within a few years. There are
28 Neiman Marcus Last Call locations, and
5 Last Call Studios, a smaller format outlet
store, with another opening in Virginia in
a few weeks.
Executives at the Reuters Retail and
Consumer in New York this week said that
for all of the outlet expansion in recent
years, they remain a relatively untapped
opportunity that is providing luxury companies with a source of growth by helping
them reach less affluent shoppers too.
“There’s a hunt that consumers enjoy,” said Richard Dickson, Jones Group’s
( JNY.N) chief executive of branded businesses, told the summit. “Outlets are going
to become a more important part of the
consumer’s quest for value.” The Jones New
York and Nine West chains have long been
fixtures at outlet malls.
Outlets used to typically be unattractive
locations, used for selling clearance merchandise. But retailers now put a lot more care into
making them attractive and brand them.
About 75 percent to 80 percent of the
merchandise at Saks’ Off Fifth and Neiman’s Last Call chains is made specifically
for those outlets, with a smaller emphasis
now on clearance merchandise from the
full service department stores.
“They’ve become more mainstream
in the eyes of our retailers,” said Steven
Tanger, chief executive of Tanger Factory
Outlet Centers Inc (SKT.N), noting that it
is now chic even for affluent customers to
seek out bargains.
There are about 150 outlet malls in operation in the United States. Tanger said
the country could support another 100 in
the next decade.
“I don’t think we’re anywhere near close
to hitting saturation on the Off Fifths,”
Saks CEO Steve Sadove told Reuters in an
interview ahead of the Summit.
Outlets are a way for Saks to get in on
the boom in the “off-price” area of retail,
whose leaders are TJX Cos Inc’s (TJX.N)
Marshall and T.J. Maxx chains, and Ross
Stores (ROST.O), which sell designer
brands at deep discounts.
Saks, Neiman and Nordstrom have all
enjoyed sales gains in the last two years to
make other retailers green with envy.
But sales at the outlet chains have often
outpaced business at full line stores. For instance, same-store sales at Nordstrom Rack
stores were up 7.3 percent in the first half of
the year, more than twice the pace of Nordstrom department stores.
Sales gains at luxury chains have generally been strong this year, but some chains
are hesitant to add more full service locations and some even closing them.
For example, Saks last week announced
the closing of two Saks Fifth Avenue
stores, and Neiman is closing its Minneapolis store. Nordstrom is only opening a
new department store here and there.
Part of the difficult balance retailers have
The outside of the Saks Fifth Avenue store is seen
in New York October 8, 2009.
REUTERS/Shannon Stapleton
to strike is to offer customers the types of
deals they are looking for at an outlet store
without hurting the luxury aura or shortchanging shoppers.
“I don’t want to see in an outlet the
same thing that I see in a full price store
at a cheaper price,” said Tumi CEO Jerome
Griffith. The luggage and accessories maker
has about 20 outlets in the United States
and plans on opening more in parallel with
its full price store expansion.
Tumi’s outlets are just as lucrative as
the full line stores: annual sales are about
$1,000 per square feet.
Neiman Marcus CEO Karen Katz told
Reuters that there was relatively little overlap between customers of the retailer’s outlet chains and its namesake stores.
Retail executives expect the outlet boom
to last even after the economy rebounds
more forcefully.
“In good times, people like a bargain,”
Tanger said. “In bad times like these, they
need a bargain.”
Reporting by Phil Wahba in New York; Editing
by Phil Berlowitz
11
Reuters retail and consumer summit 2012
Retailers see a somewhat jolly U.S. holiday season
By Jessica Wohl
NEW YORK, September 16, 2012
I
t’s beginning to look a lot like last
Christmas.
Early insights from retailers and industry experts suggest U.S. sales should rise
this holiday season about as much as they
did in November and December 2011, as
cautious optimism persists despite high
unemployment and uncertainty over the
presidential election.
Sales have risen by a single-digit percentage in each of the past two years. That
is expected to continue this year.
“What we’re seeing right now is what
I would call ‘tempered enthusiasm,’” HSN
Inc Chief Executive Mindy Grossman told
the Reuters Retail and Consumer Summit.
“When the product is right it’s differentiated, it’s compelling, there’s absolute engagement. But it’s not unbridled.”
Sales during November and December
are critical for many retailers, as shoppers
buying gifts and purchasing items for themselves complete a large part of their yearly
shopping. The season can make or break a
company’s annual results, accounting for
one-third of annual sales in many cases.
“Our preliminary forecast right now for
holiday is going to look very similar to last
year,” said Monica Aggarwal, Fitch Ratings
senior director and head of the U.S. retail team.
“We’re looking for about a 3 to 4 percent increase in overall retail spending for this year.”
That leaves retailers with the task of choosing the right items to stock and making sure
they do not order too much, to avoid having to
take unplanned discounts that cut into profits.
“My guess is it’s going to be a better
Christmas than last year and my guess is
the inventories of the retailers is in line, so
there won’t be any massive mark downs like
there was four years ago, five years ago,” said
Tanger Factory Outlet Centers Inc CEO
Steve Tanger. “I think it will be a better
Christmas than people think.”
ShopperTrak, which makes sales projections based on shopper visits to U.S. stores,
forecast on September 12 that U.S. retail
sales should rise 3.3 percent this holiday
season after seeing a 3.7 percent rise in
2010. It expects visits to stores to rise 2.8
percent during November and December,
which it said would be the first increase in
shopper traffic since 2007.
Accessories are poised do well again this
holiday season.
“The accessory trend has been phenomenal. Handbags, footwear, jewelry - those particular categories have been very strong and
I expect that those categories will continue
to have momentum going into the holiday
season,” said Richard Dickson, president
and CEO of the branded business at Jones
Group Inc . “I think apparel will be good, I
think accessories will be stronger.”
Tumi Holdings Inc, known for luxury
luggage and accessories, has put more gift
items into its line over the past three holiday seasons and will add more this year,
such as colorful cases for iPads. In 2011,
fourth quarter net sales represented about
32 percent of Tumi’s annual sales and 42
percent of operating income.
“Funny enough, people actually give briefcases and luggage as Christmas presents, don’t
ask me why,” said Tumi CEO Jerome Griffith.
One new item on this retailer’s holiday
list this year is a wristlet just big enough to
stash an iPhone and a credit card, an idea
prompted by Griffith’s 20-year old daughter.
Shoppers in the luxury sector are honing
in on exactly what they want, but are still
spending, executives said.
“The consumer doesn’t seem to have
changed how she’s been approaching shopping since we came out of the recession,” said
Karen Katz, CEO of high-end department
store operator Neiman Marcus Group Inc.
“She’s been very deliberate, wants things that
are special, unique and somewhat exclusive,
and she’s not buying things if she already
owns them in her closet.”
While Neiman Marcus does not give
forecasts, competitor Saks Inc (SKS.N)
sees a mid-single digit percentage gain in
sales for the second half of the year.
“We’re looking at a relatively solid environment,” Saks CEO Steve Sadove told Reuters
on Monday. “At the higher end, the consumer
hasn’t fallen by any means off of a cliff.”
Still, some U.S. luxury brands including
Tiffany & Co (TIF.N) and Ralph Lauren Corp (RL.N) sounded a cautious note
about the coming months because of the
threat of a slowdown in Europe and China.
Those signals were prominently followed
by Britain’s Burberry Group Plc (BRBY.L)
While companies such as Neiman Marcus and Tanger have had decades to work on
their holiday strategies, recent startup companies such as LivingSocial are still in their
infancy when it comes to the big season.
LivingSocial CEO and Co-Founder
Tim O’Shaughnessy says his daily and local deals company will improve this holiday
season over its first two.
When the season goes into full swing
on the day after Thanksgiving, “there is just
so much noise on Black Friday that really
going and cutting through that in a meaningful way was harder than we thought,”
O’Shaughnessy said.
Its work in late December in the days
just before Christmas also could use a bit of
tweaking, he said.
“We didn’t do a good job of figuring out
how you play into that last minute cycle,”
O’Shaughnessy said. “We’re going to try
and solve that this year.”
Reporting by Jessica Wohl and the Reuters
U.S. retail team in New York. Editing by Andre
Grenon
12
Reuters retail and consumer summit 2012
Crocs Chief Financial
Officer Jeff Lasher speaks
at the Reuters Consumer
and Retail Summit.
Reuters/Lee Celano
Retail leaders pine over simple holiday gifts
By Martinne Geller
NEW YORK, September 17, 2012
T
he year-end holiday season often
brings children a dizzying array of
smartphones, videogames and computers, but the retail executives who sell
these items remember a time when gifts
were much simpler.
Jeff Lasher, chief financial officer of
Crocs Inc, told the Reuters Retail and
Consumer Summit last week that his most
memorable Christmas gift was a train set
that brought together his father and his
two brothers.
“We worked on it together,” said Lasher,
speaking in New York. “My dad was an
engineer so I think he looked at that as a
quick-turnaround assignment. We went to
bed on Christmas Eve and woke up and
had a train set around the house.”
Andrea Thomas, senior vice president of
sustainability at Wal-Mart Stores Inc, recalled the Norwegian blessing lamps that
her mother had specially made for her and
three sisters. The lamp is placed on the dinner table every Sunday leading up to Christmas, and on Christmas Eve.
“The fact that she went and had it made,
and that I’m able to carry that tradition with
my family ... that was just really, really awesome because it had so much meaning and
such a tie to my childhood,” Thomas said.
While many adults now lament how
much time their children spend playing
videogames, LivingSocial Chief Executive
Tim O’Shaughnessy remembers how excited he was to get a Super Nintendo game
console, especially since his parents had
been “hellbent against” videogames.
“It was like my unicorn, because I never actually thought that this would enter our house.
And it had to come from an anonymous
source because my parents didn’t even want to
put their name on the label,” O’Shaughnessy
said. “I think it was from Santa.”
J Sainsbury Plc’s commercial director,
Mike Coupe, speaking to the summit in
London, called out a recent addition to his
guitar collection - a Fender Stratocaster.
“I have guitars on my wall but no milk in
the fridge,” said Coupe, whose company is
Britain’s third-largest supermarket operator, behind Tesco Corp and ASDA.
HSN Inc CEO Mindy Grossman fondly recalled a piece of artwork by mixed me-
dia artist Marianne Aulie that her husband
had commissioned. The large painting integrated black-and-white photography by
Grossman’s daughter and is now hanging
in her office.
“It was the most personal, but something I loved, present I’ve ever gotten,”
Grossman said.
For Monica Aggarwal, Fitch Ratings’
senior director and head of its U.S. retail
team, a memorable present was a Louis
Vuitton wallet she had bought for herself
but then returned, after her family lectured
her for spending so much.
“I think they felt so bad that I got it for my
birthday two months later,” Aggarwal said.
But for some in the luxury industry, who
are surrounded by material items, it is the
time spent with loved ones that is most
special. This is the case with Roberto Cavalli chief Gianluca Brozzetti.
Brozzetti said his best gift has been to
spend time in the mountains with family,
eating good food, enjoying traditions and
forgetting about shopping.
Editing by Matthew Lewis
13
Reuters retail and consumer summit 2012
Walletless shopping still a dream this holiday
By Nivedita Bhattacharjee
NEW YORK, September 17, 2012
T
ech-savvy holiday shoppers who
are counting on using their mobile
devices to avoid miles-long checkout lines are unlikely to see that Christmas
wish come true this year.
Apple Inc, Amazon, Nokia Oyj and
Samsung Electronics are delivering hot
new mobile devices for the holiday season,
and it is easier than ever to research products, compare prices and make purchases
from online stores.
But with mobile payment still in its infancy, the online revolution stops at check-out
- shoppers still have to pull out their wallets
and hand over cash or a credit or debit card.
“Everyone’s trying to find the right way
to make (mobile payments) easy and no
one’s found it yet. No one has the secret
sauce,” said Mark Belford, managing director and co-head of the consumer and retail
investment banking group of Janney Montgomery Scott LLC, speaking at the Reuters
Retail and Consumer Summit in New York.
When someone builds it, the shoppers
will come, Tim O’Shaughnessy, chief executive of LivingSocial, said at the summit.
Mobile payments are the new mantra
in retail technology - the proliferation of
tablets and smartphones, and social media feedback have made retailers sit up and
take notice. But aside from a few mavericks,
most are shy about experimenting.
Marshal Cohen, chief industry analyst
for market research firm NPD, said retailers like to wait and see what works before
adopting new technology.
“Retailers in the United States have not
taken retail to the next level,” Cohen said.
“It is about making an investment. Many
retailers (do) what is right for them from
a fiscal point of view rather than the consumer’s point of view,” he said. Although
studies suggest mobile payments should
improve sales as shoppers get a seamless
buying experience, this has yet to be proven
beyond a doubt, he said.
As a result, few retailers have moved beyond tried and tested services such as eBay
Inc’s PayPal online payment service and
Google Inc’s Wallet - if at all.
Starbucks Corp, which does a booming
holiday business, leap-frogged many retailers in August when it announced a deal to
use startup Square Inc to process payments.
Experts said the move by the world’s biggest coffee chain could threaten established
payment processors and shake up retailing.
Wal-Mart Stores Inc, Target Corp and
Japan’s 7-Eleven quickly followed with
news that they are developing their own
mobile payment network.
Elsewhere, Aeropostale Inc, Foot Locker Inc (FL.N) and Macy’s Inc announced
a deal with Isis - a mobile commerce joint
venture created by AT&T Mobility LLC,
T-Mobile USA and Verizon Wireless
Capital LLC - for mobile payments in
Austin, Texas, and Salt Lake City. But this
is just in the testing phase.
Neiman Marcus Group Chief Executive Karen Katz said retailers are trying to
figure out which of the many mobile payment providers is the best partner. They also
worry about privacy and security issues.
A recent survey by Shop.org and Forrester Research Inc showed many retailers
were being conservative even when it came
to the use of broader mobile technology,
not just payments.
Half of the retailers surveyed said they
spent less than $100,000 on smartphones
in 2011, and 74 percent spent about the
same amount for tablets.
Though companies are indicating a
desire to grow their investments in tablet
initiatives, their numbers still remain “conservative,” the study said.
Attendees watch a demonstration of the
Google wallet application screen during a
news conference unveiling the mobile payment
system. REUTERS/Shannon Stapleton
While brick-and-mortar retailers work
to figure out how mobile investments fit
into their overall strategy, e-commerce
players like LivingSocial, Groupon Inc,
HSN Inc and a few other nontraditional
retailers are running ahead.
“I still see people looking at their e-commerce strategy and saying mobile comes later. Actually, it should be the opposite,” said
HSN Chief Executive Mindy Grossman.
Grossman said her company did more
business in mobile in the first half of this
year than it did all of last year. But for traditional retailers, the pressure is not very great.
“We continue to monitor which brands
make sense for mobile,” said Richard Dickson,
CEO of branded businesses at Jones Group.
Dickson added that while the company
is more active in engaging mobile activities
for its Nine West brand, Jones’ broad portfolio tends to be for older shoppers who are
not known to be early adopters of technology. So the company has “more time to sit
and watch,” he said.
Reporting by Nivedita Bhattacharjee in
Chicago; editing by John Wallace
14
Reuters retail and consumer summit 2012
Summit Speakers
Marc Bolland
Mindy Grossman
Marco Belletti
CEO
CEO
Generale Managing Director and Global
Marks & Spencer
HSN
head of Consumer, Retail and Luxury
Societe
Karen Katz
Patrik Hoffmann
Monica Aggarwal
CEO
CEO
Senior Director
Neiman Marcus Group
Ulysse Nardin
Fitch Ratings
Carol Tome
Tim O’Shaughnessy
Toni Scervino
CFO
CEO and Co-Founder
CEO
Home Depot
LivingSocial
Ermanno Scervino
Gianluca Brozzetti
Rajen Ruparell
Mark Belford
CEO
VP of Global Sales
Managing Director
Roberto Cavalli
Groupon
Janney
Tadashi Yanai
Steve Tanger
Mike Coupe
Chairman, President and CEO
CEO
Commercial Director
Fast Retailing
Tanger Outlets
Sainsbury’s Group
Jeff Lasher
Jerome Griffith
Mohammed Al Fahim
CFO
CEO
CEO
Crocs
Tumi
Al Fahim Holdings
Richard Dickson
Andrea Thomas
Abdulhamied Seddiqi
President and CEO of Jones Group
Senior Vice President of Sustainability
Vice Chairman
branded businesses
Walmart Stores Inc
Ahmed Seddiqi & Sons
Jones Group
Iyad Malas
CEO
Majid Al Futtaim
FOR MORE INFORMATION:
Bradley Dorfman
[email protected]
Phil Wahba
[email protected]
Jessica Wohl
[email protected]
Antonella Ciancio
[email protected]
Astrid Wendlandt
[email protected]
James Davey
[email protected]
Nina Andrikian
[email protected]
Benjamin Beavan
[email protected]
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