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| Camo Flow Y |
Another photo of the Let It Loose Tank.
Thursday, May 26, 2011
Look Like a Bootcamp Badass
Creating The 21st Century Mall
By Ilaina Jonas
Back when most shopping malls were built, cutting edge technology was color television and a mobile phone meant a land line with a really long cord.
Today, technology allows shoppers to compare prices while at the store or buy online and has become one of the biggest threats to retailers and their mall landlords. Many retailers have adapted or embraced new technology as another channel for their sales.
But malls are not so nimble. Some retailers such as Kohl's Corp and Macy's Inc, whose department stores anchor big regional malls, have said they want to shrink the size of their stores. That is much easier said than done. Malls can refurbish, upgrade lighting, change the decor or add space. But significant changes are difficult, both physically and legally, and take years.
That means much of the next phase of the evolution of the U.S. mall -- a concept that proliferated in the 1960s through the 1980s -- will be undertaken by developers of new malls, whose construction and financing are just beginning to look plausible.
"It's a transformation of the industry," said Grant Herlitz, president of the Howard Hughes Corp, a developer and diversified real estate company spun off from mall owner General Growth Properties Inc.
"Developers have to meld themselves with those retailers to figure out the mall of the 21st Century," Herlitz said.
Malls are great big organic beings, with the fate of the specialty retailers, department stores and mall owners intertwined. Legal agreements govern what department stores and landlords can do with the buildings they either own or lease and often require all parties approve major physical changes. Other agreements, such as operating covenants, dictate the hours and years a department store must remain open for business and what it can sell.
"It's not that simple," William Taubman, chief operating officer of luxury mall owner Taubman Centers Inc, said while attending the International Council of Shopping Centers annual convention in Las Vegas.
"They take enormous approval from the department stores as well as the communities," he said. "Where we've had department stores that in our view were underperforming and in our view were willing to downsize, by the time you get done figuring all the cost involved, it almost never works."
Retailers will shape new mall development, said Howard Hughes Chief Executive Officer David Wienreb.
The company has more than a dozen development sites or redevelopment projects, such as Manhattan's South Street Seaport, Hawaii's Ward Centers and Cottonwood in Salt Lake City.
"We create a user friendly experience that's an enhancement to the community and that speaks to what the retailer is looking to deliver to their customers," Weinreb said.
Australia's Westfield Group has been a pioneer in U.S. mall redevelopment, melding traditional mall retailers with atypical mall retailers. It was the first to add value stores such as Costco Wholesale Corp and Target Corp stores and grocery stores to malls that include high-end retailers such as Neiman Marcus or Nordstrom Inc.
USING TECHNOLOGY TO FIGHT TECHNOLOGY
Many retailers today are embracing technology. Walt Disney Co's Disney Store has been transforming its toy stores into high-tech playgrounds. The stores have become entertainment centers, where children can wave a wand and Cinderella appears in the mirror, build their own car that is based on the movie "Cars" or see clips of Disney films in an in-store mini theater.
Disney opened a dozen of the new stores last year. After those generated double-digit traffic increases, the company accelerated the roll-out and plans to open another 40 this year.
O'Neill Properties Group plans to use technology to lure shoppers to The Point, a planned development that includes a 3 million square-foot retail development on part of the 453 acres in Sayreville, New Jersey, 30 miles from Manhattan.
O'Neill plans to make massive use of LED (light emitting diode) video lighting to advertise the products and the websites of the mall retailers to the 800 million people who drive past the site annually.
"We have an opportunity to build a mall from scratch," said Brian O'Neill, founder and chairman of the company that bears his name. "We've gotten more signage approved, 10 times that of Times Square in terms of signage.
Plans for the property also include 2,000 residential units, and a hotel. But the first phase will be The Landing at the Point, a 620,000 square-foot high-end retail center.
O'Neill said he has received plenty of interest from investors, including sovereign wealth funds and pension funds to foot the $1 billion price tag. He is currently in talks with large mall developers, especially real estate investment trusts, although he would not name them.
"If you think of retailing today, it's going through the most significant metamorphoses since the beginning of time," O'Neill said. "Specifically, retailers are having to figure out how to sell goods in store and online, and the ability to use each of these two mediums to drive sales has not yet been incorporated into a mall."
Urban Outfitters' Glen Senk: Look for the Right Culture, Diverse Opinions and 'Bad News'
According to Glen T. Senk, the key to success is hiring and cultivating the right people. At a recent Wharton Leadership Lecture, the CEO of Philadelphia-based retailer Urban Outfitters underscored the importance of recruiting and developing a team that is a good fit for corporate culture -- and then listening to what those employees have to say, even when the feedback isn't always positive. "When you are the CEO, everyone wants to 'yes' you; no one wants to give you bad news," said Senk, who began working at Urban Outfitters in 1994 and took the top job in 2007. "But I have to pull [the bad news] out of them. I need to know what I'm doing wrong."
Another tenet of Senk's philosophy is the importance of pursuing a career for the sheer enjoyment of the work, rather than for money. The wisdom of that viewpoint became apparent to Senk in 1989, when he successfully battled cancer. "You realize you have to take responsibility for doing what is right for you," Senk noted. "You have to live a life you want to lead." Senk added that focusing on living what he called an "authentic" life has paid huge dividends. "A lot of my friends who went on to be very successful in investment banking or law or consulting ... are not as happy as I am. There is not a day that I don't wake up bounding out of bed and can't wait to get to work."
The payoff to Senk's formula is evidenced by Urban Outfitters' rapid expansion. Over the last 10 years, the company's operating income has grown by 36% annually as the firm built a large stable of successful brands -- the core Urban Outfitters line aimed at women 18 to 30 years old; Anthropologie, a clothing and accessories retailer focused on women ages 28 to 45; Free People, a fashion-forward line of clothing and retail stores focused on women in their 20s; the Scandinavian-inspired modern apparel and footwear brand Liefsdoittir, previously sold at upscale department stores but now exclusively at Anthropologie stores, and new efforts in the garden and bridal arenas.
Although Urban Outfitters posted a 17% rise in net sales in 2010, the company has also been grappling with consumers' reluctance to trade in the skinny jeans and tunic tops that have been popular in recent years for the wide-legged pants and slimmer tops that now dominate the runway. Last week, Urban Outfitters posted net earnings of $39 million for the quarter ending April 30, down from $53 million last year. In addition, net sales were down 6% at Anthropologie and the Urban Outfitters brand posted only a 1% gain, although Free People racked up a 30% increase.
In March, the company reported a 3% decline in fourth quarter earnings for fiscal 2010, missing analysts' predictions for the first time in nearly two years. As a result, shares of the company fell 17%. Stephen Murray, global president of the namesake Urban Outfitters line, announced in April that he was leaving after a year. Senk is taking over his duties in the interim and told analysts last week that he plans to become more involved with choosing fashions and merchandise as the company attempts to turn the tide.
From the Concorde to Main Street
Senk's career at Urban Outfitters was almost a nonstarter. In the early 1990s, he left a position as senior vice president and general merchandise manager at kitchenware and home goods retailer Williams-Sonoma and decided to start his own business. While raising money for that venture, he met Urban Outfitters founder Richard Hayne. When Hayne tried to entice Senk to join his company, Senk initially took a pass. Instead, Hayne agreed to help bankroll Senk's as yet undefined new venture. "I was terrible at raising money," Senk noted with a laugh. But Hayne ultimately became a mentor to Senk, and when Senk decided to return the money he had raised to investors, he took Hayne up on his job offer. He started out running one store, the Anthropologie prototype outlet.
"I went from supervising 200 people, having two assistants and flying on the Concorde [at Williams-Sonoma] to running one store that did less than $1 million," Senk said. "I had a vision for myself and what it could be. And I believed so strongly in the culture [Hayne] had created at Urban."
Senk described that culture as one where creative, collaborative and curious people are given the freedom to operate almost like entrepreneurs. Diversity -- including diversity of race, religion and political views -- is also central to that vision. "Dick Hayne is a Republican," Senk noted. "I'm the first openly gay CEO of a Fortune 1,000 company." While Senk and Hayne may differ politically, Senk considers such disparity of opinion to be an advantage. "We believe as a company in hiring diversity, not because it is politically correct, but because diversity makes us stronger. I look for people who complement me, not [people] who look at the world the same way that I do."
Senk said the willingness of Urban Outfitters managers to debate with him and with each other drives the company's success. For example, 11 years ago, an executive at Anthropologie asked for funding to create a website for the company. Senk initially dismissed the notion, arguing that the brand's customers weren't likely to shop online. "The day it went live, we had [an impressive number of] hits," Senk recalled. "You want people who are challenging each other."
In fact, Senk described Urban Outfitters' culture as one of consistently testing the status quo and thinking entrepreneurially. Members of the company's merchant team are encouraged to take one trip every year to a non-traditional location -- Brazil or Africa or Thailand, for example -- to hunt for new ideas and concepts for the stores. Each store functions essentially like a small business; managers are free to experiment with the merchandising and presentation in their stores. The company does, however, closely measure the performance of each location. "We are constantly looking at who is [at the top and who is at the bottom of the] rank and what can [we] learn from the more successful people," he noted. "We are gut driven -- but we verify with data."
'The Theater of Retail'
Senk learned the importance of discipline at an early age. He started riding horses when he was just nine years old and was competing on a national level by the time he was a teenager. "It doesn't matter what you tell the horse as long as you don't change your mind midair," Senk said. Managing a large workforce is in some ways similar. "I can't wake up one day and want one thing, and wake up another day and want something else. You have to have very clear priorities and be very consistent. The fastest way to lose people is to give them a different set of objectives every day."
Senk's winnings from those competitions helped to pay for his undergraduate studies at New York University and his MBA from the University of Chicago. While in business school, Senk decided he wanted a career in retail. "When I was getting my MBA, I did a little bit of work with Quaker Oats and I didn't like it. It was too slow for me. I love the theater of retail. I love that I can control every part of the experience -- the product itself, the pricing, the way the product is sold, the way we communicate and so on."
Early on, Senk set his sights on landing a job at Bloomingdale's. He described calling the company 46 times asking for an interview before he finally got one. After graduating from business school in December 1980, he started with Bloomingdale's in January of 1981, staying with the company for nine years. He decided to leave when he realized the tremendous challenges facing the department store industry.
Senk went on to short stints at Habitat, a London-based home furnishings retailer, and Williams-Sonoma. The mistake in both cases, he noted, was that he was a bad fit for the cultures of those companies. "If it is not a culture fit, you probably will not do well. Spend time in the lunch room, spend time with the receptionist -- spend time with the real people in the organization if you want to know what the culture is really like."
Looking forward, Senk sees tremendous opportunity for Urban Outfitters. While he thinks the Urban Outfitters and Anthropologie lines have enough penetration in the North American market -- growing too ubiquitous would hurt both brands' images, he adds -- Senk expects more expansion for those chains overseas. He also predicts that some of the company's newer brands, including Terrain for outdoor living and BHLDN for the bridal market, could become major presences. "Our goal is to do $10 billion in sales by 2020," Senk noted. "My guess is we'll have six to eight brands that are doing $500 million plus [in sales]."
Senk is also excited about how technology will revolutionize, not only e-commerce, but also the operation of bricks-and-mortar stores. Currently, the company is piloting a new mobile point of sale system in 21 stores which allows customers to make purchases in places other than the cash register. Senk envisions a future where stores get rid of cash registers entirely and use mobile devices to make shopping a more personal experience for consumers.
For all his success, Senk gives a lot of thought to his own weaknesses. "I have seen ego destroy so many people in many businesses," he noted. "You have to be humble and open to learning every day." Part of that, he argued, is being patient. "Thank you, Dick Hayne, for mentoring me for 14 years, so that when I became CEO, it was seamless. But thank you to me for being mentored for 14 years. I could have taken a CEO position at many other companies, but I was patient."
Is Groupon's Business Model Sustainable?
What customer wouldn't want to score a deep discount on dinner, beauty treatments and other services, especially during a downturn? Barely three years old as an industry, online group buying sites are witnessing rapid growth, as more subscribers sign up, more partner businesses sign on, revenues climb and venture capitalists swarm to invest, further driving up business valuations as a result.
The most prominent group buying site, Chicago-based Groupon, has 2011 revenues estimated at between $3 billion and $4 billion. Google last December offered to buy the firm for $6.4 billion. After the acquisition was unsuccessful, the search giant launched its own venture, Google Offers. Facebook, too, is entering the space, joining the roughly 500 group buying sites that have emerged worldwide.
But much of that "wild exuberance" is miscalculated and could bring ruin to investors, warns Wharton marketing professor David Reibstein in an interview with Knowledge@Wharton. Taking Groupon as a case in point, he says the industry's current growth rates are unsustainable. Also, he faults the site's business model, arguing that it will leave customers, suppliers and investors disenchanted.
An edited transcript of the conversation appears below:Knowledge@Wharton: Online group buying sites are a growing industry. Competition is fierce. More than 500 group buying sites have sprung up even though the industry is in its infancy. What is driving all this action?
David Reibstein: Part of it is because the Internet has provided a lot of power to the customer. Group buying has provided the ability to pool customers together to give them much more collective bargaining power. There's been a long history of customers trying to pool resources so they can buy more. Often there would be resellers who pool together and form cooperatives or even franchises that would collect individuals, but now consumers are pooling their buying interests together. And so, it is turning a lot of power over to the customer. That's great.
Knowledge@Wharton: What are the strengths of this industry?
Reibstein: It continues to offer some value to customers in terms of pooling them together and providing them some strength. It has often been the case that businesses have been able to buy from suppliers and get quantity discounts. This is now allowing consumers to buy in groups and afford ... quantity discounts. That is fantastic. There's no reason why this notion of customers pooling interests to be able to do group buying should go away.
There is an advantage to the merchants as well. The advantage is, rather than sell one by one and customer to customer and doing the marketing effort one by one, it is really allowing businesses to be able to sell a significant amount of volume with more of it being channeled through one customer.
Knowledge@Wharton: What exactly do venture capital investors find attractive about this space?
Reibstein: Unlike the customer, the investors are attracted by the huge growth and the valuations that are going on in this industry. I firmly believe there's going to be a lot of money lost in some of these investments. What is it investors invest in? They invest in growth. They say, "Wow, this industry went from close to nothing [to] 500 suppliers." If you look at the total dollar volumes that are being passed through here, it looks like a tremendous amount -- and it is. But the question is will it continue to grow and particularly, will it continue to grow at the rate at which the number of suppliers is growing? The growth rate for [each] supplier will be negated by the number of suppliers. But investors are clearly attracted by the growth rate and the valuations.
Knowledge@Wharton: The biggest of these companies, Groupon, is estimated to post revenues exceeding $3 billion in 2011. What is it about Groupon's business model that is driving such growth?
Reibstein: The way this works is they go to merchants [and] say, "I am willing to sell some of your inventory and I am going to take a cut out of [the profit]. But you're going to have to give me a deep discount. If you don't give me a deep discount, we're not going to make it available to people." To some degree, they are operating just like a retailer. I am going to buy volume, I'm going to break that down and sell it to individual customers. And I'm going to sell it to those individual customers for more than what it cost me. That's exactly how every retailer operates. The difference is they are not buying any of the inventories. They are just a reseller.
Knowledge@Wharton: Why do you believe that business model will not support the current growth rates?
Reibstein: Let me talk about some of the fundamental weaknesses. Obviously, one is, however brilliant of an idea it is, there is also now a huge increase in competition. When Groupon had few competitors, it was more viable than it is now with 499 competitors.
But that is not the big weakness. The Groupon business model works better during a recession than it does during a vibrant economy. I will explain why, and this is where it gets intriguing. The reason some retailers might be willing to provide supply to Groupon is because they have excess inventory. That is particularly the case for services. One of the services I notice frequently [offered on group buying sites] is that of beauty salons. They have so many seats and so many beauticians. If I don't sell that 3 p.m. to 4 p.m. time slot on Thursday afternoon, I cannot carry that time slot in the inventory tomorrow. It perishes. It perishes in the same sense as an [unsold] airplane seat [once] a plane takes off down the runway. Because of the recession, there has been an abundance of people who are forgoing beauty salons and other sorts of luxury, discretionary services. Rather than let that airplane seat go [unfilled] and the beautician hour go with no revenue, [companies] would [rather] sell it for a little above whatever the incremental costs are. So there is a willingness to do deep discounting.
As the economy picks up and there is less excess inventory, the availability of supply will go down. The willingness of the merchant to offer deep discounts will go down. The business proposition to the customer will be less attractive if [the item or service being offered] doesn't have the same deep discount.
Knowledge@Wharton: A big chunk of Groupon's subscriber base is said to be made up of educated young women, and that is one reason why Groupon features many beauty and wellness offerings. How crucial is the makeup of the subscriber base for the success of the business model?
Reibstein: If you look at the nature of the customers who are buying from Groupon, they tend to be younger, more white-collar, they may be better educated and may be a similar profile to those who shop at [warehouse club chain] Costco. And so, they tend to be relatively savvy shoppers. Many of the merchants offer these deep discounts, not with the hope of perpetually offering them, but given that they have excess inventory right now, it would be nice to let people sample their product or service with the hope that they are going to like it and subsequently will come me back and buy it when it is not being offered on Groupon [and] is at its full retail price.
Unfortunately, the people Groupon is attracting are those who are referred to as "deal prone customers" -- who are, to put it differently, price-sensitive customers. These customers tend not to be the most loyal of customers. And because you have attracted them with a low price, you are more likely to lose them because somebody else offers a lower price. The merchant might say, "Well I am not making money on these customers, but hopefully I am building some future business." But there is the challenge of whether they are really building future business, because what they really getting is a fickle customer. Merchants are going to discover that the Groupon customer is not where you build your future business. Therefore, the savvy merchants are going to learn that this is not a good way for them to do business.
Knowledge@Wharton: How could this industry change customer expectations? What would that mean for retailers?
Reibstein: There is a real concern that [the model] takes regular customers and makes them more deal sensitive. Imagine the risk for a spa that has a set of customers who are willing to pay $120 each [for services]. Those customers either see or learn of a Groupon offering. It's one thing when [a Groupon deal attracts] an incremental customer who is paying $60 for what normally would have been $120, and [the business is] getting $60 it was not going to get [otherwise]. But it is disastrous when you take customers who were going to pay $120 and now you only get $60 from them.
You want [to attract] those customers who were not at all part of your existing customer base.... What would be really bad is if you make your Groupon offering frequently enough that the customer just sits around and waits, [thinking,] "Rather than getting my normal salon service, I am going to wait until they offer that 50% to 80% discount." [In that case,] the entire normal margin that the salon owner was going to make is totally gone.
Knowledge@Wharton: There have been cases where retailers have been swamped by customers with Groupon coupons and unable to cope. Also, there may be offers where Groupon does not attract the minimum required number of customers to "unlock" an offering. What are the downsides there?
Reibstein: Indeed, there have been some merchants that have been overwhelmed with the volume, and the correct solution is for retailers to be able to put a cap or a ceiling [on the discount]. That may create a little bit of frustration among customers, but that doesn't really hurt Groupon [because] it gets people to respond even quicker and buy it now before the deal closes. I think it works to Groupon's advantage to have a ceiling.
As for the floor, if you don't get a minimum number of people buying an offer, that makes sense, too. This is, again, in the same spirit of retailers buying from manufacturers; generally there is a minimum order that is required, and [group buying] is very similar to that.
Knowledge@Wharton: Wouldn't a supplier or retailer's existing client base feel shortchanged when others with coupons pay less?
Reibstein: The very loyal customer who is paying full retail price will start to resent [those who are using the Groupon discount], particularly if you go to a restaurant [and you are] willing to pay the full retail price. If everybody else who is walking in with a Groupon coupon is paying less, you will feel like an idiot. So retailers start developing some of that resentment in their best customers.
Knowledge@Wharton: How would customers paying full price respond?
Reibstein: This piggybacks on what I mentioned earlier. You could anticipate consumers will start saying, "I see you offering it to [Groupon users] at $50 off, and I expect you to give it to me. If you don't, then I am going to be more irritated." That has not happened as yet that we know of.
But I am sure there have been customers who were normally going to pay full retail price who now aren't because they were able to get a Groupon deal. A savvy customer could say, "I am not going to buy anything at Groupon that I wasn't normally going to buy. I'll just go online and look to see what is on there. If I see something that was already on my shopping list and now I can buy it at a cheaper price, then it's great."
Knowledge@Wharton: You said this model works best in a recession economy. We've heard the same thing being said about Walmart. Shouldn't group buying work just as well, or better, when the economy is stronger and people have more disposable income?
Reibstein: It is the case that Walmart's market share grew during the recession. Walmart still works well, but it works better in a recession. There's no question that during the recession, consumers were looking for bargains. Previously, they were not as inclined to look for bargains.... If the economy were to recover, then just looking for the bargain becomes not as much of a selling point. Everybody's fear is when the recession ends, that they have trained customers to be looking for bargains.
Knowledge@Wharton: The group buying market globally is largely underserved. These firms could enter huge untapped markets. Wouldn't that help them continue to grow at the current rate or even better?
Reibstein: The answer is yes. They still have opportunities to grow by going into untapped markets. But then the question is going to be, how long will their growth continue, and what's going to happen in those markets as more and more competitors enter?
Knowledge@Wharton: Groupon's valuation was last put at $6 billion. Do you see any parallels between what is happening in this industry and the dot-com boom and bust of 10 years ago?
Reibstein: That $6 billion is what Google offered them [in December 2010]. I think Google was foolish to make that offer, and the only thing worse was for Groupon to turn it down. [Groupon later raised $950 million in fresh financing, giving it a valuation of $6.4 billion.] Groupon's value will not persist if it stays in its current model. There is this wild exuberance, because of the growth, that has gotten everybody euphoric. But the question is, will it persist? Obviously, I don't believe that it will.
I see a lot of parallels with the dot-com boom, and that includes the enthusiasm of growth and everybody running to the same spot. It's like a school of kids on a soccer field ... where they are all going to where the ball is. There are too many people in one spot, but that's where the energy is....
Knowledge@Wharton: What can Groupon and the other group buying sites do to fix the flaws in their business model?
Reibstein: There are lots of things that can be done to make the model even better. Groupon just announced one, which I think is big. There is Groupon Mobile, which is really cool. Groupon Mobile knows if you are near a merchant that is on Groupon, and it will message you that the pizza shop you are walking in front of is offering a 50% coupon....
The next enhancement that would make sense is to get down to individual information and be able to know that John likes pizzas and we're going to offer that to John. Or that John bought a new sweater and maybe a blue shirt would go with that sweater. If they start customizing offerings individually, it will be all the more powerful.
Knowledge@Wharton: Could the explosive growth of group buying become too big to handle for Groupon?
Reibstein: I am not at all worried about that. When you have growth, it is hard to manage it. But when you get the kind of valuations that you have seen [for Groupon], they can afford to find people to handle that growth volume. Everybody wishes they had that problem.
Is LinkedIn Way Over-Priced Already?
Barron's
By Andrew Bary
Call it Bubble 2.0.
The wild reception for LinkedIn's initial public offering last week evoked the dot-com bubble of the late 1990s, when dozens of dubious Internet companies surged following their IPOs, often attaining multibillion-dollar market values, only to crash when they ran out of money or couldn't meet Wall Street's expectations.
By contrast, LinkedIn (ticker: LNKD) is a real business, with more than 100 million members in a kind of Facebook network for professionals. But it looks overvalued, after a jump from $45 at its IPO Wednesday to 93 at Friday's close.
The company now has a market value of $8.7 billion, based on 94 million shares outstanding—and that doesn't include another 30 million that may be issued to satisfy options and executive stock grants. The market value is equal to 35 times 2010 revenue of $243 million and almost 550 times 2010 profit of 17 cents a share. Google (GOOG) is valued at five times revenue and 20 times trailing earnings.
LinkedIn's revenue is growing sharply, with sales hitting $94 million in the first quarter, more than double the year-earlier total. It made just two cents in the first quarter and doesn't expect to be profitable this year, as it "invests for future growth."
LinkedIn appears to have a sustainable business model geared toward selling access to its member data to potential employers and advertisers, but its valuation looks steep, at more than 20 times possible 2011 revenues of $400 million.
The stock could easily be cut in half if the company stumbles. Less than a month ago, it was trading in the 30s in private markets, and in April employees got a wad of options at $22.59, then deemed to be the fair value. One factor driving the subsequent run-up: the thin IPO float of just 7.8 million shares.
LinkedIn defies conventional analysis because of minimal profits. It's essentially a bet that the company ultimately can supplant online job sites like Monster.com, and get advertisers to pay a lot to target its huge membership.
The deal creates another Internet billionaire in chairman Reid Hoffman. His 20% stake is worth $1.8 billion. The average price paid by existing holders, including many employees, is just $1 per share. Also to benefit, indirectly, from LinkedIn's dazzling debut, are the looming IPOs of Twitter, Groupon and Facebook.
LINKEDIN HAS GRAND, OR GRANDIOSE, ambitions. Its prospectus says, "Our vision is to create economic opportunity for every professional in the world," and that "we believe we are transforming the way people work by connecting talent with opportunity at massive scale." Members post profiles on the site, detailing as much professional and personal information as they care to disclose, which is available to other LinkedIn members as well as potential employers.
One key issue is whether LinkedIn is approaching saturation of its market. The company's 101 million members are roughly split 45/55 in the U.S. and outside the country. It boasts that it has been adding a million members every 10 days. Just looking at the U.S., there are 180 million adults between 21 and 65, including the unemployed and those out of the job market. This suggests that the firm, with its 45 million U.S. members, may be reaching most of the nation's professionals already.
Expenses could rise because the cost of attracting talent in Silicon Valley, where LinkedIn is based, has soared as companies compete for top engineers and programmers. LinkedIn now is at a disadvantage because start-ups can offer cheap, pre-IPO stock to new hires, while LinkedIn has to grant stock or options at current prices.
Monster Worldwide (MWW), which operates the leading online jobs site, has a market value of $1.9 billion, just 20% of LinkedIn—and Monster has $1 billion of annual revenue. It was a hot stock as recently as 2007, when it looked like a category killer, destroying the classified ad business. But at 15, Monster's shares are at a fraction of their '07 peak. Such a fate could befall LinkedIn, too.
So far, Facebook and other social networking sites haven't targeted professionals, but they could. And while LinkedIn has significant growth opportunities abroad, its international revenue is still just 27% of total sales.
A handful of the dot.com moonshots—like Amazon.com (AMZN) and eBay (EBAY)—have justified their initial hype. But most highfliers flame out, and the odds are long that LinkedIn can justify its huge market value. Investors probably should stay away.
Photos of Wren Camo CRB and Illuminate Jersey
Bliss Tank - Perspiration Issues
There were some comments speculating on how Tencel handles perspiration. Here is a photo from last year when the Bliss tanks were first released. I'm not sure if older reviews are still on the website but I remember reading somone commenting that it sticks to your stomach when you start to sweat.
ARTHUR RANKIN on set
c. 1960 RANKIN/BASS PRODUCTIONS/RICK GOLDSCHMIDT ARCHIVESArthur Rankin, Jr. working on the last five episodes of THE NEW ADVENTURES OF PINOCCHIO with a character named Willy Nilly, who was able to go back in time. These episodes lead to the premise of their feature film WILLY McBEAN & HIS MAGIC MACHINE (1965).
Forever 21 Moving Into Bigger and Bigger Stores
The cheap-chic retailer is aggressively super-sizing its stores as other chains shift to smaller locations. Retail experts aren't sure whether bigger is better, but Forever 21 says the larger stores are attracting new customers.
Los Angeles Times
By Andrea Chang
Forever 21 Inc. built a retail empire by selling the latest fashion trends, but when it comes to running its own business, the Los Angeles company isn't following the crowd.
During the recession, when Mervyns and other chains were going bankrupt and shutting stores, Forever 21 snatched them up.
At a time when competitors, worried about taking risks in a down economy, focused on basics like T-shirts and jeans, Forever 21 continued to churn out fresh and trendy merchandise.
Now as traditional big-box retailers such as Wal-Mart Stores Inc., Target Corp. and Kohl's Corp. are opening smaller retail locations, Forever 21 is aggressively super-sizing its stores.
Its latest megastore opened last week in L.A., when the family-owned company consolidated its three Beverly Center stores into a new 45,000-square-foot space, more than doubling its presence in the mall.
The retailer also took over an 86,000-square-foot former Mervyns at Los Cerritos Center last year and a 91,000-square-foot location in Times Square in New York. Its new Las Vegas flagship is 127,000 square feet, about the size of an average Target, and in September, it will open a store in Mission Viejo in a building previously occupied by Saks. Its biggest store, at 150,000 square feet, opened last month at a shuttered Gottschalks location in Fresno.
With spaces that large, Forever 21 is moving into unknown territory for a cheap-chic retailer: No longer relegated to the cluttered-and-cramped feel of many of its smaller stores, the company is bringing its rapidly changing merchandise into huge spaces typically associated with department stores.
And with a growing lineup of categories — maternity, plus sizes, cosmetics, children's, swimwear and shoes among them — all sold at bargain-basement prices, retail analysts say the retailer is shaking up and redefining the traditional mall anchor concept.
But is bigger better? Retail experts aren't sure.
"Do I normally advise my clients to expand? No. But in times like this, if you have good reason to expand, then I think you take advantage," said Marshal Cohen, chief industry analyst at NPD Group. But "they've got to be careful that they don't get too big."
Forever 21 is "almost taking a mini, hipper department store approach," said Christine Chen, a retail analyst at Needham & Co.
"The question really is, how sustainable is what they're doing?" she said. "They have defied odds and skepticism, but going forward they have all these really large locations. As they go into more and more markets and become more ubiquitous, does the coolness factor at some point in time go away?"
For now, shoppers say they can't get enough of the chain's prices and selection.
More than 300 shoppers turned out at the Beverly Center on Saturday before the store's 10 a.m. grand opening, queuing up in a line that stretched through the food court and out onto the terrace. It was an eclectic crowd made up of young and old shoppers, teenagers, mothers pushing strollers, tourists, children, older customers and luxury shoppers toting Louis Vuitton handbags. The earliest shoppers, a family from Bell, had arrived shortly after midnight.
"In this economy, it's the best bet to be able to go shopping and not break the bank," said Lisa Cullen, 27, a bartender from Hollywood. "You can come every other day and there will be something new."
The opening also attracted some first-timers such as Nick James, 28, a model who said he hadn't known the chain carried men's clothing.
"I always wanted Forever 21 — I was almost jealous of my girlfriend when she had so many options to choose from," he said. "It's like disposable fashion."
The bigger stores have generated a lot of buzz, but they've also translated into increased business, President Alex Ok said. With more room for varied styles, shoppers are spending more time and money in the larger stores; the company is also seeing a wider clientele.
"People used to say we were a two-generation store, now we're a three-generation store," Ok said.
Los Angeles Times
By Andrea Chang
Forever 21 Inc. built a retail empire by selling the latest fashion trends, but when it comes to running its own business, the Los Angeles company isn't following the crowd.
During the recession, when Mervyns and other chains were going bankrupt and shutting stores, Forever 21 snatched them up.
At a time when competitors, worried about taking risks in a down economy, focused on basics like T-shirts and jeans, Forever 21 continued to churn out fresh and trendy merchandise.
Now as traditional big-box retailers such as Wal-Mart Stores Inc., Target Corp. and Kohl's Corp. are opening smaller retail locations, Forever 21 is aggressively super-sizing its stores.
Its latest megastore opened last week in L.A., when the family-owned company consolidated its three Beverly Center stores into a new 45,000-square-foot space, more than doubling its presence in the mall.
The retailer also took over an 86,000-square-foot former Mervyns at Los Cerritos Center last year and a 91,000-square-foot location in Times Square in New York. Its new Las Vegas flagship is 127,000 square feet, about the size of an average Target, and in September, it will open a store in Mission Viejo in a building previously occupied by Saks. Its biggest store, at 150,000 square feet, opened last month at a shuttered Gottschalks location in Fresno.
With spaces that large, Forever 21 is moving into unknown territory for a cheap-chic retailer: No longer relegated to the cluttered-and-cramped feel of many of its smaller stores, the company is bringing its rapidly changing merchandise into huge spaces typically associated with department stores.
And with a growing lineup of categories — maternity, plus sizes, cosmetics, children's, swimwear and shoes among them — all sold at bargain-basement prices, retail analysts say the retailer is shaking up and redefining the traditional mall anchor concept.
But is bigger better? Retail experts aren't sure.
"Do I normally advise my clients to expand? No. But in times like this, if you have good reason to expand, then I think you take advantage," said Marshal Cohen, chief industry analyst at NPD Group. But "they've got to be careful that they don't get too big."
Forever 21 is "almost taking a mini, hipper department store approach," said Christine Chen, a retail analyst at Needham & Co.
"The question really is, how sustainable is what they're doing?" she said. "They have defied odds and skepticism, but going forward they have all these really large locations. As they go into more and more markets and become more ubiquitous, does the coolness factor at some point in time go away?"
For now, shoppers say they can't get enough of the chain's prices and selection.
More than 300 shoppers turned out at the Beverly Center on Saturday before the store's 10 a.m. grand opening, queuing up in a line that stretched through the food court and out onto the terrace. It was an eclectic crowd made up of young and old shoppers, teenagers, mothers pushing strollers, tourists, children, older customers and luxury shoppers toting Louis Vuitton handbags. The earliest shoppers, a family from Bell, had arrived shortly after midnight.
"In this economy, it's the best bet to be able to go shopping and not break the bank," said Lisa Cullen, 27, a bartender from Hollywood. "You can come every other day and there will be something new."
The opening also attracted some first-timers such as Nick James, 28, a model who said he hadn't known the chain carried men's clothing.
"I always wanted Forever 21 — I was almost jealous of my girlfriend when she had so many options to choose from," he said. "It's like disposable fashion."
The bigger stores have generated a lot of buzz, but they've also translated into increased business, President Alex Ok said. With more room for varied styles, shoppers are spending more time and money in the larger stores; the company is also seeing a wider clientele.
"People used to say we were a two-generation store, now we're a three-generation store," Ok said.
Nordstrom Views Department Store Expansion In Canada
Dow Jones Newswires
By Karen Talley
Nordstrom Inc. is looking at expanding into Canada as a way of extending its luxury department stores beyond the U.S.
The retailer is scouting a number of sites, feeling demand should be significant enough to make the endeavor successful.
"We already know we have a lot of Canadian customers," Nordstrom spokesman Colin Johnson said. The retailer, whose Seattle headquarters isn't too far from Canada's border, has Canadian customers who shop its stores when they visit the U.S., Johnson said. Also, Canadians make up the biggest share of Nordstrom's international online customers.
So far, it's been "tough to find a location where everything will come together," Johnson said. He didn't give a timeframe when Nordstrom might make a formal announcement, but did say the company would start with department stores before opening any Nordstrom Rack outlets in the country.
Johnson also said Nordstrom knows that there are challenges, including a lot of established retailers in the country and in regard to customers "we would have to work hard to earn their business."
Nordstrom would be the latest U.S. retailer to announce plans to enter Canada if it does find locations. Target Corp. plans to start operating in the country in the next couple of years through its acquisition of the leases of up to 220 Zellers stores owned by Hudson Bay Co.
Wal-Mart Stores Inc., Sears Holding Corp., Costco Wholesale Corp. and Marshall's and T.J. Maxx operator TJX Cos. have been in Canada for some time. But they are largely the exceptions. Many U.S. retailers, despite the close proximity, don't have stores in Canada.
Retail spending per capita for Canada and the U.S., expressed in U.S. dollars, are now equal, a new report by Colliers International said. As recently as 2004, Canadians' retail sales per capita was $8,000, while Americans' spending power was 50% higher, at about $12,000 per capita.
Aside from tapping a fresh group of consumers, one of the most compelling reasons for U.S. retailers to operate in Canada is the value of the Canadian dollar compared with the U.S. dollar, Colliers said. With a stronger Canadian dollar, it becomes increasingly worthwhile to establish Canadian stores rather than to sell only to Canadian customers who shop online or on cross-border trips, Colliers said. For some U.S. retailers, Canada is the largest, closest and or most similar market to the U.S., and represents a logical next move.
Canadian retailers also haven't had to resort to the kinds of mark-downs that their U.S. counterparts are engaging in. As a result, U.S. retailers could earn a greater return on their merchandise, which can serve as another incentive. U.S. companies will, however, face established Canadian retailers that have a loyal following, so they can expect to engage in plenty of marketing and executive time as they try to familiarize themselves with residents.
By Karen Talley
Nordstrom Inc. is looking at expanding into Canada as a way of extending its luxury department stores beyond the U.S.
The retailer is scouting a number of sites, feeling demand should be significant enough to make the endeavor successful.
"We already know we have a lot of Canadian customers," Nordstrom spokesman Colin Johnson said. The retailer, whose Seattle headquarters isn't too far from Canada's border, has Canadian customers who shop its stores when they visit the U.S., Johnson said. Also, Canadians make up the biggest share of Nordstrom's international online customers.
So far, it's been "tough to find a location where everything will come together," Johnson said. He didn't give a timeframe when Nordstrom might make a formal announcement, but did say the company would start with department stores before opening any Nordstrom Rack outlets in the country.
Johnson also said Nordstrom knows that there are challenges, including a lot of established retailers in the country and in regard to customers "we would have to work hard to earn their business."
Nordstrom would be the latest U.S. retailer to announce plans to enter Canada if it does find locations. Target Corp. plans to start operating in the country in the next couple of years through its acquisition of the leases of up to 220 Zellers stores owned by Hudson Bay Co.
Wal-Mart Stores Inc., Sears Holding Corp., Costco Wholesale Corp. and Marshall's and T.J. Maxx operator TJX Cos. have been in Canada for some time. But they are largely the exceptions. Many U.S. retailers, despite the close proximity, don't have stores in Canada.
Retail spending per capita for Canada and the U.S., expressed in U.S. dollars, are now equal, a new report by Colliers International said. As recently as 2004, Canadians' retail sales per capita was $8,000, while Americans' spending power was 50% higher, at about $12,000 per capita.
Aside from tapping a fresh group of consumers, one of the most compelling reasons for U.S. retailers to operate in Canada is the value of the Canadian dollar compared with the U.S. dollar, Colliers said. With a stronger Canadian dollar, it becomes increasingly worthwhile to establish Canadian stores rather than to sell only to Canadian customers who shop online or on cross-border trips, Colliers said. For some U.S. retailers, Canada is the largest, closest and or most similar market to the U.S., and represents a logical next move.
Canadian retailers also haven't had to resort to the kinds of mark-downs that their U.S. counterparts are engaging in. As a result, U.S. retailers could earn a greater return on their merchandise, which can serve as another incentive. U.S. companies will, however, face established Canadian retailers that have a loyal following, so they can expect to engage in plenty of marketing and executive time as they try to familiarize themselves with residents.
Charming Shoppes May Put Fashion Bug On The Auction Block
Bloomberg News
By Lauren Coleman-Lochner and Jeffrey McCracken
Charming Shoppes Inc., the operator of the plus-size Lane Bryant chain, is exploring a sale of its Fashion Bug stores, according to a person with knowledge of the matter.
Moelis & Co. is advising the retailer on a possible deal, said the person, who declined to be named because the process isn’t public. A sale of the unit may be a few weeks away, the person said. Fashion Bug, aimed at women aged 30 to 50, makes up about a third of the chain’s more than $2 billion in sales.
Chief Executive Officer Tony Romano is devoting resources to the more profitable Lane Bryant label to revive earnings after almost $500 million in losses since 2007. While demand for plus-size apparel is growing, Fashion Bug’s challenge as a lower-priced retailer is to deliver stylish clothing without sacrificing margins, said McMillan Doolittle LLP’s Neil Stern.
"You have a really difficult apparel market that really hasn’t gotten its footing in say, five years,’’ said Stern, a senior partner at the retail consulting firm in Chicago.
Fashion Bug operated about 740 stores as of Jan. 29, mostly in strip malls, according to regulatory filings. The Bensalem, Pennsylvania-based company operated almost 2,100 locations at the end of last year, including about 850 Lane Bryant stores and outlets and 475 Catherines, aimed at women 45 and older.
Stock Performance
Charming Shoppes rose 8 cents, or 2 percent, to $4.07 at 4 p.m. New York time in Nasdaq Stock Market trading. Earlier the shares advanced as much as 10 percent.
Gayle Coolick, a spokeswoman for Charming Shoppes, said she couldn’t immediately comment. Andrea Hurst, a spokeswoman for New York-based Moelis, declined to comment.
Fashion Bug’s sales at stores open at least 13 months rose 4 percent last year, outpacing the company’s average. So-called same-store sales are considered a key gauge of retail performance because they strip out the impact of store closings and openings. Charming Shoppes is scheduled to report first- quarter results on June 2.
Charming Shoppes began more than 70 years ago when the Sidewater brothers opened a single apparel store in Philadelphia. The purchase of the Lane Bryant chain a decade ago turned Charming Shoppes into the largest plus-size retailer in the U.S., according to the company’s website.
By Lauren Coleman-Lochner and Jeffrey McCracken
Charming Shoppes Inc., the operator of the plus-size Lane Bryant chain, is exploring a sale of its Fashion Bug stores, according to a person with knowledge of the matter.
Moelis & Co. is advising the retailer on a possible deal, said the person, who declined to be named because the process isn’t public. A sale of the unit may be a few weeks away, the person said. Fashion Bug, aimed at women aged 30 to 50, makes up about a third of the chain’s more than $2 billion in sales.
Chief Executive Officer Tony Romano is devoting resources to the more profitable Lane Bryant label to revive earnings after almost $500 million in losses since 2007. While demand for plus-size apparel is growing, Fashion Bug’s challenge as a lower-priced retailer is to deliver stylish clothing without sacrificing margins, said McMillan Doolittle LLP’s Neil Stern.
"You have a really difficult apparel market that really hasn’t gotten its footing in say, five years,’’ said Stern, a senior partner at the retail consulting firm in Chicago.
Fashion Bug operated about 740 stores as of Jan. 29, mostly in strip malls, according to regulatory filings. The Bensalem, Pennsylvania-based company operated almost 2,100 locations at the end of last year, including about 850 Lane Bryant stores and outlets and 475 Catherines, aimed at women 45 and older.
Stock Performance
Charming Shoppes rose 8 cents, or 2 percent, to $4.07 at 4 p.m. New York time in Nasdaq Stock Market trading. Earlier the shares advanced as much as 10 percent.
Gayle Coolick, a spokeswoman for Charming Shoppes, said she couldn’t immediately comment. Andrea Hurst, a spokeswoman for New York-based Moelis, declined to comment.
Fashion Bug’s sales at stores open at least 13 months rose 4 percent last year, outpacing the company’s average. So-called same-store sales are considered a key gauge of retail performance because they strip out the impact of store closings and openings. Charming Shoppes is scheduled to report first- quarter results on June 2.
Charming Shoppes began more than 70 years ago when the Sidewater brothers opened a single apparel store in Philadelphia. The purchase of the Lane Bryant chain a decade ago turned Charming Shoppes into the largest plus-size retailer in the U.S., according to the company’s website.
Today's Upload - Some Goodies
I didn't get anything but that's good because I bought a ton of stuff this month. I am hoping to see the new Let It Loose Tank hits my local stores soon.
What did you all get?
Beverly Mall Works To Stay Relevant As Shopping Destination
By Christina Binkley
Even as malls go, the Beverly Center is no beauty: It's old, dark and a hulking nine stories high. Its competition includes Rodeo Drive and the Grove, a trendy outdoor mall with trolleys, lawns and a pond. By almost every mall-development theory, the Beverly Center ought to be ready for the wrecking ball.
Instead, Louis Vuitton is increasing the size of its store there by 25%, and Prada just opened a boutique near Gucci, Fendi, and Tiffany. Jimmy Choo and Yves St. Laurent are opening there this fall. Fast-fashion retailer Forever 21 opened a 50,000-square foot megastore at the 29-year-old mall last weekend, and watch maker Omega moved in—from Rodeo Drive—in December.
"We just didn't get the foot traffic," says Omega chief executive Stephan Urquhart. He expects better from the mall.
"People have been predicting the death of the mall ever since it was born, practically," says Bill Taubman, chief operating officer of Taubman Centers Inc., a real estate investment trust that operates the Beverly Center, the Mall at Short Hills in Short Hills, N.J., and other long-lived malls. The first enclosed mall in the U.S., Southdale Center in Edina, Minn., is still rolling along. It opened in 1956.
In recent years, new malls have been built as open-air entertainment centers, with parks and community activities to draw people in. Rick Caruso, developer of the Grove, says people spend about 180 minutes on average at his property—about twice the typical visit to an enclosed mall.
But old-style malls often have good locations—the Beverly Center is located just east of Beverly Hills—and desirable stores. "People know there's some key tenant they want to go to," says Jeung Hyun, a portfolio manager who follows malls at Adelante Capital Management in Oakland, Calif.
To shuttle luxury shoppers directly to the stores of their choice, the mall built a valet parking stand on the ground-floor garage. Shoppers are greeted by uniformed valets who offer a car wash for $20. A carpeted walkway leads to elevators that whisk shoppers directly to the seventh-floor luxury area.
A Prada spokesman says the brand chose the Beverly Center over other locations in part because the mall is drawing luxury customers who are likely to buy the full range of Prada's products, from shoes and bags to ready-to-wear clothing. The Fendi store there draws "aspirational" shoppers who buy the brand's footwear, logo accessories, and men's goods, says a Fendi spokeswoman.
Mr. Taubman concedes that the 3.2 million-square-foot mall is something of an eyesore. Its first five stories are a parking garage. Escalators on the outside move about 14 million people a year from floor to floor. It is surrounded by heavily trafficked streets and the sprawling Cedars Sinai Hospital. "We're not defined by the beautiful outdoor environment," he says. "We're defined by the stores that we have."
Taubman Centers has tried to beautify the mall. Beverly Center got a facelift several years ago that replaced the Habitrail-like tunnels around the escalators with sheets of glass. Inside, the renovations never end as stores move in and out. Taubman keeps lease lengths to about seven years, shorter than the industry average 10 years, in order to keep the inventory of stores fresh.
Mr. Taubman tries to shoo out retailers that aren't performing or don't draw customers who will shop at other mall tenants. "This was a mistake. It looks tacky," he said recently as he stared at Shiekh Shoes, a sneaker retailer that occupies an enviable position on the eight floor by the new Forever 21 store. "They sell lots of shoes and pay lots of rent, but it's not doing anything for the tenants around it."
Shiekh store manager Shavonne Cann says that the store's look appeals to an urban customer who buys Nikes, Converse and Air Jordans: "Our store is the right style for our customer."
One area of the mall that is coming up for a revamp is its food court, which features Sbarro, Haagen-Dazs and Steak & Potato Co. around a sprawling field of tables. Food courts feed shoppers quickly and get them back out spending, but the Beverly Center's version is dingy and dated. "This just isn't that nice," Mr. Taubman says. "We have to figure out what to do here."
However, he also says that it's important that the Beverly Center not try to do something it can't do well: "I love getting a cappuccino and sitting at the Grove as much as anyone," he says.
But "we are like a machine that's constructed to create an efficient, comfortable shopping experience."
Tiffany Raises Forecast As Profit Climbs 26%
Wall Street Journal
By Melodie Warner
Tiffany & Co.'s fiscal first-quarter earnings rose 26%, topping the company's own guidance, as it continued to post double-digit sales growth and improved margins.
Shares were trading up 2.3% at $71.65 premarket as the company raised its full-year earnings estimate to $3.45 to $3.55 a share from its March forecast of $3.35 to $3.45. The stock has risen 61% over the past year.
The jewelry retailer has seen increased sales of late, benefiting from recovering demand for high-end goods and its expansion into international markets. Tiffany had warned that store closings caused by the Japan earthquake and tsunami would affect earnings by five cents a share. Those stores have since re-opened and Japan sales rose 7% to $123.4 million.
For the quarter ended April 30, Tiffany reported a profit of $81.1 million, or 63 cents a share, up from $64.4 million, or 50 cents, a year earlier. Excluding items, earnings rose to 67 cents from 48 cents. The most-recent quarter included a headquarters relocation charge of 4 cents, while the year-earlier quarter included a 2-cent tax benefit.
Sales jumped 20% to $761 million. Excluding currency changes, they rose 16%. In March, the company projected per-share earnings of 57 cents on an 11% sales increase.
Gross margin rose to 58.3% from 57.8%. Total same-store sales rose 19%, or 15% on a constant-exchange-rate basis.
Every geographic segment saw double-digit sales growth, including a 19% increase in the Americas—which accounted for the bulk of the total—a 37% climb in the Asia-Pacific region and a 25% rise in Europe.
By Melodie Warner
Tiffany & Co.'s fiscal first-quarter earnings rose 26%, topping the company's own guidance, as it continued to post double-digit sales growth and improved margins.
Shares were trading up 2.3% at $71.65 premarket as the company raised its full-year earnings estimate to $3.45 to $3.55 a share from its March forecast of $3.35 to $3.45. The stock has risen 61% over the past year.
The jewelry retailer has seen increased sales of late, benefiting from recovering demand for high-end goods and its expansion into international markets. Tiffany had warned that store closings caused by the Japan earthquake and tsunami would affect earnings by five cents a share. Those stores have since re-opened and Japan sales rose 7% to $123.4 million.
For the quarter ended April 30, Tiffany reported a profit of $81.1 million, or 63 cents a share, up from $64.4 million, or 50 cents, a year earlier. Excluding items, earnings rose to 67 cents from 48 cents. The most-recent quarter included a headquarters relocation charge of 4 cents, while the year-earlier quarter included a 2-cent tax benefit.
Sales jumped 20% to $761 million. Excluding currency changes, they rose 16%. In March, the company projected per-share earnings of 57 cents on an 11% sales increase.
Gross margin rose to 58.3% from 57.8%. Total same-store sales rose 19%, or 15% on a constant-exchange-rate basis.
Every geographic segment saw double-digit sales growth, including a 19% increase in the Americas—which accounted for the bulk of the total—a 37% climb in the Asia-Pacific region and a 25% rise in Europe.
Tommy Hilfiger Treks Up North -- Menswear Launch Planned for The Bay
From WWD Issue 05/26/2011
The Tommy Hilfiger Group, wholly owned by Phillips-Van Heusen Corp., has a new distribution strategy to tackle the Canadian market.
The firm has signed a deal to offer Hilfiger men’s wear exclusively in 90 The Bay stores across Canada, beginning in August.
The launch of Hilfiger’s men’s sportswear at The Bay signals the brand’s reentry into the wholesale distribution channel after a few years of a retail-only business model in Canada. Hilfiger will invest in the development of fixtured shop-in-shop environments in key doors. In August, 66 locations, including The Bay’s flagships in downtown Toronto, downtown Montreal and Vancouver, will open Hilfiger shops, followed by 24 more throughout the fall. The average Hilfiger men’s wear shop will be about 500 square feet, but will measure 750 square feet in the Toronto, Montreal and Vancouver flagships.
“With this partnership, we are nearly doubling our presence in Canada, which reflects both our enthusiasm and our deep commitment to this market,” said Gary Sheinbaum, chief executive officer of Tommy Hilfiger North America. “In the United States, the strategic alliance with Macy’s has served our business very well over the past three years, and we’re confident that this new arrangement with The Bay will have a similar impact.”
Hilfiger’s men’s sportswear line for The Bay will be similar to that being produced for Macy’s. It will include wovens, knits, sweaters, pants and jackets. The Hilfiger women’s line isn’t part of The Bay deal.
Bonnie Brooks, president and ceo of The Bay, added, “With one of the most recognized lifestyle brands available in 90 stores, The Bay will provide Canadian customers the full Tommy Hilfiger shopping experience in a strong branded environment.”
As part of its restructuring, Hilfiger will close seven of its 18 Canadian specialty retail locations between May 31 and Oct. 31. The affected locations are Anjou and Rockland in Quebec; Promenade and Sherway Gardens in Ontario, and Market Mall, Chinook and West Edmonton Mall in Alberta.
In 2009, Hilfiger discontinued its Canadian wholesale women’s and men’s business to concentrate exclusively on the expansion of its retail business there. The company then integrated Tommy Hilfiger Canada and Tommy Hilfiger USA Inc., under the umbrella of Tommy Hilfiger North America, and restructured its personnel, putting Sheinbaum in charge of retail business in Canada, as well as the U.S.
Profits At Guess Drop 15.2% In Quarter
by Evan Clark
From WWD Issue 05/26/2011
Guess Inc.’s first-quarter profits topped expectations, but fell 15.2 percent as costs related to the denim and sportswear firm’s retail expansions in Europe and the U.S. overwhelmed the benefit of stronger sales, particularly in Asia.
Paul Marciano, chief executive officer, said international expansion was the company’s “number-one priority” and that the Guess brand had room to grow given strong consumer awareness across urban markets in Germany, Spain and France. The Los Angeles-based firm is well on track to exceed $1 billion in European revenues this year.
In the first quarter, profits attributable to the firm fell to $42.7 million, or 46 cents a diluted share, from $50.3 million, or 54 cents a year earlier. Earnings were 2 cents ahead of analysts’ consensus estimate.
Revenues for the quarter ended April 30 rose 9.8 percent to $592.2 million from $539.3 million. Gross profit margins fell to 42.1 percent of revenues from 43.6 percent a year earlier and sales, general and administrative expenses rose to 30.1 percent of revenues from 29.3 percent.
Marciano told analysts on a conference call that the women’s apparel business in its retail stores was “challenging” as the firm worked through soft customer traffic and slow-moving product that was left over from the fourth quarter.
In North America, retail sales rose 5 percent to $247.5 million, with comparable-store sales down 3.1 percent. North American wholesale revenues increased 6.8 percent to $45.6 million.
European revenues increased 12.4 percent to $210.2 million.
But it was the smaller, Asian division that showed the strongest growth, with revenues up 23.7 percent to $60.1 million. The region could continue to produce much of the firm’s momentum, with 56 Guess stores slated to open in China this year.
“China, of course, is the most important strategic initiative of our company history, where the possibilities of development seem to me to be endless if properly funded, structured, strategized and executed,” Marciano said. “We have seen a dramatic result when we did exactly that in Europe in the last six years.”
Guess reaffirmed its annual profit forecast of $3.30 to $3.50 a share. The company has 484 stores in North America and 937 elsewhere.
From WWD Issue 05/26/2011
Guess Inc.’s first-quarter profits topped expectations, but fell 15.2 percent as costs related to the denim and sportswear firm’s retail expansions in Europe and the U.S. overwhelmed the benefit of stronger sales, particularly in Asia.
Paul Marciano, chief executive officer, said international expansion was the company’s “number-one priority” and that the Guess brand had room to grow given strong consumer awareness across urban markets in Germany, Spain and France. The Los Angeles-based firm is well on track to exceed $1 billion in European revenues this year.
In the first quarter, profits attributable to the firm fell to $42.7 million, or 46 cents a diluted share, from $50.3 million, or 54 cents a year earlier. Earnings were 2 cents ahead of analysts’ consensus estimate.
Revenues for the quarter ended April 30 rose 9.8 percent to $592.2 million from $539.3 million. Gross profit margins fell to 42.1 percent of revenues from 43.6 percent a year earlier and sales, general and administrative expenses rose to 30.1 percent of revenues from 29.3 percent.
Marciano told analysts on a conference call that the women’s apparel business in its retail stores was “challenging” as the firm worked through soft customer traffic and slow-moving product that was left over from the fourth quarter.
In North America, retail sales rose 5 percent to $247.5 million, with comparable-store sales down 3.1 percent. North American wholesale revenues increased 6.8 percent to $45.6 million.
European revenues increased 12.4 percent to $210.2 million.
But it was the smaller, Asian division that showed the strongest growth, with revenues up 23.7 percent to $60.1 million. The region could continue to produce much of the firm’s momentum, with 56 Guess stores slated to open in China this year.
“China, of course, is the most important strategic initiative of our company history, where the possibilities of development seem to me to be endless if properly funded, structured, strategized and executed,” Marciano said. “We have seen a dramatic result when we did exactly that in Europe in the last six years.”
Guess reaffirmed its annual profit forecast of $3.30 to $3.50 a share. The company has 484 stores in North America and 937 elsewhere.
American Eagle Anticipates Denim Resurgence
by Alexandra Steigrad
From WWD Issue 05/26/2011
American Eagle Outfitters Inc. on Wednesday set out a new strategy of building inventory in “heritage” categories such as denim to reclaim lost market share as the teen chain reported that it doubled net income against a year-ago quarter that was hurt by losses from discontinued operations.
In the three months ended April 30, the Pittsburgh-based specialty chain registered net income of $28.3 million, or 14 cents a diluted share, compared with profits of $10.9 million, or 5 cents a share, in the year-ago quarter. Excluding extraordinary items, such as the year-ago loss from discontinued operations, income from continuing operations was $14.6 million versus $17.8 million in the year-ago quarter.
A dearth of inventory, notably in the denim category, contributed to a 6 percent dip in quarterly net sales to $609.6 million from $648.5 million, the retailer said
The performance matched Wall Street’s EPS expectations of 14 cents a share but fell short of revenue estimates of $636.3 million.
Quarterly comparable-store sales declined 8 percent, as gross margin fell to 38 percent of sales from 39.7 percent a year ago.
“Every once in a while for some reason we let go of our key ‘heritage’ programs and we let people take market share from us,” said Roger Markfield, vice chairman and executive creative director, on the company conference call. “We will protect our turf as we move into back-to-school. We’re going to have enough fashion so you’ll have the sprinkles you need in the store, but our intensity is in the key ‘heritage’ items we know about and a very strong denim impact.”
Building “heritage” inventory means flowing more denim, fleece and graphic T-shirts in stores, a move that the company said will allow it to introduce “classic preppy” back into its assortment.
That might not be the best idea, according to Stifel Nicolaus analyst Richard Jaffe, who rates the firm’s stock “hold.”
“We do not share management’s optimism regarding the new merchandise strategy. First, we believe there has been a shift away from the preppy teen uniform with teenagers looking for more fashion-forward items,” he said. “Second, in the teen retail space, the preppy merchandise space is very crowded (Aéropostale, American Eagle, Abercrombie and Hollister), likely resulting in companies competing on price given a lack of differentiation between brands.”
The analyst said he foresees “deep promotions” on key items, which will pressure margins.
For the second quarter, the company said it expects earnings in the range of 10 cents to 13 cents a diluted share, and annual earnings of $1.02 a share. Analysts are looking for second-quarter EPS of 13 cents and yearly EPS of 99 cents.
Shares fell 64 cents, or 4.7 percent, to 13.02 in New York Stock Exchange trading Wednesday.
From WWD Issue 05/26/2011
American Eagle Outfitters Inc. on Wednesday set out a new strategy of building inventory in “heritage” categories such as denim to reclaim lost market share as the teen chain reported that it doubled net income against a year-ago quarter that was hurt by losses from discontinued operations.
In the three months ended April 30, the Pittsburgh-based specialty chain registered net income of $28.3 million, or 14 cents a diluted share, compared with profits of $10.9 million, or 5 cents a share, in the year-ago quarter. Excluding extraordinary items, such as the year-ago loss from discontinued operations, income from continuing operations was $14.6 million versus $17.8 million in the year-ago quarter.
A dearth of inventory, notably in the denim category, contributed to a 6 percent dip in quarterly net sales to $609.6 million from $648.5 million, the retailer said
The performance matched Wall Street’s EPS expectations of 14 cents a share but fell short of revenue estimates of $636.3 million.
Quarterly comparable-store sales declined 8 percent, as gross margin fell to 38 percent of sales from 39.7 percent a year ago.
“Every once in a while for some reason we let go of our key ‘heritage’ programs and we let people take market share from us,” said Roger Markfield, vice chairman and executive creative director, on the company conference call. “We will protect our turf as we move into back-to-school. We’re going to have enough fashion so you’ll have the sprinkles you need in the store, but our intensity is in the key ‘heritage’ items we know about and a very strong denim impact.”
Building “heritage” inventory means flowing more denim, fleece and graphic T-shirts in stores, a move that the company said will allow it to introduce “classic preppy” back into its assortment.
That might not be the best idea, according to Stifel Nicolaus analyst Richard Jaffe, who rates the firm’s stock “hold.”
“We do not share management’s optimism regarding the new merchandise strategy. First, we believe there has been a shift away from the preppy teen uniform with teenagers looking for more fashion-forward items,” he said. “Second, in the teen retail space, the preppy merchandise space is very crowded (Aéropostale, American Eagle, Abercrombie and Hollister), likely resulting in companies competing on price given a lack of differentiation between brands.”
The analyst said he foresees “deep promotions” on key items, which will pressure margins.
For the second quarter, the company said it expects earnings in the range of 10 cents to 13 cents a diluted share, and annual earnings of $1.02 a share. Analysts are looking for second-quarter EPS of 13 cents and yearly EPS of 99 cents.
Shares fell 64 cents, or 4.7 percent, to 13.02 in New York Stock Exchange trading Wednesday.
Wednesday, May 25, 2011
DON DUGA
Don has always been a great friend and a great help with my research! He contributed tons to my books and still does some great work at his company POLESTAR ANIMATION. The day my first book came out....ARTHUR RANKIN, JR. and DON DUGA gave a talk at the SCHOOL OF VISUAL ARTS in New York and did a book signing (I have this on video).....while I was at the NEWBERRY LIBRARY in downtown Chicago, doing the same :)
THANKS Dale!
Polo Ralph Lauren To Invest One Billion To Expand International Retail Operations
From WWD Issue 05/26/2011
Polo Ralph Lauren Corp. Wednesday weathered a rare earnings decline in the fourth quarter as it plotted a course for future growth through international retail expansion.
Roger Farah, president and chief operating officer, told WWD that the company would put over $1 billion into capital expenditures over the next three years, including $325 million in the new fiscal year alone, and that “70 percent” of the total would be focused on growing the company’s store base internationally, particularly in Europe and through concession shops in China and Hong Kong.
Polo will pare some operations in Asia as well, exiting 65 locations over the next 12 months that are part of a distribution network inherited from Dickson Concepts.
New for fall are Black Label denim for men, a women’s Collection denim line and Ralph Lauren Denim and Supply premium offering. The new denim line will also be offered in Europe and Asia, where it will replace the existing Polo Jeans Co. business.
Finally, Club Monaco will expand initially as a shop-in-shop concept in Europe before the focus turns to freestanding stores, and the first Rugby store in Europe will open later this year in London.
“As we look to the future, the scope of our opportunities across products, channels and geographies is incredibly invigorating,” said Ralph Lauren, chairman and chief executive officer.
In the fourth quarter ended April 2, net income declined 35.8 percent to $73.2 million, or 74 cents a diluted share, below the 79 cents expected, on average, by analysts polled by Yahoo Finance. Year-ago profits were $114.1 million, or $1.13.
Net revenues rose 6.7 percent to $1.43 billion from $1.34 billion, which included a net sales gain of 7.2 percent to $1.38 billion from $1.29 billion. Wholesale sales inched up 2.1 percent to $751.5 million from $736 million, while retail sales increased 13.9 percent to $631.3 million from $554.3 million. Comparable-store sales rose 7 percent, reflecting a 3 percent decline at Ralph Lauren stores because of a high-single-digit reduction in Japan; an 8 percent rise in factory stores, and a 10 percent increase at Club Monaco stores. Ralphlauren.com sales rose 21 percent in the quarter.
The company saw operating expenses increase 12 percent to $693.1 million from $612 million last year. The increase, mostly in selling, general and administrative expenses, was due to costs associated with Polo assuming full control of its South Korean operations, continued investment in the firm’s strategic growth initiatives and higher incentive compensation costs, the company said. Quarterly results also reflected restructuring and store impairment charges and the disruption in Japan following the March earthquake.
Investors were disappointed, sending shares down $14.69, or 11.4 percent, to $114.70, their lowest close since Feb. 7.
Farah told analysts on the company conference call, “We responded to the rapidly changing environment by pursuing additional market share opportunity and working to protect margins in the face of unprecedented inflationary pressures for our industry.”
Gross margins receded to 56.8 percent of sales from 59 percent a year ago, with higher costs being partially offset by improved margins at retail.
Farah noted that the 13.7 percent rise in annual revenues — to $5.66 billion from $4.98 billion — was double the firm’s original outlook and fueled by the “excellent momentum of our core apparel offerings, particularly in the U.S. and in Europe where revenues rose at a double-digit rate.”
For the full 52-week year, profits rose 18.4 percent to $567.6 million, or $5.75 a diluted share, from $479.5 million, or $4.73, in fiscal 2010, a 53-week year.
Midway through the first quarter of fiscal 2012, “sales are trending well,” Farah noted, adding that the company is projecting first-quarter consolidated revenues to increase in the mid-20s range. He said product has been “well received, reflecting the ongoing actual strength of the business.”
For fiscal 2012, the company expects consolidated revenues to increase by a midteen percentage, although operating margins from continuing operations are expected to be 100 to 150 basis points below those of fiscal 2011 due to the impact of cost-of-goods inflation, investment in strategic growth initiatives and the disruption in Japan.
Farah thinks that cost inflation pressures could ease a year from now, but noted the company was being “thoughtful” in the categories in which it elected to raise prices, even if that meant it would have to absorb a portion of the increases.
“In certain product categories we saw single-digit cost increases; in some others it was up to a 20 percent price increase. The fall product is being delivered in the next couple of months. We’ve raised prices where we can make the adjustments and customers will still respond [by buying where they see value],” he said.
“Our big concern was the midtier distribution, where the moderate customer is squeezed the hardest with rising apparel and gas prices. In that sector we were more sensitive to passing along price increases,” Farah said.
Neiman Marcus Launches Rachel Zoe Designer Line
From WWD Issue 05/26/2011
When Rachel Zoe heard the long list of retailers that ordered her first collection for fall, she went numb.
“It was this dream that I never thought would be reality because I was petrified — I was,” she recalled. “I feel so complete now becoming a designer and having my son. I’m that happiest that I’ve ever been in my life.”
No wonder. Nordstrom, Saks Fifth Avenue, Bloomingdale’s, Intermix, Selfridges, Kirna Zabête and Shopbop.com have purchased her label, Zoe said, though she has “no clue” what annual sales might be for the Li & Fung licensed brand.
Neiman Marcus is launching the celebrity stylist’s sportswear, handbags and shoes in July at all 41 doors plus online and at Bergdorf Goodman. The rollout across the entire Neiman Marcus Group is a rare endorsement of a fledgling brand.
Neiman’s backing is what brought her to a board room of the Ritz-Carlton hotel in Dallas with Mandana Dayani, her vice president, general counsel and chief wrangler, and Ken Downing, senior vice president and fashion director of Neiman Marcus.
“She is a real talent,” Downing said. “She understands the customer and she’s brought an effortless chic to the collection. The clothes are going to appeal to women of many ages. And, she’s got an amazing name.”
Downing gave her considerable guidance, convincing her “not to be afraid of color and prints” and to evaluate fabric weight and bulk, Zoe noted.
Dressed in a Rachel Zoe cream wool crepe tank dress with black velvet stripes, the celebrity stylist was calm, poised and free of both a camera crew and the frenetic quality that defines her on “The Rachel Zoe Project,” which begins broadcasting its fourth season on Bravo in July. Maybe that’s because she gave birth March 24 to a son, Skyler Morrison Berman. Now, she’s juggling motherhood with her demanding schedule by “really focusing” and not wasting time.
“Like, now I do 10 things at a time instead of four,” Zoe said.
Next up: fashion jewelry for fall 2012. “I wish it were for spring,” she said wistfully. “I am dying to do jewelry. I’m gagging.”
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