GLG News by Allan Zwerner

Implications: Will Dillards put themselves in both a less profitable position, as well another year of sales declines?The positioning that Dillards plans to go to seems to have a small opportunity to grow sales and profits. Dillards cannot just put better goods on the floor to be successful, they need a total change in their service concept, which will add expenses.

Analysis: Dillards upscale approach in the short run will help grow sales volume for many of the upscale vendors, however, once the season concludes the need for gross margin support will be a major issue for both the vendors as well as Dillard's bottomline.The niche, that Dillards is planning to focus on is too small to make a major sales volume contribution, furthermore, as of today Dillards sales per square foot is on the low end of the Department  retailers.Dillard's talk about less promotions, Nordstroms does not promote except four times a year, Dilllards pretends to be a regular price retailer yet their sales productivity, their margins' are  below those of Macys, Bloomingdales etc.For Dillards to state that Macys does their sales in a few doors only brings greater concerns that their program will not work in the smaller markets.For  example when yopu match Dillards up to the Macys division in Florida the only way their sales are close is do to the heavy markdown business they do.
In conclusion Dillard's should focus on getting the overall mix right, presentation and selling service needs greater execution before they look to attract the upscale consumer, lastly in the markets they are in v few retailers be it the Department Stores, Better specialty or the better young mens and womens businesses, will tell you these  remote markets are not the  drivers sales and margins.

Implications: American Eagle once again introduces a concept to max. sales productivity , by introducing f.i.t. line in a total of 45 plus doors for holiday.AEO has proven their ability to shift space to grow plus sales.Expanding in this category will also improve gross margins since it is a hot trend that will be on every young females list for xmas.

Analysis: American Eagle has found a way to continue to have comp store sales growth with the addition of f.i.t. classification.As with the Aerie concept last year for 4th QT., AEO has proven they can max. sales productivity by introducing Workout Wear to their female consumer,furthermore, this addition continues to tell the consumer that AEO is the place to shop for new ideas and new lifestyle concepts.
Unlike many other mall based retailers in womens that seem to think the way to ad plus sales is "do things bettter than last year" vs find new lifestyles , ideas that one's targeted consumer would react favorably towards.

Implications: PacSun needs to focus it's organization as well as it's capital. PacSun needs to grow comp stores and it is a must that they expand the brands lifestyle vs go after a business that was not working well when Urban was strong.

Analysis: This will be a big hit for the Urban vendor community, they will lose volume, most of the volume will not shift to other retailers, however, Man Alive Stores may find a window of opportunity in some markets to pickup some strong locations and or new markets.
PacSun neeeds to continue it's efforts in growing their female business which I would guess is the key to their comp growth. They should also look at the opportunities for some locations to expand PacSun space to max the growth of womens business (ie loungewear). The sooner PacSun decides to close down the sooner they can limit the markdown cost of closing, we are going into the best time of the year to limit the margin hit.

Implications: Macy's win, is the exclusive with a brand that has a proven track record.Furthermore, with this exclusive there will be opportunities to improve Gross Margin performance.Hilfiger's win will benefit from the long term sales growth, as well as, reduce their sku count and sample lines etc, yes major expense savings will be had.

Analysis: This move will have tremendous plus for Macys within 6-12 months in markets that have a strong Hispanic population as well as on the Boarders of Mexico, it could produce $15-20m plus retail volume in the boarder and selected locations.In some of these markets Tommy generates more volume than Polo.
Dillards and SSI stores will have to work fast to replace the volume in selected doors which could have implications for those respective Malls, not to have a highly demanded brand.
Lastly when was the last time a retailer has taken a successful brand exclusive, with a high consumer recogination, not too that the Hilfiger brand has had and still does well inother classification ie home textiles, and in time willprobably bring back the childrens business.

Implications: Ann Taylor strategy to open a new concept before fixing their existing business can further hurt their total profitable growth. There are issues that need to be fixed today in the A.T and Loft stores which can bring plus profits and growth.The answer is not a new concept, note Gap found this out with their venture that closed down.

Analysis: Ann Taylor and Loft stores neeed to reposition their merchandise focus to capture more of both their existing loyal consumers as well as bring in new consumers.Both stores have the space and ability to add new and aggressive classifications to their respective floors, which can grow sales and profits.Without having access to these stores detailed selling, I would suggest that they both look hard at getting into new emerging trends that their target consumers are using( it maybe late now) ie denim and denim related tops.Or developing an active lifestyle classification that the women can wear on the weekend in a casual lifestyle.To say things are healthy in a business that dropped 3.5% GM points is taking a major hit lightly and to further say most of it is with the Loft, down plays the urgency  of repositioning, not developing a new concept.
Without the details of their new concept, focused on the Baby Boomer, will have high risk for success since there are (as noted in the article) several strong  retailers in this zone  as well as the Big Box retailers ( which is their respective strenght).

Implications: PVH needs to take total control over the CK Brand, not as a licensor, but as an owner of the brand.For PVH to grow domestically and max international growth PVH must buy back the CK Brand.CK Brands future lies in developing own retail stores and to build a profitable model the stores must have both Sportswear as well as Denim.

Analysis: For PVH to build a strong direct retail business, the Merchandising team needs total access to the total product assortment be it Denim, Sportswear and or Dress Furnishings in mens and womens. To simply say that PVH can just buy goods from key volume licensees is a distant second to being able to design and flow what the merchandising team needs, as well as, to react to trends as they emerge.Until there is one mindset for the CK Brand , the retail concept will not be as profitable.At frist one may argue that Guess useslicenseeing product and is successful, this is true however the key elemant total sportswear and denim male and female is under one mindset.Therefore if PVH is going to continue to have long term growth in sales and profits one"mindset" is a must.

Implications: Growth opportunity for RL Corp. The product has a reason for being and can take market share from AnF. note todate AnF brand has little competition in th elook and prise zone.Everytime I visit a Rugby Store, I say to myself, "when will RL roll out the concept as a major vertical retail business"? Rugby would compete withAnF brand for the 20-30 year old male and female consumer in feeling as well as pricepoints.I also feel that Rugby can attract an older 30plus conmsumer. Yes the line can take some market share out of the POLO Brand as well.The mens consumer needs a hip fun updated traditional  brand to get the consumer to spend vs. the strong off price business that is going on at the malls today( excluding AnF). RL has spent a few yaers developing and learning what this consumer wants, my gut RL is close to spreading it's wings with Rugby and if it works at Colette get ready for European doors.

Analysis: see above information

Implications: Macys buyers need to get more aggressive in finding and max. the new brands and or concepts.How will Macys pay for the introduction of Martha Stewart , who and what comes off the floor to make room for the M.S. brand, does Macys have MD dollars allocate for this transition?

Analysis: When you look back over the last 1-2years and evealuate the hot new brands and trends, and than look at the Macys floors as a total corporation (excluding Bloomingdales) it becomes more clear as to why Macys trends at both the May doors as well as the Legacy doors are not competitive is sales trend to LY. Where is the Big push on Designer Denim ie. Seven for all Mankind, True religion and others, Under Armor( the answer is not Field Gear),Crocs, in the 80's when Swatch Watches came on the retail landscape Macys(federated) was the leader  of this brand, they own it to the degree that it was more than 1% of the total stores sales, Juicy Couture(again limited doors) except for fragrances.
When you review the May Corp.  sales strategy you would find that they look carefully at both Kohls and JC Peneys promotional program and a a result took and aggressive promotional position vs. Macys Corp.Therefore one has to ask can the "New Macys" bring back the May consumer without an aggressive promotional gameplan.It is not simple to just run deeper price reduction in the May doors or spending on a second ad for an event, it ties to the total assortment of product and floor positioning etc. In th eend Macys ahs their work cut out fot them through Sept 30th of 07, hopefully the holiday season will see the no addditional customer erosion.

Implications: Overall the article has merit, however, there are bigger issues that are not being recognized and or a plan to improve both sales and profits. Three years ago the home store at Macy's was consolidated into a central buying team, great for expenses, but the sales growth has not been there.( gut down trend every year), so it should have been in the merger plan, that the May Doors would experience some of the same negativesales results.The centralization of Home is still a question mark( in relation to a success or failure), to believe that the use of the Martha Stewart name will improve sales is a big question mark.

Analysis: Federated needs to work on the total Home stores results and not think that a single  new brand will turn th ebusiness around , keep in mind that when the Martha product hits the floors other product will com eofff, therefore the big question will be ,is it a plus or trade off.Based on the results of the last three years one has to have great concerns that M.S. will be a plus.
Private label has always been a plus to both sales and margins for retailers,however, there is a delicate balance of when it is too much, too duplicative and have high risk. The men's world  seems to be getting out of balance at the Macy's doors so it is no suppprise that May doors are feeling the weakness as well.One key reason that private label historically has been successful at almost all Retailers is that the product assortment was edit from the total world and the big item, volume items went into Private Label and out of the balance of the mix. When retailers start developing their own fashion brands they need the talent in design and leadership with experience in developing a line vs knocking one off and or editing from existing lines.

Implications: Own brands are a absolute in the total mix of a retailers store's assortments.However, retailers need to keep the balance and look inward to determine i fhtey have the team to create brands as well as the execution from a marketing,ie advertising , product placement and instore presentation .
The number merchandising focus of the Dept. Stores and Mass Retailers has been on finding, selecting, planning and negotiating how to max. the items and or lines.Now Management is asking the merchants to wear another hat as well, key is management willing to bring in the necessary talent ie form specialty own brand stores to execute the idea profitably.

Analysis: see above information

Implications: The success of Branded Dept. stores is  the delicate balance of brands vs. private labels.
How do you keep the balance, what factors need to be considered.

Analysis: When retailers take on their own brands be it promotional or regular price the key question is can the retailer, market it , can the retailer present it well in store and have the support to get the profitable results.
The question for JCPenney and others; when are their too many brands too soon to focus a major organization on them properly, can Sr. Management focus on the brands as well as financial and motivational support. JCPenney now has LIZ, POLO new brand Arizona and C7P, it is easy to simplify the execution by noting that the brands are for different areas of the store,( but is it that simple?).Lastly do the retailers have the expernced talent to build brands when the vast majority of the merchandising organization has focused on selecting the best the vendor community has to offer vs. creating brands and setting trends.

Implications: AnF has proven over time that their focus on "product right" vs. promotions and fast MDs, is best way to high sales per sq. foot and high margins
Europe does not promote off-price until end of season, therefore the AnF culture of product right  will be an easy transition as long as they keep in mind fit and cultural differences
In the 70's and early 80's  Polo and LaCoste did not take MDs until end of season , however as they over expanded in the USA they found they were forced to take MDs sooner and in the end hurt their respective brands

Analysis:

AnF has continued to be product right both in mens and Jrs,AnF continues to flow new product early in the season, ie this spring 07 we saw a wide a assortment of knit tops for the Jr market ,and with their structure they are able to re-oder and max. the items. Furthermore, AnF continues to find key items at regular price and maximizing by expanding the color roll.
By being a regular price business in the USA allows for the AnF team to stay focused on product right for the Europe, and long term worldwide markets, that do not MD in season and or run sale events.This allows the AnF team to tweak the fit needs and continue to focus on product, it is best when you enter a new market , not to have to change your model, but only layer onto it.

There is no question in my mind that by not overexposing a brand you can if you are executing well a regular price business model ,this has been AnF's strategy and credit to them for staying with it, vs. expanding until every street in NYC etc.When POLO and LaCoste were the top collection brands in menswear in the 70's and early 80's to grow sales they both decided best way was to expand the distribution as a result LaCoste pulled out of the USA do to overexposure and heavy "MDing" of the brand, Polo found themselves in a somewhat similar situation, but not as bad,blaming it more on competition than exposure( note, however, Polo has decided to reduce their exposure over the last two years).

Implications: Kohl's must continue to separate itself from the promotional retail environment, promotions are key and cannot get lost; however , key vendors and or product that are exclusive and wanted by consumers,( not because of price only, but the place to shop) needs to be a part of the mix, key is balance.

Kohl's should continue to take advantage of the repositioning at macy's stores through spring 07.

Analysis: Kohl's has embarked on developing exclusive brands however are these brands that the consumer really wants  if so than the promotional beat should be less of a focus to motivate the consumer.

Implications: Decline in licensing revenue can be an indicator of soft business ahead.

There was no mention of how Kenneth Cole plans to make the upscale label work at retail, seems the upscale strategy has not happened at retail.

How long will it take and at what cost to turn the apparel trend around at regular price retail?

Analysis: Last year Kenneth Cole took back the Ken Cole New York label in-house and planned to take it upscale, however, there does not look like there is much product at the retail sector. Now KC is taking in-house the Reaction label in mens sportswear, how will this play out?

Implications: Polo's approach to building its own brand business for Penney's is unique and will bring early profits vs. the normal 2-3 yrs to see rewards. By having the commitment to the brand, both space and OTB dollars further confirms Penney's will in fact market the brand both in advertising and at point of sale. Polo will further benefit by teaming up with a retailer in the product development process, by knowing what sells and how to tweak the assortments to maximize sales, turns and margins.

Analysis: Having headed up the Tommy Hilfiger product development process as the President of Mens for three years as well as product development of Federated (Macys) stores, I can truly state that it is a plus to know what the retailer needs and maximize the concept with the needs upfront of the process vs. after the fact. As time moves forward and this concept executes positively, it can negatively impact many vendors who are currently doing key items for retailers.